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Microcredit deserves support to benefit the poor

Shahid Khandker's picture

Microcredit has been in the spotlight lately. This innovative banking program, pioneered by Professor Muhammad Yunus, has created the option for millions of poor people, especially women, to become self-employed entrepreneurs.  By empowering women, microcredit has created opportunities to lift countless families out of abject poverty.  Clearly, this has been a net gain for society.  Yet current criticism of microcredit points to its failure to alleviate poverty, high indebtedness of borrowers, high interest rates, coercive loan-collection tactics, lack of transparency in public fund management, and uncertainty of succession in leadership. 

Natural Disasters, Aid, and Egypt

Swati Mishra's picture

An 8.9 magnitude earth quake and extremely destructive Tsunami waves have left Japan reeling.Thousands of people are dead and many more still remain missing. As the effects of the disaster unfold, the international community is concerned about a) How Japan will come out of this crisis, and b) How this crisis will impact energy prices. Robert Peston shares his thoughts on reconstruction of Japan in an insightful post ‘How will Japan finance its reconstruction?’, and to know about energy prices, read the post ‘The Japanese Crisis and World Energy Prices’ by Catherine Rampell. However, the worst is not over as there are fears of radioactive leakage at the Fukushima nuclear plant. This has led to serious concerns on the safety of nuclear power plants around the world, especially in the US. 
 
With the devastating Haiti earthquake just a year back and the recent Japan incident, the international community's focus is on natural disasters. Drawing data from the 2010 World Disasters Report, the post ‘A decade of disasters - get the key data’ gives a comprehensive analysis on the subject. The World Bank and UN's joint report, 'Natural Hazards, UnNatural Disasters' looks at disasters primarily through an economic lens.

Underutilization of capacity and Ricardian equivalence

Justin Yifu Lin's picture

In a recent blog post “Ricardian Confusions”, Paul Krugman commented on my paper “Beyond Keynesianism and the New New Normal” delivered at the Council on Foreign Relations on Feb. 28. He points out that the government’s fiscal stimulus generally is temporary and households will not increase savings by the full amount of the stimulus. As a result, the stimulus is expansionary even if Ricardian equivalence holds. His comment triggered a series of discussions (Antonio Fatas and Ilian Mihov, Mark Thoma, Paul Krugman, Nick Rowe, and Brad Delong).  
 
I have no disagreement with Paul about the possibility of an expansionary effect of a temporary fiscal stimulus. But if the effect exists and the stimulus does not increase productivity as in his example, there will also be a contractionary effect after the exit of stimulus and the increase of tax to retire the public debts. At the end the issue of underutilization of capacity, which my paper attempts to address, will still be there. 

Watch out for minimal food stocks! But don’t assume the worst has come…

Merrell Tuck-Primdahl's picture

Food price spikes happen when stocks are low and when unpredictable events occur. That was the main message of Professor Brian Wright at his Development Economics Lecture at the World Bank on March 11.

Wright, who is Professor & Chair Department of Agricultural & Resource Economics, has long followed the markets for storable commodities. He is also an expert in invention incentives, intellectual property rights, the economics of agricultural research and development, and the economics of conservation and innovation of genetic resources.

Today’s food and fuel concerns do not constitute the ‘perfect storm’, Wright said. However, he warned that if several important crop-producing countries have a bad season in the coming year, and if the demand for biofuels rises faster than the rate of production of major grains, we could be in real trouble.

What’s the best fix for this situation? Wright argues it’s keeping food supplies cheap and investing in the Consultative Group for International Agricultural Research (CGIAR), since it will be super-seeds, drought resilient crops, and innovations to boost yields that will turn things around. He also emphasized that, during a crisis, it’s essential to put minimum food needs above animal feed and fuel uses. 

Watch the video interview with Wright below. 

Food Crisis: The Role of Agricultural Productivity

Jean-Jacques Dethier's picture

The current food crisis—increasing poverty linked to price volatility and high food prices—have put agricultural growth and food production issues back on the development agenda. Is productivity growth the only way to address the short-run challenge (the food crisis) and longer-term needs (meeting increased demand for food)? 

Even though today agriculture is the main source of livelihood for 2.5 billion people, including 1.3 billion smallholders and landless workers, public investment in agriculture in developing countries, as well as the share of agricultural expenditure in total government spending, have been gradually declining since the 1980s. Bilateral and multilateral assistance to agriculture, after an increase in the 1970s, also fell starting in the mid-1980s.  It is only in recent years that the World Bank and other aid agencies have increased their lending and boosted their investments. But will these investments be effective? This depends on whether they will have a sizeable impact on agricultural productivity. 

Gender Equality and the 2012 World Development Report

Justin Yifu Lin's picture
Photo: istockphoto.com

Equality between men and women matters for development, which is why the 2012 World Development Report  (WDR) will focus on this vital topic. Since the 100th anniversary of International Women’s Day is March 8, we thought it an auspicious day to launch the WDR 2012 website.

Gender was chosen as the focus for next year’s WDR in part because gender equality can lead to better development outcomes and because, as Amartya Sen  asserted, development is a process of expanding freedoms equally for all individuals. This view assumes that gender equality is a core goal in and of itself and that people’s welfare shouldn’t be determined by their birthplace or whether or not they were born male or female. 

The 2012 WDR will analyze the wide swath of literature on gender and development and it will highlight the impressive progress in gender indicators on many fronts. However, it will also reveal that in many domains—whether in the realms of power and decision making or maternal health – outcomes for women have improved very slowly or not at all.

Food Prices, Structural Change, and MPI

Swati Mishra's picture

After escalating for eight consecutive months, food prices have finally reached an all time high. Due to this unprecedented spike, FAO expects a tightening of the global cereal supply in coming months. According to a Forbes article, "the situation has prompted experts to warn of a global food crisis reminiscent of the spike in food costs that in 2008 caused various riots.”

To add to the concern are high oil prices, which the FAO thinks are a key factor driving the food price increase. However, IMF researchers believe that bad weather and rising demands for bio fuels are also to blame. They also stressed on the fact that it will take years for farmers to increase their production to meet rising demand for food, which “reflects structural changes in the global economy that will not be reversed.”

Economic development in resource-rich, labor-abundant economies

Justin Yifu Lin's picture

Tackling poverty and inequality through appropriate growth strategies is at the core of the World Bank’s mission. In my view, achieving sustainable and inclusive growth depends on a well-functioning market and to a significant extent also the degree to which government policies facilitate private firms’ upgrading and diversification into industries that are aligned with an economy’s comparative advantages.

To smooth the way and allow this dynamic process to function optimally, we need to answer many questions that are unique to different types of economies. For example, how is it possible to successfully tap a developing country’s comparative advantage when it is rich in resources and has an abundant labor supply?

New Pragmatism versus Failing Neoliberalism

Grzegorz W. Kolodko's picture

The source of the current global economic crisis lies deeply in U.S.-style neoliberal capitalism, or contemporary laissez faire. It could not have been triggered in countries with a social market economy, but only in the conditions of the neoliberal Anglo-American model. The intense shock the world experienced could take place only as a result of the coincidence of numerous political, social and economic circumstances (as well as technological ones, since it would not have been possible without the Internet). The overlapping of these conditions in a specific way, which accumulated the crisis-related phenomena and processes, was possible only under a special combination of values, institutions and policies — are typical of U.S.-style neoliberalism.

Could easier access to AIDS treatment increase risky sexual behaviors?

Damien de Walque's picture
 Photo: istockphoto.com

By the end of 2009, an estimated 5.2 million people in low- and middle-income countries received antiretroviral therapy (ART). In sub-Saharan Africa, nearly 37% [34%–40%] of people eligible for treatment had access to those life-saving medicines (UNAIDS 2010). This is an extraordinary achievement, considering that as recently as 2003, relatively few people living with HIV/AIDS had access to ART in Africa. The scaling-up of ART in Africa and other regions has saved the lives of countless people and we hope will continue to do so.

 At the same time, access to HIV/AIDS treatment might have transformed the perception of AIDS from a death sentence to a manageable, chronic condition, not necessarily different from any other chronic disease. Such a change in perception could lead to change in sexual behaviors. If AIDS is not perceived as a killer disease anymore, it might induce complacency and increase risky behaviors and the mixing between higher- and lower-risk groups in the population. That’s what has been described as the “disinhibition” hypothesis.

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