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October 2013

Pushing on String – Can Multilaterals Set Priorities?

Liesbet Steer's picture

Recent reforms in multilateral agencies, including those under implementation at the World Bank, have focused on the key question of how institutions can implement global priorities in organizations driven by country level decision making. A recent report on basic education financing, by the Center for Universal Education at Brookings and the UNESCO-Education for All Global Monitoring Report (EFA GMR), takes a closer look at the extent to which the global development goal of universal access to primary education has been supported by multilateral action.

Reading togetherThe challenge is substantial. Despite good progress over the past decade and a reduction of 45 million in the number of out-of-school children, there are still 57 million children out-of-school, and 250 million children who are in school but who are not learning. Most of these are from marginalized and disadvantaged groups. Keeping the global promise of universal access for all children will require more money, as part of the solution.  After taking account of available domestic resources, the EFA GMR estimates that an additional $26 billion will be needed per year to make sure all children receive a basic education by 2015. This gap will need to be filled by domestic as well as international resources.

Let Them Eat Cash

Shanta Devarajan's picture
Also available in: Español | Français

The Economist this week has an excellent article on giving cash transfers, conditionally or unconditionally, to poor people to alleviate their poverty.  Calling it “possibly the single best piece of journalism on cash transfers that I’ve seen so far,” Chris Blattman—one of the scholars whose research has provided grist for this mill—laments that such writing “tends to make the Pulitzer committee fall asleep in bed.”  Maybe so, but the idea is potentially transformative.

Cash Transfers

That cash conditional on sending your children to school or taking them for a medical checkup improves health and education outcomes has been established for some time now.  More recently, some studies show that unconditional cash transfers could have the same effect.  Chris’s work demonstrates that giving cash to idle young people leads to higher business earnings than if the money were used to run vocational training courses for these people.

In parallel, Todd Moss at the Center for Global Development and my colleague Marcelo Giugale and I (along with several others) have been exploring the idea of transferring oil revenues to citizens as cash transfers, as a way of reducing the resource curse that afflicts many resource-rich countries, especially in Africa.  Gabon for instance, with a per-capital income of $10,000 has the second-lowest child immunization rate in Africa.  Marcelo and I show that, with just 10 percent of resource revenues’ being transferred directly to citizens (in equal amounts), poverty can largely be eliminated in the smaller resource-rich African countries.

How Can We Reduce High Income Inequality?

Augusto Lopez-Claros's picture
Also available in: Español

There are many ways to think about income inequality. One can, for instance, look at it within the boundaries of a particular country and ask how is income distributed today among Brazil’s 198 million citizens? It is also possible to look at the average income per capita of all the countries in the world (or a region of the world) and ask: how unequal are income differences across countries at a particular moment in time? We can think of this as international inequality. One can also abstract from national boundaries and concepts of citizenship, view the world as one human family, and ask: how is income distributed among its 7 billion people? Call this global income inequality.


Russia’s Great Deceleration

Birgit Hansl's picture

Russia’s fortune and growth prospects remain tied to its most important economic partners in the Euro area and its main export products: oil and gas. In the last decade Russia grew at around 6 percent (if we exclude the crisis year of 2009 - 4.7 percent on average otherwise).

This high growth was driven by high commodity prices, but it also translated into the non-tradables. Russians enjoyed a higher standard of living and consumed more. The economy still looked strong in 2012 when the country grew at 3.4 percent, especially when compared to Europe, the US and Japan, but also vis-à-vis emerging economies such as Brazil and Turkey. Unemployment dropped to record lows and real wages grew, with poverty decreasing dramatically in recent years.

In the past, given the buoyant oil revenues, Russia followed a pro-cyclical growth model of stimulating domestic demand, partly through public investment projects and partly through increasing public wages and other public income sources such as pensions.

If the prices of oil and gas were to drop in the near future, Russia’s growth model might be in need of urgent adjustment.

What will Shape Our Children's Future?

Wolfgang Fengler's picture

Have you ever wondered what the world will look like when today’s children will have grown up to adulthood? What opportunities will be theirs to grab and what new challenges they will have to face? What will the global balance of power look like? Will the old North/South dichotomy still make any sense?

BT023S01 World Bank Sadly, the future -especially technological and scientific advances- remains largely unpredictable. In the 1960s, our grandparents would have discarded as pure science fiction the possibility that we would soon be making video calls around the word from anywhere and without a cable almost for free! Nonetheless, some fundamental shifts can be predicted, especially as many are already underway and unlikely to reverse. In fact, the UN’s high-level panel (“post MDG”) has just issued a report which takes a long perspective on future development challenges.

As a development practitioner – and father of three children - here are the big trends I am keeping my eyes on:

Global Indicators vs. Some Realities on the Ground

Gael Raballand's picture

Tunisia has traditionally been perceived as a paragon of good practices in logistics in the MENA region. According to the Logistic Performance Index 2012, Tunisia is the best performer within the MENA region with a score of 3.17 over 5 (after U.A.E and Saudi Arabia) when Egypt scored at 2.98, Morocco 3.03 and Algeria 2.41. Tunisia also performs better than the regional benchmark countries in the trading-across-borders ranking of the Doing Business indicator. Tunisia is ranked 40th, far before Turkey (67th rank), Morocco (72nd rank) and Algeria (122nd rank).

DS-TN014  World Bank At the same time,  many importers in Tunisia complain about the inefficiency of  Radès, the main Tunisian port, corruption in customs, and so on-- apparently with good reasons: dwell time, which is a good proxy for logistics efficiency, is benchmarked at around 3-4 days in middle income countries, whereas in Radès dwell time is officially around 6 days and more than 9 days according to the recent Tunisia investment climate assessment (with high dispersion), making it comparable to Mombasa in Kenya and much worse than a port like Durban in South Africa.

Surprising Results from Fragile States

Joel Hellman's picture

If there is one thing that most of the donor community can believe in, it is this:  aid gets better results in countries with better governance.  The data linking aid effectiveness and governance go back to the work of David Dollar and Craig Burnside around 15 years ago.  And though there have been many challenges to the original findings, more recent studies by Aart Kray and colleagues on the World Bank’s (WB) own portfolio confirm that over the past 25 years, WB projects have performed better in countries with better governance.  But for most people, it’s not the data that convinces them of this simple, but powerful maxim; it’s just a matter of plain common sense.  Or is it?

Something strange and unexpected has happened to the WB’s portfolio in the last few years.  Since 2009, projects in fragile and conflict affected states (FCS) have out-performed projects in the rest of the portfolio as judged by both internal and independent evaluations. The share of “satisfactory or better” projects has been 5-10 percentage points higher in FCS versus non-FCS over a three year moving average.  Of course, a few years of volatile project performance data are not enough to challenge one of our most deeply held assumptions about aid performance.  But what is going on here?

Spoiler alert:  I don’t have the answer, just a lot of potential hypotheses.  Here are some that come to my mind.  You’ll undoubtedly have others.

Is Climate Change a Myth?

Max Thabiso Edkins's picture

I am still surprised by how much climate change denial we come across.

Recently Connect4Climate ran the iChange competition, challenging students to present the climate challenge in a 30-second video. We received great responses from around the world and compiled a video with some of the best for MTV.Posting this on our YouTube channel quickly resulted in more than 7000 views, a hearty discussion, and this comment: “lol i havent even watched this video. but ive read some of the comments. global warming is a MYTH!“

iClimate Connect4Climate Competition

What? Such outright denial! How can this be when the science is so overwhelming clear, when world leaders have shown their support for climate action, when reports left right and centre highlight the dire impacts of climate change, not least the World Bank’s own 4°C report?
I couldn’t let such comments go without responding.

Should We Stop Calling $1.25 a Day Extreme Poverty?

Tom Bundervoet's picture

Imagine reading a paragraph like this somewhere in a magazine, a newspaper or a blog:

In recent years several African countries have made strong progress on poverty reduction. Driven by solid growth, national poverty rates in Rwanda have fallen by 14 percentage points over the past decades, and countries such as Tanzania (poverty headcount of 33 percent) and Uganda (25 percent) seem in a position to almost eradicate poverty within the next decade-and-a-half. Despite this, the extent of extreme poverty, as defined by the World Bank’s $1.25 a day line, remains daunting. Rwanda’s extreme poverty rate (63 percent) is still 18 percentage points higher than its overall national poverty rate (45 percent), and in Tanzania twice as many people live in extreme poverty (68 percent) than in poverty (33 percent).”

Weird, right? And yet it is exactly this situation depicted in the below figure that poverty economists (well, at least one of them) had to explain repeatedly over the past year to Government, development partners and even other economists.

To make sense of this confusion, one first needs to know that there are national and international poverty lines. National poverty lines are usually estimated based on the so-called cost-of-basic-needs method. This method estimates, for each country, the monetary value of the level of food and non-food consumption that is deemed ‘absolutely necessary’ to sustain human life. The monetary value (in local currency) of this combined food and non-food bundle is the national poverty line. Households with expenditures lower than the national poverty line are considered poor, and the percentage of these households in the total population is the national poverty headcount (red circles in Figure 1). Households with expenditures below the food poverty line (the monetary value of the minimal required food bundle) are considered extremely poor and the percentage of these households in the total population is the extreme poverty headcount. The national poverty lines should be used to examine the extent and evolution of poverty within a given country.

Disrupting Low-level Political Equilibria

Shanta Devarajan's picture

Absentee teachers, negligent doctors, high transport costs, missing fertilizers, and elite-captured industrial policy all stand in the way of poor people’s escaping poverty.  While the proximate reason for these obstacles may be a lack of resources or an erroneous policy, the underlying reason is politics. Lawmakers meet during a session of Parliament in Accra

- In many developing countries, teachers run the political campaigns of local politicians, in return for which they are given jobs from which they can be absent.  The situation can be described as an equilibrium, where the candidate gets elected and re-elected, and teachers continue to be absent.  The losers are the poor children who aren’t getting an education.  The equilibrium has no intrinsic force for change, especially if, as in Uttar Pradesh, India, 17 percent of the legislature are teachers.

 - High transport costs in Africa are due not to poor-quality roads (vehicle operating costs are comparable to those in France) but to high prices charged by trucking companies, who enjoy monopoly power thanks to regulations that prohibit entry into the trucking industry.  High transport prices and monopoly trucking profits are an equilibrium. In one country, the President’s brother owns the trucking company, so prospects for deregulation there are grim.

- Several countries subsidize fertilizer, sometimes to the tune of several percentage points of GDP, only to find that it fails to reach poor farmers.  Thinking that the problem is the public distribution system, some governments have tried to use the market to allocate fertilizer, by giving farmers vouchers that they can redeem with private sellers.  A scheme in Tanzania found that 60 percent of the vouchers went to households of elected officials. When subsidies are captured to this extent by political elites, their reform will be resisted—another equilibrium.

Is Trust a Crucial Factor in Business Success? (Part II)

Jacques Morisset's picture
Also available in: Français

Running a small business in a developing country is tough. Many entrepreneurs have little education to operate their business efficiently. They have also to do it in a difficult environment; full of predators –such as customers that do not want to pay their purchase, employees that leave with equipment and creditors that charge exorbitant interest rates. Many of those problems are rooted in the lack of trust (see part 1). Unfortunately, in most developing countries, traditional channels of regulation and trust between people and businesses have not yet been replaced by alternative mechanisms. This has to change.

A great many odds
Maasai women make, sell and display their bead work In the industrialized world, small firm owners are generally more educated and wealthier than the average citizen. In the US, they are about three times richer. Entrepreneurship is by choice, especially for those who have the initial assets, and this self-selective mechanism ensures that small firms do expand as their owners are also the people most capable to make them succeed.
By contrast, in developing countries entrepreneurship is not a choice for the vast majority. It is often their only option for economic survival. For this reason, the rate of entrepreneurship is four times higher in Uganda and Tanzania than in the US or 10 times higher than in France. (Tanzania National Panel Survey 2010/11) However, these entrepreneurs have little education and suffer severe cash constraints and limited access to credit. These factors explain why so much attention is devoted to improving entrepreneurs’ assets and capacities, mostly through skills development and better access to credit. The most successful programs appear to be those that have targeted young entrepreneurs by combining both training and financing programs.

The Making of the Middle Class in Africa

Mthuli Ncube's picture
Also available in: Français

Robust economic growth over the past 15 years has led to visible changes across Africa. Visitors to cities on the continent cannot help but notice the emerging African middle class.  Defined as those earning between $2 and $20 a day in 2010, Africa’s middle class is expected to grow from 355 million (34 percent of Africa’s population) to 1.1 billion (42 percent of the population) in 2060. To be sure, about 60% of them – approximately 180 million people – remain barely out of the poor category. They constitute the ‘floating’ class, earning between $2 and$4 a day. They are in a vulnerable position, constantly at risk of dropping back into poverty in the event of any unexpected shocks, such as the loss of income and the death of the head of household.
Pointing out business processess at ITU-Inveneo ICT Entrepreneurship Training Not only is Africa’s middle class crucial for economic growth, but they are essential for the growth of democracy and will play a key role in rebalancing the African economy. Consumer spending by the middle class has reached an estimated $680 billion in 2008 – or nearly a quarter of Africa’s GDP. By 2030 this figure will likely reach $2.2 trillion and Africa will comprise about 3 per cent of world-wide consumption.

Despite a reputation for thrift, middle-class households do allocate part of the household budget to leisure and entertainment. Our analysis shows that middle-class households are likely to spend more on private education and health, as well as on household assets such as televisions and refrigerators. In addition to being better off in material terms, the middle class are in general both more satisfied and more optimistic about the future than their poorer compatriots.

A Data Revolution for the post-2015 Agenda?

Homi Kharas's picture

Last week saw hundreds of people gather for the UN General Assembly debates on the post-2015 agenda. Member states agreed on an outcome document that outlines the process for getting to an agreement. That will still take two years. First, a group of countries comprising the Open Working Group will consider what the agenda should be. They are expected to deliberate until February next year, and then negotiate a text during the summer to present to the 2014 General Assembly. Then, the Secretary-General will be tasked with presenting a draft for member states’ consideration and eventual agreement at the 2015 General Assembly.

 A Conversation with Jim Yong Kim and UN Secretary General Ban Ki-Moon.So much for process. But what about substance? Already, some of the contours of the new agenda are emerging. It will be a single agenda, merging the efforts to eradicate poverty and to promote sustainable development. It will be a universal agenda, with actions to be taken by all countries. It will probably include consideration of personal safety, of strengthening institutions, and of infrastructure, jobs and growth, none of which are currently part of the Millennium Development Goals. Gender equality is likely to be emphasized more. There is much talk of a new global partnership, although that means making progress on things like agricultural subsidies, the global trade talks, and other international agreements on which progress has stalled. These themes have emerged in a number of reports that were considered by the UN at various special events last week. Among those reports is the report of the High-Level Panel on the post-2015 agenda (Disclaimer: I was the Lead Author for that report.)