Syndicate content

Climate Change

For success and sustainability, seek broad social ‘well-being’; Good governance promotes a ‘virtuous cycle’ of growth

Christopher Colford's picture

Beyond the cold calculus of GDP and TFP and FDI, development is about promoting strong societies as well as propelling powerful economies. But how can we measure societies’ progress toward success? Some may try to calculate “Gross National Happiness” as a yardstick, and some may envision “getting to Denmark” as the ideal end-of-history destiny of development – but are there patterns that reveal how societies can flourish?

Two recent Washington seminars suggest that – by pursuing innovation and inclusion, and by focusing on broad-scale social “well-being” – policymakers can define realistic paths toward development success.

The methodologies used by Harvard economist Philippe Aghion at an International Monetary Fund forum and by former World Bank strategist Enrique Rueda-Sabater at a Center for Global Development discussion may have been different, but their conclusions were in harmony: Societies thrive – in a sustainable way – when inclusion and innovation help expand the circle of opportunity, and when strong governance standards lead to sound civic decision-making.

Taken together, the two seminars’ insights should help inform policymakers’ debate about the Sustainable Development Goals, which are due to be approved in September at the opening of the United Nations General Assembly.

Aghion, at an IMF seminar (sponsored by its Low-Income Countries Strategy Unit) on June 30, approached the topic of “Making Growth Inclusive” by imagining “how to enhance productivity growth while promoting social mobility.” Presenting data from a recent paper on “Innovation and Top-Income Inequality,” which he recently co-authored with an all-star team of economists, Aghion outlined the way that income and wealth inequality have drastically soared in developed countries since the mid-1970s – analyzing trends that by now are sadly familiar to the squeezed middle class, as calculated in the esteemed work of Thomas Piketty, “Capital in the Twenty-First Century.”

Building on that data, Aghion took the inequality-and-inclusion logic several steps further. He lamented the way that “skill-biased technological change” has (in the absence of policy safeguards) provoked societies to stratify along the lines of wealth, income, education and connections. Yet “creative destruction” is inevitable in “a Schumpeterian world,” reasoned Aghion: A significant factor expanding the wealth gap is the same process of continuous economic renewal that helps economies advance. “There is a big [economic] premium to being a superstar innovator,” he asserted, noting that “you can become rich by innovating” – and thus “innovation is a big part of top-1-percent income inequality.”



Philippe Aghion

“Creative destruction is good for social mobility” and broader inclusion, in the long run, because it causes a steady procession of “new innovators to replace old incumbents.” The effect of each wave of innovation is fleeting, especially in a hyperspeed economy: “You get temporary ‘rents’ when you innovate. You don’t get them forever,” because the relentless Schumpeterian process will eventually cause yesterday’s innovators to become, in turn, tomorrow’s has-beens.

The darker danger of entrenched inequality occurs, said Aghion, when incumbent interests use their political power to lobby for the protection of their advantages – whether by pleading for tax-code favors, seeking government-imposed barriers to the entry of new competitors, or purchasing influence with pliant politicians through campaign donations. (In an aside on U.S. politics, Aghion pointed to his paper’s data linking a state’s representation on the congressional Appropriations Committees with its amount of federal favors – a shrewd quantification of the pork-barrel compulsions of Capitol Hill.)

Because innovation promotes social mobility and thus greater inclusiveness, Aghion contended that “innovation is a good guy; lobbying is a bad guy.” So “if you’re for inclusive growth, then you will be against lobbying and [the creation of] entry barriers.”

Focusing simply on present-day inequality is less informative than focusing on social mobility, he asserted. There’s nothing wrong with an economy that bestows ample financial rewards upon genuine innovators who create new products and processes. There is, however, something deeply wrong – and economically growth-inhibiting – with governments that allow no-longer-innovative incumbents to use their political connections to suppress potential competitors.

The IMF panel’s respondents amplified Aghion’s analysis. World Bank economist Daniel Lederman noted that it would be wise to use “the lexicon of ‘inequality of opportunity’,” because some degree of wealth inequality is inevitable (and perhaps even desirable) when individuals’ talent and effort are rewarded with rising incomes. IMF economist Benedict Clements – deploring the “great degree of disparity in ‘equality of opportunity’ ” that now prevails in advanced economies, including the United States – noted that there need be “no conflict between equity and efficiency if you design your policies right.”

Getting policies right – by upholding strong standards of governance – was also one of the underlying themes at a July 21 seminar at the Center for Global Development led by Rueda-Sabater, who is now a senior advisor to the Boston Consulting Group and a visiting fellow among CGD’s strong lineup of scholars. Rueda-Sabater is well remembered at the World Bank for leading a research team’s detailed “scenario planninganalyses that, in 2009, discerned the contours of three possible scenarios for the world in the year 2020.

Presenting a recent BCG report, “Why Well-Being Should Drive Growth Strategies,” Rueda-Sabater outlined an imaginative BCG diagnostic tool: the “Sustainable Economic Development Assessment” (SEDA), which measures the relative well-being of 149 countries by gauging their success in converting wealth into well-being – that is to say, in effectively translating their potential into tangible progress.


 

Kicking green on the green for more than just the green

Leszek J. Sibilski's picture

Sport, and in particular football, can be used to promote health and development in many countries. However, large-scale sporting events like the football World Cup can have a detrimental effect on the environment and sustainable development.  Can FIFA and other governing bodies use their immense influence and budgets to establish environmentally friendly practices?

young kids play football in ZimbabweSport is a powerful symbol which eliminates barriers and provides opportunities for rapprochement. It does not have the power to stop tanks, but is capable of bringing people together and can be an excellent platform to open up dialogue, unite people and build trust. Sport is a bond to make a positive change in the world.” - Wilfried Lemke, UN Special Adviser on Sport for Development and Peace
 
An ever-increasing number of leaders in sports as well as politics, business, education and even religion are starting to pay closer attention to how sports can be a tool to benefit humanity. UN Secretary General Ban Ki Moon emphasized the commitment of the UN System to promote sport as a tool for development – including using it to achieve the United Nations Millennium Development Goals.
 
The game of football is a sport embedded in the lives of many people, communities, and economies. Often called “The Beautiful Game,” it is accessible to all. An estimated 265 million male and female players in addition to five million referees and officials make a grand total of 270 million people - or four percent of the world's population - that are actively involved in the game of football. 
 
Football supports development in various ways as it generates income from sports-related sales and services that boost international trade. It also creates jobs, supports local economic development, enhances a country’s reputation, transcends national differences, improves health and social well-being, encourages teamwork, and most importantly it serves as a global communicator while speaking a world language for the sake of social good.
 

Going, going, gone – timeline of an innovative auction that aims to reduce methane emissions

Scott Cantor's picture
Pilot Auction Facility for Methane and Climate Change Mitigation (PAF)








Private investors bought price guarantees for 8.7 million tons of methane emission reduction in an innovative auction, attracting bidders from across the globe.
 
The Pilot Auction Facility for Methane and Climate Change Mitigation (PAF) provides support to businesses that invest in climate friendly projects.  The first pilot auction was held online on July 15, 2015, auctioning off price guarantees, or put options, targeting methane reducing projects. 
 
By providing a floor price for captured methane, the PAF offers private investors a financial incentive to fund carbon capture. Using an auction maximizes the impact of public funds dedicated to slowing climate change.
 
Here’s my journal entry from the day – July 15 – auction day (at last!)

The case for inclusive green growth

Sri Mulyani Indrawati's picture
Women fishers in Ghana. (Andrea Borgarello/World Bank - TerrAfrica)



Over the last 20 years, economic growth has helped to lift almost a billion people out of extreme poverty. But 1 billion people are still extremely poor. 1.1 billion live without electricity and 2.5 billion people without access to sanitation. For them, growth has not been inclusive enough.

In addition, growth has come at the expense of the environment. While environmental degradation affects everyone, the poor are more vulnerable to violent weather, floods, and a changing climate.

Development experts, policymakers, and institutions like the World Bank have learned a major lesson: If we want to succeed in ending poverty, growth needs to be inclusive and sustainable.

Crowding in Technical and Financial Resources in Support of Forest Landscapes

Paula Caballero's picture
Mexico butterflies by Curt Carnemark / World Bank ​As financing for development talks wrapped up last week in Addis, many conversations revolved around the “how much” as well as on the “how” of achieving universal sustainable and inclusive development in the post 2015 context. Work in the natural resources arena has valuable lessons to offer. 

There is a growing consensus that a new approach is needed to meet the financial needs of developing countries to ensure sustainable, inclusive and resilient growth paths. We all know that Official Development Assistance (ODA) finance is limited and cannot address the massive investment needs of countries. In addition to increased domestic resource mobilization, the more effective engagement of a variety of players, especially from private sector, NGOs, and philanthropic organizations, will be key to close the finance gap. 

Bridging the Gap in LAC Infrastructure

Karin Erika Kemper's picture


The other day I had the opportunity to participate in the annual CAF conference on Infrastructure, this time held in Mexico City. The conference featured CAF's new IDEAL report on the state of infrastructure in Latin America and the conference, attended by many decision and opinion makers from across LAC, was organized around findings of the report.
 
I had a few takeaways from the discussions, notably that (1) there is convergence on a range of key issues and (2) there are some important Bank messages that are unique:

Economic growth and climate action – a formula for a low carbon world

Sri Mulyani Indrawati's picture

© Shynar Jetpissova/World Bank

Most people now realize the cost of inaction to deal with climate change is far higher than the cost of action. The challenge is mustering the political will to make smart policy choices.

A new report by the Global Commission on the Economy and Climate, of which I am a member, shows climate action delivers local development benefits as well as emissions reductions. In fact, smart policy choices can deliver economic, health and climate benefits for developed and developing countries alike.

Lighting up the future in Bangladesh

Yann Doignon's picture

Children using a computer powered by solar energy

Night falls in Dhaka. Commercial streets glow with lights and the neon-lit stores and restaurants are abuzz with shoppers enjoying a break from Ramadan. This is a great visual spectacle punctuated by the incessant honking of colorful rickshaws.

But the reality is different right outside the capital. Sunset brings life to a halt in rural areas as about 60 percent of rural households do not have access to grid electricity. Kerosene lamps and battery-powered torches are widespread yet limited alternatives, their dim light offering limited options for cooking, reading or doing homework.  

It is a sweltering hot day when our team sets out to visit a household of 14 in the village of Pachua, a two-hour drive from Dhaka. Around 80% of the villagers have benefited from the solar panel systems to access electricity. The Rural Electrification and Renewable Energy Development Project (RERED), supports installation of solar home systems and aims to increase access to clean energy in rural Bangladesh.
 
We’re accompanied by Nazmul Haque Faisal from IDCOL, a government-owned financing institution, which implements the program. “This is the fastest-growing solar home system in the world,” Faisal says enthusiastically, “and with 40,000-50,000 new installations per month, the project is in high demand.”

We’ve now reached our destination and Monjil Mian welcomes us to his house, which he shares with 13 other members of his family, including his brothers, two of them currently away for extended work stints in Saudi Arabia.

How can sport and the social media alliance help tackle climate change?

Leszek J. Sibilski's picture

The prevalence and use of social media is rising worldwide. Alongside that, there has also been an explosion of sport-related content on social media platforms.  How can these two phenomena be utilized to raise awareness and action on climate change?

Women's team, EcuadorSport has become a world language, a common denominator that breaks down all the walls, all the barriers. It is a worldwide industry whose practices can have widespread impact. Most of all, it is a powerful tool for progress and for development.” Ban Ki Moon, UN Secretary General

In last year’s Tour of Spain cycling race, faced with abnormally high temperatures, riders drank 12 bottles of water a day but still lost up to 4.5 kg in weight. From the melting snow of the Sochi 2014 Winter Olympics, to the stifling heat of the Australian Open Tennis Championships in Melbourne and the US Open Tennis Championships in New York City, climate change has once again proven its relentlessness and lack of forgiveness.

It’s no good denying it – temperatures are going up. According to the World Bank’s “Turn Down the Heat” reports, the planet could warm from its current global mean temperature of 0.8°C above pre-industrial levels to as high as 4°C by 2100, even if countries fulfill current emission-reduction pledges. In all likelihood, it will mean more extreme heat waves with health, socio-political, and economic ramifications occurring across the globe.

Weekly wire: The global forum

Roxanne Bauer's picture

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

Does talking about corruption make it seem worse?
The Guardian
What do most people immediately think of when you ask them why poor countries are poor? We’re pretty confident that it will be corruption. Whether you ask thousands of people in a nationally representative survey, or small focus groups, corruption tops people’s explanations for the persistence of poverty. Indeed, 10 years of research into public perceptions of poverty suggests that corruption “is the only topic related to global poverty which the mass public seem happy to talk about”.  Which is odd, because it’s the absolute last thing that people actually working in development want to talk about.
 
Africa’s moment to lead on climate
Washington Post
Climate change is the greatest threat facing humanity today. To avoid catastrophe, we must dramatically reduce the carbon intensity of our modern energy systems, which have set us on a collision course with our planetary boundaries. This is the challenge leading up to three key international events this year: a July summit on financing for new global development goals, another in September to settle on those goals and — crucially — a global meeting in December to frame an agreement, and set meaningful targets, on climate change. But focusing on ambitious global climate goals can mask the existence of real impacts on the ground. Nowhere is this truer than in sub-Saharan Africa.   No region has done less to cause climate change, yet sub-Saharan Africa is experiencing some of the earliest, most severe and most damaging effects. As a result, Africa’s leaders have every reason to support international efforts to address climate change. But these leaders also have to deal urgently with the disturbing reality behind Africa’s tiny carbon footprint: a crushing lack of modern energy.
 


Pages