Editor's Note: Khrystyna Kushnir is a consultant on micro, small and medium-sized enterprises with the Enterprise Analysis Unit of the World Bank Group.
The landmark piece of legislation that President Obama signed into law yesterday - The Wall Street Reform and Consumer Protection Act, 2010 - was a massive lift for all concerned. Students of governance always say that a crisis is one of the best opportunities for reform, yet the fact of the global financial crisis has not made the reform of financial services an easy lift in any country. And we all know why: banks are rich and they can hire the best lobbyists either to block or water down the reform. So, the reform process has been tough, but now we have the historic legislation.
Last Thursday night, Charlie Rose interviewed Barney Frank, the Chair of the Financial Services Committee of the US House of Representatives. Frank, together with Senator Dodd, his opposite number in the Senate, shepherded the new law through Congress over many tough months. Towards the end of the interview, Rose asked him to reflect on the lessons of the reform process itself. What had he learned? You might be surprised by one of the things he said; but, then, if you have been reading this blog, you might not be.
Here is what he said:
Usually, the term 'G20' induces images of interminable meetings and high-minded but vaguely worded communiques. But the G20 is trying to get hip. It is sponsoring a competition to crowdsource ideas for one of the perennial problems of development (and one greatly exacerbated by the financial crisis) -- access to finance by SMEs. Here are the details:
Editor's Note: Nadia Piffaretti is assistant and advisor to the Senior Vice President and Chief Economist, Development Economics.
“The world has been slow to realize that we are living in the shadow of one of the greatest economic catastrophes of modern history”. This could be the opening to any one of the dozens of Op-Eds appearing since the start of the crisis, but they are the words of J. M. Keynes from his 1930 piece The Great Slump of 1930.
F. Halsey Rogers, a World Bank economist in the Development Research Group, has put together a helpful summary of the impact of the crisis on development thinking. Clearly, financial markets in rich countries went haywire. What should this mean for the role of markets in developing countries?
This month's edition of The Atlantic contains an excellent profile of economist Paul Romer and his campaign to create charter cities. Money quote:
Bill Easterly argues that development is about creating problem-solving systems, and not just individual solutions or interventions for specific problems (e.g. malaria, access to finance, etc.). The whole post is worth reading in full, but here is a snippet:
Editor's Note: Kusi Hornberger is an Investment Policy Officer with the Investment Climate Advisory Services of the World Bank Group.
I just realized that what is called "Keynesian stimulus" works differently when the government is starting off a situation of deficit. The math would produce different results, which makes me wonder why economists cannot spot it (I inject more perturbations and see massive fragility). In one case, to make an analogy to an individual, you can invest money you have on the side(assuming you've had suspluses [sic] from the past). In the other, you fragilize yourself by borrowing, and transfer the liabilities cross-generations.
Last month Jaana Remes, a senior fellow at the McKinsey Global Institute, came to the World Bank to discuss the findings of a new report called How to Compete and Grow: A Sector Guide to Policy. Remes spoke on a topic that has not been a traditional strong suit of the Bank, viz. competitiveness policies for particular sectors of the economy.