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The big economic view, Brazil, the utility of economists, slow trade, and consumption floors

LTD Editors's picture
Following a disappointing 2014, developing countries should see an uptick in growth this year, according to the latest Global Economic Prospects report. But low oil prices and a stronger US economy will not be enough to counter renewed bouts of financial market volatility and worries about diverging monetary policies across major central banks. On top of that, measures are needed to recover fiscal space in developing countries.

What can the cost of Big Macs tell us about the relative attractiveness of sending remittances?

Christian Eigen-Zucchi's picture
Why do migrants send international remittances? They do so mainly because in caring about the well-being of their family and friends, they wish to convey purchasing power for a basket of goods and services. This is the same as individuals choosing among different goods and services to buy and consume (for themselves and for others), only that it crosses international borders.

Who needs cars? Smart mobility can make cities sustainable

Pierre Guislain's picture
 

Last year marked an important tipping point: for the first time, half of the global population lives in cities. Cities currently add 1.4 million people each week and this population growth comes with new buildings, roads and transport systems.

In fact, 75 percent of the infrastructure that will be in place by 2050 does not exist today. With cities poised to invest now in infrastructure that will last for decades, huge opportunities lie ahead. But without major shifts now in how we manage established as well as rapidly growing cities, we risk losing out on the potential of urbanization to create more inclusive and prosperous societies.

2015 offers a big chance for the international community to help put cities on a more sustainable path. We at the World Bank and the World Resources Institute (WRI) believe that we must seize this opportunity, because cities and urban mobility are key to a sustainable future.

Business-as-usual urbanization patterns come at a hefty price. Cities already produce 70 percent of energy-related greenhouse gas emissions and traffic crashes claim 1.2 million lives per year, with developing cities carrying the greatest burden.

Traffic congestion cost Rio de Janeiro and São Paulo a combined $43 billion in 2013 alone, equivalent to 8 percent of each city’s GDP. In Beijing, the costs of congestion and air pollution are estimated at 7-15 percent of GDP. Urban sprawl costs the United States alone $400 billion per year.

This is not the future we want for our cities.

Will cheap oil lead to cheap food?

Juergen Voegele's picture

The halving of world oil prices over the last six months raises questions about the implications for food prices and the welfare of poor people.
 
Do lower oil prices mean lower food prices? To a certain extent. But for low-energy cropping systems common in most developing countries, and in areas where food is not transported far, the impact will be dampened. For large oil exporters, however, food prices may increase. In general, lower oil prices should lower the cost of moving food from producers to consumers and reduce on-farm fuel and fertilizer costs. But a countervailing factor is that cheap oil may also induce people to drive more, and as fuel ethanol mandates link biofuel use to overall fuel use, ethanol use and the volume of maize used to produce it would also go up. In countries where oil is a large share of exports, real exchange rates may depreciate, which will disproportionately increase the price of traded goods like grains relative to other prices.
 
Is the downturn in agriculture commodity prices necessarily bad for farmers who produce food? A major downturn in commodity prices would not be great for farm incomes, and high crop yields would be needed to help dampen the effect on farm profits.  Lower fertilizer and transport costs may help mitigate any negative impacts.
 
How long will oil prices remain low? While there is no certainty in forecasts, current estimates suggest fuel prices will remain low for 2015, increasingly slightly in 2016. There are three main drivers of the oil price decline which are structural: Significant increases in US shale oil production, receding concerns of oil supply disruptions in the Middle East, and a change in OPEC policy to maintain rather than cut production.

Working With The Grain: An Important New Book on Rethinking Approaches to Governance

Duncan Green's picture

Even though it’s relatively short (223 pages), Working With the Grain (WWTG) took me two months to finish, but I’m glad I did. It adds to a growing and significant body of literature on ‘doing development differently’/’thinking and working politically’ – Matt Andrews, Adrian Leftwich, David Booth, Diana Cammack, Sue Unsworth etc. (Like Matt and Adrian, WWTG author Brian Levy is a white South African – what attracts that particular group to rethinking governance would make an interesting study in itself.)

Brian summarizes the common elements of this emerging school of thought as:

"An insistence that the appropriate point of departure for engagement is with the way things actually are on the ground — not some normative vision of how they should be;

A focus on working to solve very specific development problems – moving away from a pre-occupation with longer-term reforms of broader systems and processes, where results are long in coming and hard to discern [...]

Recognition that no blueprint can adequately capture the complex reality of a specific setting, and thus that implementation must inevitably involve a process of iterative adaptation." (pg. 207)

What makes this book special is Brian’s CV – two decades at the World Bank, which experience he raids to provide great case studies throughout. It feels like he’s now gone back into academia (he teaches at Johns Hopkins and the University of Cape Town) partly to make sense of what he’s learned from 20 years of success and (more often) failure (he characterizes the orthodox governance approach as ‘a breathtaking combination of naivete and amnesia’). Unlike most such tomes, I found it clearer on the ‘so whats’, than the general diagnostic, which tends to get bogged down in endless 3 point lists and typologies (hence the two months).

Lessons Learned from Armenia's Open Skies

Daniel Saslavsky's picture
"Flight 2." Source - Ken Douglas


Air transport is an increasingly critical area for trade and trade facilitation. As such, our World Bank trade teams are always searching for global good practice and promising policy results.

This search recently brought us to Armenia, where an “Open Skies” policy has been in place since late 2013. For a country with a long legacy of tight regulations in its commercial aviation market, this new policy signaled a sharp break from tradition.

Although there are no single accepted definitions of Open Skies, it refers to a set of provisions typically agreed on a bilateral basis, that enable each party to set freely the number of flights, carriers, types of aircraft and destinations; but also pricing freedom, as well as establishing the conditions for fair competition and provisions for carriers to engage in commercial cooperation.  

Armenia’ Open Skies policy is particularity important when considering the country’s historically limited connectivity with international markets – partly determined by geography, and partly determined by geopolitical considerations. Besides being landlocked, the country has open land borders with only two of its four neighboring countries.

Weekly Wire: The Global Forum

Roxanne Bauer's picture

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

Many in Emerging and Developing Nations Disconnected from Politics
Pew Research
In recent years, high-profile protest movements have erupted in several emerging and developing countries, roiling, and sometimes overturning, the political status quo in Tunisia, Egypt, Turkey, Ukraine, Brazil, Thailand and other nations. Millions have demonstrated, and activists have pioneered new forms of online engagement.  However, a recent Pew Research Center survey finds that many people in these nations remain relatively disconnected from politics. Although most vote in elections, few take part in other forms of political participation.
 
21st-century censorship
Columbia Journalism Review
Two beliefs safely inhabit the canon of contemporary thinking about journalism. The first is that the internet is the most powerful force disrupting the news media. The second is that the internet and the communication and information tools it spawned, like YouTube, Twitter, and Facebook, are shifting power from governments to civil society and to individual bloggers, netizens, or “citizen journalists.”  It is hard to disagree with these two beliefs. Yet they obscure evidence that governments are having as much success as the internet in disrupting independent media and determining the information that reaches society. Moreover, in many poor countries or in those with autocratic regimes, government actions are more important than the internet in defining how information is produced and consumed, and by whom. 
 


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