Global financial integration and the linkages between the financial and the real sides of economies are sources of huge policy challenges. This is now beyond doubt, after what we saw in the run-up to and the unfolding of the 2008 global financial crisis. As a consequence, the established wisdom regarding monetary policies and prudential regulation has been subject to a deep critical review, including a demise of the belief that they should be maintained as fully independent functions.
Kaushik Basu has a new piece being carried by Project Syndicate that appeared in The Global Times, one of China's leading English language news sites. Titled 'Policy stasis raises odds of 'L-shaped' recovery', it cautions that the tenuous recovery in advanced countries, while buoyed by the latest US indicators, will only hold if economists and policymakers move away from ‘stasis’ positions that fail to promote entrepreneurship and innovation.
He warns that avoiding analytical creativity is dangerous and stresses that, at times, intuition and theory are needed to get out of economic ruts and to keep up with the pace of technological change in our globally integrated world.
Social scientists have for long acknowledged that people evaluate their own wellbeing not only on the basis of what they have but also on the basis of what they have relatively to what other people have. Adam Smith (1776) wrote that "By necessaries I understand not only the commodities which are indispensably necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without".1 And Marx (1847) wrote that "A house may be large or small; as long as the neighboring houses are likewise small, it satisfies all social requirement for a residence. But let there arise next to the little house a palace, and the little house shrinks to a hut”.2
Despite the old age of these ideas, it is only during the second half of the twentieth century that scholars have tried to provide more analytical substance to the concept of relative deprivation. Duesemberry (1949)3 proposed a relative income hypothesis based on the idea that people determine their savings behavior not on their absolute incomes but on their relative position on the income scale. Runciman (1966)4 built an entire theory of social justice around the concept of relative deprivation defined as the sense of frustration that people experience when they observe other people having something they desire and within their reach but unattainable. While popular, these new theories struggled to become mainstream and it is only recently and thanks to studies on happiness that the concepts of relative deprivation have acquired new life.
Buzz is growing about taper readiness, as economists and Fed watchers anticipated the market reaction to the likely end of US quantitative easing in 2014. In 'Are investors ready for the taper?' on the FT's 'The Short View,' Ralph Atkins cites from a joint paper by Poonam Gupta and Barry Eichengreen titled "Tapering Talk: The Impact of Expectations of Reduced Federal Reserve Security Purchases on Emerging Markets"
Who are the bottom 40 percent of society? Where do they live? What do they do? What other characteristics do they have?
These are just some of the questions we are hoping to answer as part of the World Bank Group’s new mission critical – to end extreme and chronic poverty by 2030 and boost shared prosperity. The renewed effort against poverty is needed as more than one billion people in the developing world continue to live in abject poverty (i.e. on less than $1.25 a day).
In both 2011 and 2012, I did a roundup of the most read 200 World Bank blogposts of the year, and compared the performance of the various World Bank blogs in terms of readership. What did blogging at the World Bank in 2013 look like?
Table 1 compares the Bank’s blogs in terms of how many of the 200 most-read posts they produced. As before, I excluded pages that didn’t look like posts – blog home pages, blogger profiles, thematic pages, and so on. I got the data on views from Omniture. This apparently gives more precise – and typically lower – page view figures than the Bank’s blogger platform whose counts are vulnerable to spammers. Readers who manage to read an entire blogpost without clicking on the URL of the post (e.g. through Feedly or the now defunct Google Reader) won't show up in my numbers are readers
The following post first appeared on the Huffington Post.
Half the world's adults, approximately 2.5 billion individuals, do not have an account with a formal financial institution. Lack of access to finance is disproportionately skewed towards the poor, women, youth, and rural residents. Defined as the proportion of individuals and firms that use financial services, financial inclusion is increasingly seen as critical for ending extreme poverty and supporting inclusive and sustainable development. It provides people with the tools to invest in themselves by saving for retirement, investing in education, capitalizing on business opportunities, and confronting shocks (Global Financial Development Report, 2014). According to the World Bank Group's newly launched Global Financial Development Report 2014 on Financial Inclusion, most of the unbanked cite barriers such as cost, lack of documentation, distance, lack of trust, or religious reasons.
Following the launch of the World Development Report (WDR) 2014, Risk and Opportunity: Managing Risk for Development, various team members have been traveling to different countries to present its findings. I recently joined other team members in a visit to Morocco, Egypt, Ethiopia, and South Africa, with a stop in the middle in London and Oxford.
One thing that struck me was how relevant the topic of risk management is for many countries. The importance of risk management seemed immediately apparent to many participants in our discussions. Indeed, many participants gave examples of risk management measures that have been practiced in their cultures for generations (such as storing grain in African villages), or linked messages in our Report to common sayings – for example, as Professor Awad from the American University in Cairo told us, our message on the importance of saving in good times for the bad times has a direct parallel in the old Arabic adage, “to keep a white coin for a black day”.
How has globalisation affected inequality in incomes around the world? How do the incomes of the richest Chinese compare with those of the poorest Americans, and how has the gap changed over the last 20 years? Where do the poorest and richest people in the world live?
In May 2013, officials of the Federal Reserve System first began to talk of the possibility of the U.S. central bank tapering its securities purchases (of it gradually reducing them from the prevailing $85 billion monthly rate to something lower, presumably as a prelude to phasing them out entirely). A milestone to which many observers point is May 22, 2013 when Chairman Bernanke raised the possibility of tapering in his testimony to the Congress. This “tapering talk” had a sharp negative impact on economic and financial conditions in emerging markets.
Three aspects of that impact are noteworthy. First, not only was the impact sharp but, in the view of many commentators, it was surprisingly large. The most alarmed (some would say alarmist) commentators raised the possibility that some emerging countries might be heading towards a full blown crisis like those in Mexico in 1994 and Asia in 1998. Second, the impact was not felt uniformly; different countries were affected rather differently. And, third, there were complaints from policy makers in the developing world about the Fed’s turn to tapering that were seemingly hard to square with earlier criticisms of quantitative easing by the U.S. central bank as a form of “currency war.”