Normative Narratives


Leave a comment

Economic Outlook: Inelastic Demand, Imperfect Competition, and Price Regulation

Talk is cheap, which is why makes sense for business owners to claim prices will increase and / or mass layoffs will result if regulations are put in place. What this really means is that profits will fall, so it is worth it to talk (which, remember, is cheap), and hire lobbyists (which are relatively cheap for big business compared to the benefits they deliver) to support these claims.

In most cases, markets decide pricing. Increase prices, and people can substitute your good for a competitors. Lay people off to make a political statement, and you forego market-share that will be readily snapped up by competitors. In competitive markets, these problems tend to regulate themselves. While true Perfect Competition doesn’t exist in reality, some markets are closer to this ideal than others.

Under perfect competition, there are many buyers and sellers, and prices reflect supply and demand. Also, consumers have many substitutes if the good or service they wish to buy becomes too expensive or its quality begins to fall short.

When a good is necessary for living (healthcare) or for social mobility (college), imperfect markets can price lower income people out.

bls data

Base Year 1978 (Prices = 100)

Healthcare:

ACA–companies justify price increases:

Rate Review helps protect you from unreasonable rate increases. Insurance companies must now publicly justify any rate increase of 10% or more before raising your premium.

Price controls imposed as part of the ACA are at least partially responsible for the dramatic slowdown in healthcare cost increases over the past few years (the Great Recession was another major factor).

College:

While a college education is not a silver bullet, it is an important element of the social mobility puzzle. As the graph above shows, college costs have skyrocketed in recent decades, leading poorer students to take on increasing levels of debt to afford a degree.

Those who complete their degree still tend to realize a strong return on investment, but the high (and increasing) debt burden is a huge stressor, which likely contributes to poor graduation rates (especially among lower class students). The combination of non-completion (and related low earnings) and high debt can result in an inescapable debt cycle.

A good proxy for the “necessity” of a good or service is it’s elasticity of demand:

Products that are necessities are more insensitive to price changes because consumers would continue buying these products despite price increases.

The availability of substitutes…is probably the most important factor influencing the elasticity of a good or service. In general, the more substitutes, the more elastic the demand will be.

Imperfect markets result in a lack of substitutes, as barriers to entry result in little competition. Policymakers can start with a matrix of competitiveness and necessity (elasticity of demand); goods and services that are both necessities and exist in highly imperfect markets are primary candidates for price regulation. Two obvious tools for regulating these markets are:

  1. Price controls (making companies justify price increases over a certain threshold)
  2. Tying federal funding to price oversight

 

Price controls may seem like a blunt tool, but they can actually be quite nuanced. Take the ACA’s “Rate Review”. A company can has an opportunity to make its case that a price increase is justified; if it justified is, the government will allow it. It is in no ones interest to see businesses fail in the name of price control regulation. Such failures hurt the economy, and undermine support for the regulatory policies that lead to their failure.

What is the American dream? Is it meritocracy and social mobility, or is it the freedom to charge whatever the market will bear regardless of the social cost?

Admitting their are limits to what PC market models can achieve in the real world does not make you a socialist. It makes you a good economist and policy analyst. There is room for these industries to remain private and profitable. That does not mean we cannot regulate them in ways that make them work for society as a whole (considering the social benefits when they are widely available, and the social costs when they are not).

It is the job of politicians to identify these markets and call owners on their bluffs. Failure to do so reinforces power asymmetries that stifle social mobility.


Leave a comment

Conflict Watch: Kurdish Awakening

Original article:

Turkey and the United States have agreed in general terms on a plan that envisions American warplanes, Syrian insurgents and Turkish forces working together to sweep Islamic State militants from a 60-mile-long strip of northern Syria along the Turkish border, American and Turkish officials say.

The plan would create what officials from both countries are calling an Islamic State-free zone controlled by relatively moderate Syrian insurgents, which the Turks say could also be a “safe zone” for displaced Syrians.

And with only 60 Syrian insurgents having been formally vetted and trained by the United States under a Pentagon program, questions also remain about which Syrian insurgents and how many will be involved in the new operation. A larger number of rebels that American officials deem relatively moderate have been trained in a covert C.I.A. program, but on the battlefield they are often enmeshed or working in concert with more hard-line Islamist insurgents.

Such Syrian Arab insurgents would gain at the expense of the People’s Protection Units, a Kurdish militia known by the initials Y.P.G. that is seeking to take the same territory from the east. While the United States views the group as one of its best partners on the ground, Turkey sees it as a threat; it is affiliated with the Kurdistan Workers’ Party, a militant group whose longstanding conflict with Turkey has flared anew in recent days.

The plan does not envision Turkish ground troops entering Syria, although long-range artillery could be used across the border. Turkish ground forces would work on their side of the border to stem the Islamic State’s ability to infiltrate foreign fighters and supplies into Syria.

Awakening–an act or moment of becoming suddenly aware of something. Awakening is the word used to describe the coming together of disparate Sunni tribes and U.S. coalition forces to fight and defeat al Qeada in Iraq–the “Sunni Awakening”.

But there was another “awakening” for these factions–a rude awakening. After doing the heavy lifting on the front lines, these Sunni factions were largely shut-out of the political reunification of Iraq. This was not only unjust, it contributed to the government ineptitude and subsequent power-vacuum that has helped fuel ISIL’s rapid advance across Iraq.

There is a parallel in the fights against ISIS and Assad. This time, the YPG and PKK Kurdish forces are playing the front-line role. Furthermore, the Kurds are far more ideologically aligned with “Western values” than the Sunni Awakening tribes ever were.

My first thought when I heard Turkey was stepping up its fight against ISIS was “about time”. But my enthusiasm was quickly tempered as it became clear that Turkey’s plan is more about fighting the PKK and Turkish politics than the fights against ISIS and Assad. Turkey has the capacity to play a very important role in the fights against Assad and ISIL–this plan does not fulfill that role, and will likely be a net-negative.

The Kurdish pesh merga is a capable military with boots on the ground. Kurdish political leadership is stable and able to balance security and human rights better than any Middle-Eastern government aside from Turkey, Israel, and Tunisia. For a fraction of the financial and moral support sunk into failed ME regimes, Kurdistan could probably now be a fully functioning democratic state by now–I reiterate my support for an independent Kurdistan (although not on Turkish land, but in parts of Syria and Iraq).

For its part, Kurdish political leadership must denounce terrorist attacks against the Turkish government, and distance itself from any radical elements of their parties. Such terrorist attacks are counter productive–they cost the Kurdish statehood movement public support (which is a necessary element for ever becoming an internationally recognized state) and provide Turkey with legitimate reasons to attack Kurdish positions.

The Kurds should also expand their security mandate from solidifying their borders, to actively engaging and degrading ISIL. Backed by coalition airstrikes, boots on the ground are exactly what the fight against ISIL is most lacking. Despite war at it’s front door, Turkey will still not provide ground troops. The Kurds can use this cowardly position to their advantage, juxtaposing the importance of its ground troops against moderately useful Turkish air bases (yes they allow coalition airstrikes to get to positions faster, but without boots on the ground acting in concert with these airstrikes, they are largely ineffective in the fight against ISIL).

If the Turks want to stay out of the fight against ISIL and Assad, that is its prerogative as a sovereign nation. But the U.S. government and NATO should not sanction Turkey using this fight as a cover to degrade the one capable force on the ground fighting both ISIL and Assad. There is no longer a moderate Syrian opposition without the pesh merga. We should heed the lessons of abandoning our front-line allies after they have done “the dirty work” of war. The Kurds will not remain our allies if we abandon them at the first hint of Turkish intervention in the fight against ISIL.

(Update: In a further blow to the moderate Syrian rebels who figure so prominently in Turkey’s plan to fight ISIS and Assad, the leader of the only U.S. vetted force, Nadeem Hassan, was kidnapped along with 6 other rebels. This puts the number of vetted moderate Syrian rebels somewhere between 53 and 47, a reasonably large college lecture class, but not an army capable of fighting ISIS or Assad, regardless of the level of aerial support.)

Assad and ISIL cannot last indefinitely. The question is what morning-after do we want the Kurdish people to awaken to? The one where we stood by them as partners? Or the one where we gave the thumbs up for Turkey to bomb them after months of doing the world’s dirty work fighting ISIL? 

The Obama administration misplayed its hands in Syria and Egypt. Over time, what began as legitimate democratic movements became exactly what the Assad and Sisi wanted–a fight between “strong men” and radical extremists. We cannot let Kurdistan, a budding “Island of Decency” (in the words of Thomas Friedman), become another example of a failed democratic movement in the Middle East.

Some countries are truly not ripe for democratic modernization–it is a process. Failure to realize this can lead to costly wars and greater instability than before said interventions started. This is not to say the international community cannot or should not use it’s intelligence and resources to identify and support the civil elements within a country that are laying the socioeconomic and ideological groundwork for future democratic movements–we should. But we must be realistic when considering our willingness to dedicate resources and our partners capacities when determining whether direct intervention is a pragmatic decision; moving too fast is as bad as not moving at all.

At the other end of the spectrum, failure to support movements that have the capacity to solidify universal aspirations of freedom into sustainable political infrastructure and government administration–such as Kurdish leadership–should not be an option either. Not only does this go against “Western values”, it is geopolitically short-sighted. Furthermore, continuing to make this mistake makes the “democracy cannot exist in the middle east” narrative self-fulfilling.


Leave a comment

The Greek Bailout Deal Is A Failure of Leadership in Both Greece and Germany

Kick-The-Can2

The terms of the 3rd bailout deal between Greece and its creditors brought a lot of issues to the forefront.

Silly me for thinking negotiations had to with economics–modernizing the Greek economy by enacting needed structural reforms, while providing the Greek government with the fiscal space needed to promote growth and address it’s pressing humanitarian crisis (which said structural reforms would only exacerbate in the short run). Instead, the defining elements of the deal were related to personality and politics.

The Germans were mad at the Greeks, so much so that German finance minister Wolfgang Schäuble said perhaps Greece might be better off leaving the Euro–this short-sighted self interest is not suitable behavior for Europe’s de facto leader. Tsipras’s government, for it’s part, apparently did not have a backup plan in case it’s creditors failed to offer a reasonable deal. I know Syriza is new to politics, but you don’t have to be a master negotiator to know that going into negotiations without a backup plan is a flawed strategy.

I was a fan of Tsipras’s government because of the interim agreement it secured in February–the potential for trading structural reforms for fiscal space. But since that point it terribly misplayed its hand. It went into negotiations without a backup plan. It held a referendum at least a month too late–the overwhelming “no” vote would have been a strong bargaining chip had Greece been able to take it back to the negotiating table while still covered under the terms of its prior bailout.

But once those terms expired, and Greek banks closed, the only choices for Greece were Grexit or capitulation. Since there was no plan in place for a Grexit, Greece ended up with the terrible deal it got. That deal–as it currently stands–fails in all regards: financial sustainability, growth prospects, and short term humanitarian concerns.

Not Financially Viable:

The International Monetary Fund threatened to withdraw support for Greece’s bailout on Tuesday unless European leaders agree to substantial debt relief, an immediate challenge to the region’s plan to rescue the country.

A new rescue program for Greece “would have to meet our criteria,” a senior I.M.F. official told reporters on Tuesday, speaking on the condition of anonymity. “One of those criteria is debt sustainability.”

The I.M.F. is now firmly siding with Greece on the issue. In a reportreleased publicly on Tuesday, the fund proposed that creditors let Athens write off part of its huge eurozone debt or at least make no payments for 30 years.

The I.M.F. said in its report that a write-down could be avoided, but only if creditors extended the schedule for Greece to repay its debt. The only other alternative to a haircut would be for the eurozone countries to give Greece the money it needs to repay them.

“The choice between the various options is for Greece and its European partners to decide,” the I.M.F. report said.

Greece would need to spend a sum equal to more than 15 percent of G.D.P. annually to pay interest and principal on its debt, according to the latest I.M.F. report.

Does Not Fulfill Greek’s Human Rights:

The implementation of new austerity measures in Greece amid the country’s deteriorating economic crisis must not come at a cost to human rights, a United Nations expert warned today as he urged international institutions and the Greek Government to make “fully informed decisions” before adopting additional reforms.

“I am seriously concerned about voices saying that Greece is in a humanitarian crisis with shortages in medicines and food,” Juan Pablo Bohoslavsky, the UN Independent Expert on foreign debt and human rights, stressed in a press statement today. “Priority should be to ensure that everybody in Greece has access to core minimum levels of economic, social and cultural rights, including the right to health care, food and social security.”

“A debt service burden that may be sustainable from a narrow financial perspective may not be viable at all if one considers the comprehensive concept of sustainable development, which includes the protection of the environment, human rights and social development,” he added.

And of course, as the IMF report highlights, the deal is not even “sustainable from a narrow financial perspective”.

Kicking the Can or Letting Heads Cool?

If Greece’s creditors, led by Germany, ultimately want to see Greece stay in the Eurozone (for the long run), a friendlier deal is needed. If a “Grexit”, with its short term pain but long term possibilities to return Greece to economic health, is indeed in Greece’s best option given what it’s creditors are willing to offer, why not take that tough medicine and let the healing start? The current deal represents the worst of both worlds–economic pain now and a likely Grexit in the future.

The one positive of this deal is that it did buy time, which should not be undervalued as “Grexit” would be permanent and have terrible geopolitical consequences. But  without stimulus (there are talks of a 35 billion euro stimulus fund by 2020 if reforms are fully implemented, but this may be too little too late) and debt restructuring (which cannot be ruled out, but also cannot be counted on), the deal is little more than kicking the can down the road–all while the Greek people continue to suffer.

Greece’s creditors cannot keep dangling future carrots while imposing fiscal restraints which hurt Greece’s already beleaguered citizenry in the here and now. Aid must be synced with structural reforms, or else the Greeks will see their situation go from terrible to worse and reject the terms of this 3rd bailout. 

Doing the same thing and expecting different results is the definition of insanity. Greece has tried to implement reforms in order to unlock future aid before, and we see where that got it--a severely contracted economy, depression level unemployment rates, and costly political instability. 

This is not the time for more business as usual; this is the time for bold action and trust between Greece and it’s creditors. Unfortunately nothing about the past few months of negotiations suggest this is outcome will be realized.

 


Leave a comment

Economic Outlook: The “Neighborhood Effect” on Social Mobility

New Bitmap Image

The 2014 Education Choice and Competition Index Map

The “Neighborhood Effect” on Personal Development:

In a recent blog, we examined Harvard economist Raj Chetty’s study on the “Neighborhood Effect” on social mobility–how where a child grows up impacts the life he or she comes to live. The neighborhood one grows up in affects ones prospects later in life primarily in two ways:

1) Experiences: The people one meets and interacts with outside of family (friends, role-models, mentors, etc.). I would like to highlight President Obama’s “My Brother’s Keeper” initiative–which matches underprivileged minority youths with positive role-models–as a powerful tool in promoting social mobility.

2) Quality of schools and other public services: These institutions enable children to pursue interests that keep them “off the streets”, and if cultivated can lead to very marketable skills. Good public schooling and extracurricular programs are important for everyone, but even more so for lower-income children, whose families otherwise likely could not provide such opportunities.

The neighborhood one grows up in can either mitigate or exacerbate the affect a person’s family has on their personal development; a “good” neighborhood will benefit a child, while a “bad” neighborhood (we will use median income as a proxy) can hinder them. The combination of “bad” parenting and a “bad” neighborhood can create a nearly inescapable poverty trap; just because there are one-in-a-million stories of rags-to-riches with no help doesn’t mean we should accept leaving the vast majority of poor minority youths behind.   

Unfortunately, the data shows that–even holding income constant–minority families tend to live in poorer neighborhoods than their white and Asian-American counterparts. The findings are especially notable because they come shortly after a separate research project, by two Harvard economists, that we’ve covered in detail at The Upshot. That project has tracked several million children since the 1980s to analyze how the area where they grew up affected their lives. Children who grew up in better neighborhoods — which tended to have less poverty, less crime, more two-parent families and schools with higher test scores — fared much better as adults than otherwise similar children from worse neighborhoods.

The new paper, being published in The Annals of the American Academy of Political and Social Science, suggests that these neighborhood effects are helping to widen racial disparities, including disparities in upward mobility.

Consider these numbers: A typical black child living in a household with $100,000 in annual income lives in a neighborhood with a median income of $54,400. And a black child in a household making $50,000 typically lives in a neighborhood with a median income of $42,200.

White and Asian children are much more likely to live in neighborhoods where median income is similar to — or higher than — that of their own family. Latino children fall in the middle, less likely than white and Asian children to live in middle-class or affluent neighborhoods but more likely than black children to do so.

Of course, the neighborhood gap arises in part from voluntary choices. Many Americans, of all races, prefer to live among people who are similar to them, note Mr. Reardon and his colleagues Lindsay Fox and Joseph Townsend. For African-Americans, such a choice often means living in lower-income areas, given the racial disparity in incomes.

Taken together, the research shows that neighborhoods matter enormously to a child’s life chances — and play a big role in the nation’s racial inequalities. Some of the gaps will persist as long as the white-black income gap does. But some of the problems are more easily addressed through housing policy.

Housing developments that allow low-income families to move into higher-income neighborhoods appear to be a cost-effective antipoverty strategy. Vouchers that help lower-income families move into better neighborhoods may be even more so.

The fact that the neighborhood gap arises partially from choice cannot be ignored. And as the article points out, incomes are not the only consideration when choosing where to live. Wealth also matters–in America White people’s median wealth is much greater than their Latino and Black counterparts.

Whatever the reason, financial or social, minority families tend to live in poorer neighborhoods, perpetuating racial economic disparities across generations.

Desegregating America: Rethinking The Fair Housing Act and Promoting School Choice

Lost in the mix of two landmark Supreme Court rulings on gay marriage and healthcare subsidies, the Supreme Court recently made an important ruling with regards to federal housing policy that could help chip away at racial isolation:

The Supreme Court on Thursday endorsed a broad interpretation of the Fair Housing Act of 1968, allowing suits under a legal theory that civil rights groups say is a crucial tool to fight housing discrimination. “Much progress remains to be made in our nation’s continuing struggle against racial isolation,” Justice Anthony M. Kennedy wrote for the majority in the 5-to-4 ruling. “The court acknowledges the Fair Housing Act’s continuing role in moving the nation toward a more integrated society.” The question in the case was whether plaintiffs suing under the housing law must prove intentional discrimination or merely that the challenged practice had produced a “disparate impact.” Drawing on decisions concerning other kinds of discrimination, Justice Kennedy said the housing law allowed suits relying on both kinds of evidence.

The first kind of proof can be hard to come by, as agencies and businesses seldom announce that they are engaging in purposeful discrimination. “Disparate impact,” on the other hand, can be proved using statistics.

The latest case, Texas Department of Housing and Community Affairs v. Inclusive Communities Project, No. 13-1371, was brought by a Texas group that favors integrated housing. The group helps its clients, who are mostly lower-income black families, find housing in the Dallas suburbs, which are mostly white.

The families use housing vouchers, but not all landlords accept them. Landlords receiving federal low-income tax credits, however, are required to accept the vouchers.

The fair housing group argued that state officials had violated the Fair Housing Act by giving a disproportionate share of the tax credits to landlords in minority neighborhoods.

The Supreme Court returned the case to the lower court for further proceedings, cautioning that allowing disparate-impact suits did not mean that they should always succeed. Indeed, Justice Kennedy expressed concern about “abusive disparate-impact claims” and suggested that the case before the court would face headwinds.

Not surprisingly, racially segregated neighborhoods have led to racially segregated schools, an issue brought up by presidential hopeful Hillary Clinton. While a broad interpretation of the Fair Housing Act enables communities to chip away at the neighborhood gap, all levels of government should also promote efforts to desegregate schools through policies that enable greater choice in schooling:

School districts across America are transitioning from the traditional model of assigning students to a school based on their residential address to a system that allows families a choice of schools. Depending on the district, families can choose public charter schools, affordable private schools, magnet schools, virtual schools, and regular public schools in which enrollment is based on parental preference rather than zip code.  Districts differ in which of these options is available, the ease with which parents can exercise the choices available to them, and the degree to which the choice system results in greater access to quality schools.

Like a child’s parents, the neighborhood he or she grows up in is outside his or her control. The purpose of social mobility policies should be to ensure that children that “lose” the “parenting / neighborhood lotteries” still realize some developmental floor, enabling them to realize their full potential.

Making children pay for the questionable choices of their parents is not only socially unjust, it is economically shortsighted. 

The First Step Towards Recovery is Admitting There is a Problem:

In the wake of the recent massacre at the Charleston S.C. Emanuel African Methodist Episcopal Church, there has been a lot of soul-searching amongst Americans. The question on many peoples minds’ being “is America a post-racial country?”–it would appear not. Taking down Confederate flags, while itself a positive step, can have at best a marginal impact on race relations.

The best way to overcome racial divisions is to have people of different races interact with one another. This puts a human face to stereotypes, and exposes the false anecdotes on which they are based (SPOILER: every culture and race has industrious, innovative, good people, as well as lazy, stupid, evil people–it is not a racial thing).

Integration efforts have their greatest impact at a young age, when people’s world views are being formed, another reason why primary school integration is such an important avenue for overcoming racial divides. I know this from first hand experience–attending public schools K-12 with classmates from diverse racial and socioeconomic backgrounds undoubtedly impacted my personal beliefs. This highlights another important point–desegregating neighborhoods and schools is not only beneficial to low income people, it benefits the children of current wealthier residents as well.

The ability to interact with people of diverse backgrounds will only become more important as globalization continues to make the world “smaller”. Children who are not exposed to different types of people will find themselves shut out of many opportunities in the global economy.

The SCOTUS Fair Housing Act decision and expanding school choice are important policy tools in the fight to promote equality of opportunity, meritocracy, and social mobility, while also addressing the very real remnants of America’s lingering racially charged history.

This multi-pronged approach, utilizing both affordable housing policy and school choice policies, are also the cornerstones of Raj Chetty’s policy mix for addressing social mobility–I fully support this prescribed policy mix as an important piece of the social mobility puzzle. “My Brother’s Keeper” type mentor programs are another important tool.

Of course there are other “poverty traps” (which tend to disproportionately affect racial minorities), many of which I have discussed in past blogs, such as the America’s current criminal justice system and predatory payday loans. Addressing each of these poverty traps requires its own nuanced policy mix.

Update (7/9): The Obama administration today announced stricter plans for holding localities accountable for how they dispense federal low income housing credits:

The Obama administration announced an aggressive effort on Wednesday to reduce the racial segregation of residential neighborhoods. It unveiled a new requirement that cities and localities account for how they will use federal housing funds to reduce racial disparities, or face penalties if they fail.

“This rule makes it clear that the fair housing obligation isn’t just being able to say, ‘I didn’t discriminate,’ ” Mr. Breymaier said. “It’s also saying, ‘I’m doing something proactively to promote an integrated or inclusive community.’ ”

Ed Gramlich, a senior adviser at the National Low Income Housing Coalition, cautioned that change was likely to come slowly. Local governments that receive federal funding are required to draw up plans once every five years. For some jurisdictions, the new rules may not need to be addressed until 2020.

Still, he described the new requirement as “tremendous.” Until now, he said, local governments have basically had the freedom to decide for themselves whether they were complying with the 1968 law.

“Jurisdictions would say, ‘We put up a fair housing poster during Fair Housing Month,’ and that was it,” he said. “The whole concept was unenforceable and therefore meaningless.”


1 Comment

The Democratic Costs of a “Grexit”

To Grexit, or not to Grexit?

Greece’s negotiations with its creditors have not gone smoothly.  The Greek government treated an interim deal reached in February as a starting point for negotiations, while it’s creditors considered it more of an non-negotiable outline of a deal. The result has been two sides talking past each other; the longer this situation persists, the more likely a “Grexit”–Greece leaving the Eurozone and / or EU–becomes.

There is a ton of middle ground for the two sides–both want Greece to return to growth and full employment. The Greek government also wants a safety-net for people negatively affected by labor market and other structural reforms; pushing already impoverished people further into poverty is not only morally reprehensible, it is bad economics.

To prevent this result, Greece has passed an “anti-poverty law” to protect its most vulnerable citizens. The problem is financing this program; the Greek government needs room to implement needed structural reforms without further destabilizing Greek society.

In addition to staving off a humanitarian crisis, Greece also needs a long-term growth strategy beyond structural reforms. There are few options for the Greek government:

1) It can completely comply with creditor demands.

2) It can continue to push its lenders for more fiscal space (smaller primary surplus and / or promises of greater EU level aid / debt relief).

Or,

3) It can default on its debts and exit the Eurozone.

The first option is a non-starter, as the Greek government feels current demands would exacerbate social and economic hardship in Greece.

The second option would allow Greece to leverage more public money for safety net programs, educational and workforce training programs, and public private partnerships. This would allow Greece to avoiding default while mapping out a plan to boost economic growth.

The last option would be painful in the short-run as Greece would get battered by financial markets and possibly have to deal with currency instability as it reintroduced the drachma(?), but it would open policy space and make Greece much more competitive in terms of cost of doing business. A Grexit could also lead to a domino effect–if other ailing E.U. countries see a post-E.U. Greece succeeding, it would bolster anti-E.U. parties within these countries.

It is obvious that the second choice is in everyone’s best interests. Unfortunately, that is no guarantee this route will be taken:

Herman van Rompuy [former head of the European Council of EU leaders] told a Brussels conference that if Greece were to leave the euro zone, that would also have geopolitical repercussions in the current standoff with Russiaover Ukraine, emboldening Moscow to see Europe as weak.

Van Rompuy urged all sides to consider the political and geopolitical implications of such a step and not just the economic and financial arguments.

“I hope we will never have to answer the Grexit question,” he added

Greece staying in the E.U. is important for both sides of the negotiation. There are enough crises in the world without manufacturing one in Greece. It is exactly times like these when budgetary restrictions should be relaxed in the name of pragmatic, longer-term priorities. But so far Greece and it’s lenders have been unable to map out a solution that worksall parties involved, and so the current impasse and possibility of an “accidental Grexit” persists.

Greece did submit a new proposal to it’s creditors yesterday, and it was apparently strong enough that it got an unofficial endorsement from French Prime Minister Francois Hollande. This could be meaningful development, as heads of major European states have to this point been reluctant to acknowledge Greek concessions. It is a step towards the “political dialogue” Tsipras has been pleading for (framing the debate less in adversarial terms between debtor and creditor, and more as a mutual compromise between equal partners working towards a common goal).

“Democracy in Recession”

If Greece were to leave the EU, (aside from the economic impact) there would be significant geopolitical repercussions, including a Greek pivot towards Russia. The Greek government has already signaled it disagrees with EU sanctions on Russia. More recently, it was reported that Putin and Tsipras “did not discuss financial aid” on the sidelines of the St. Peteresburg International Economic Forum. Generally speaking, whenever someone has to defend that something “wasn’t discussed”, it means it either was discussed or very likely will be in the future.

This is not to say that Greece would stop being functioning as a democracy if it leaves the EU. In fact, it is a strong belief in democratic ideals that underpin the current standoff between Greece and it’s creditors. But a fracturing of the EU would certainly be a blow to the ideals the EU stands for–peace and prosperity through a cooperative, democratic international system. Specifically, if Greece signed a natural gas pipeline deal with Russia, it would undermine the current sanctions regime against Russia.

Even more alarmingly, Greece’s problems are emblematic of a greater inward shift by major democratic powers:

A recent NATO Poll found that “At least half of Germans, French and Italians say their country should not use military force to defend a NATO ally if attacked by Russia,” the Pew Research Center said it found in its survey, which is based on interviews in 10 nations.

In the United States, the study notes, support for NATO remains fairly strong. Americans and Canadians, it says, were the only nationalities surveyed in which more than half of those polled believed that their country should take military action if Russia attacked a NATO ally.

This is further evidence of a worrying global trend, what Thomas Friedman calls Democracy in recession”:

“…perhaps the most worrisome dimension of the democratic recession has been the decline of democratic efficacy, energy, and self-confidence” in America and the West at large. After years of hyperpolarization, deadlock and corruption through campaign financing, the world’s leading democracy is increasingly dysfunctional, with government shutdowns and the inability to pass something as basic as a budget. “The world takes note of all this,” says Diamond. “Authoritarian state media gleefully publicize these travails of American democracy in order to discredit democracy in general and immunize authoritarian rule against U.S. pressure.”

Diamond urges democrats not to lose faith. Democracy, as Churchill noted, is still the worst form of government — except for all the others. And it still fires the imagination of people like no other system. But that will only stay true if the big democracies maintain a model worth following. I wish that were not so much in question today.

Look, I get it. The world is still emerging from a generational economic crisis. Democracies are first and foremost accountable to their electorates, and in the face of short-term problems it is difficult to sell the importance of dealing with seemingly longer-term issues. But this is what we should demand of our political leaders–the ability to meet peoples short term needs while simultaneously laying the groundwork for long-term peace and prosperity.

The Democratization Process

Modernization theory and recent history support the idea that sustained democratic movements must result from organic desire by local factions. When these natural movements towards democratic governance emerge, they must be nurtured.

Democratic movements are always opposed by those who stand to lose power should they succeed. If the primary champions of democracy (the U.S. and the E.U.) seem increasingly unwilling to provide the resources needed to defend those who share our values, democratic movements are less likely to take shape against adversaries that tend to have economic and military advantages.

Autocratic rulers have always used propoganda and media control to make democracy look less appealing. This job becomes easier when traditional democratic stalwarts appear unable to govern effectively at home, and unwilling to defend their ideals abroad.


1 Comment

Economic Outlook: Fiscal Policy, Equality of Opportunity, and Social Mobility

georgraphyofupwardmobility_chetty_Page_06

“Your chances of achieving the American Dream are almost two times higher … if you are growing up in Canada than in the United States,” said Harvard’s Raj Chetty at a Center on Children and Families (CCF) event held on Monday. Chetty, the Bloomberg Professor of Economics and a leading scholar on opportunity and intergenerational mobility, presented his latest research on how where one grows up has a huge impact on success later in life.

Chetty and colleagues calculated upward mobility for every metro and rural area in the United States. 

The heat map below shows the chances that a child born in the bottom fifth of the income distribution in that particular place will reach the top fifth later in life.

My more perceptive readers may be thinking, “Ben, you usually advocate for equality of opportunity, not outcomes, what gives?”

This is a fair observation. Generally speaking, I do believe more in equality of opportunity than equality in outcomes. But these two concepts cannot be fully separated. In fact, they intersect at what has become an important issue for politicians, academics, and social scientists alike–social mobility.

Observing social mobility outcomes at the macro level provides insight into opportunity (or lack thereof) at the micro level. At more macro levels (neighborhood, city, county, etc), the differences in individuals’ development experiences (wealth, culture, parental values, personal ability, luck, etc.) are naturally smoothed out. Taking into consideration every possible permutation of personal development, these forces offset one another. What we are left with is the “average” (for lack of a better word) personal development experience.  

This “average” experience leaves a common factor–public goods and services–as the variable explaining why certain areas recognize greater social mobility than others (as shown on Mr. Chetty’s map). The fact that the administration of many important public services is carried out at these same levels reinforces the idea that social mobility outcomes are the result of policy choice(s).

Once we get past the question of “if” government programs can impact people’s opportunities, we can focus on which programs are most effective in promoting social mobility. Data mapping serves an important role here, highlighting areas that may have a working policy mix (although since economic development is context sensitive, even the seemingly best policy mix must be adapted to local realities to be effective).

The question then becomes how to pay for the programs which enable equality of opportunity. Fiscal debates are always implicitly an often explicitly shaped by underlying budgetary positions. The unwillingness of governments around the world to engage in stimulus spending despite low interest rates and high un(der)employment (a liquidity trap) is case-in-point.

In order to pay for the services needed to enhance social mobility in poorer neighborhoods, significant investments are needed. This necessitates higher effective tax rates on the ultra-wealthy (which in turn requires a multi-faceted approach, closing loopholes in capital gains, income, and inheritance/gift taxes to name a few); people whose wealth is often unrelated to productivity.

The economic outcomes of the wealthiest ultimately must be impacted in order to finance programs that promote equality of opportunity. This fact, however, does not necessitate class warfare between the lower, middle, and upper-middle classes–the vast majority of the America’s citizenry.

The American economy must work for everybody who is willing to work hard to succeed, regardless of their socioeconomic background. Once this condition is met, inequality is not only defensible, it actually spurs hard work and innovation. Unfortunately, contemporary America is nowhere near this “good inequality”; our inequality is not the result of meritocracy, but primarily the result a political process / tax code beholden to wealthy interests and an outdated criminal justice system.


Leave a comment

Green News: The Needed E-Recycling Movement

Artist rendition of an e-waste pile from the movie “Idiocracy”

If you live in the developed world, chances are you either have or know someone who has a drawer, cabinet, or closet full of “e-waste”–a combination of old electronic devices and wires that serves absolutely no purpose but to take up space. Why does our e-waste get hoarded? I believe it is because e-recycling options are few and far between.

The head of the United Nations body tasked with setting the global environmental agenda today stressed the need to limit the use of dangerous chemicals and to find a solution to the masses of electronic waste building up around the world, as a Conference of Parties to three major Conventions on the subject began in Geneva today.

Achim Steiner, Executive Director of the UN Environment Programme (UNEP), told journalists that the “tsunami of e-waste rolling out over the world” not only accounted for a large portion of the world’s non-recyclable “waste mountain” but also needed dealing with because many elements found in electronic equipment are potentially hazardous to people and the environment.

“Never mind that it is also an economic stupidity because we are throwing away an enormous amount of raw materials that are essentially re-useable,” said Mr. Steiner. “Whether it is gold, silver or some of the rare earths that you have heard about perhaps in recent years, it is still an incredible amount.”

Mr. Steiner said that the amount of some such materials that are available above ground in unused electronics now exceeds the amount still in the ground and he looked to the potential of the Basel Convention to help access ‘urban mines’ by working to better inform people of how to dispose of their e-waste.

“Annually, one million people die from occupational poisoning,” Mr. Steiner said, referring to the effects of the use of chemicals on people’s bodies. “This is something that is, in this day and age, not only unnecessary it’s really intolerable. And this is why the sound management of chemicals is something that has brought Governments, civil society but also the private sector and the chemical industry together.”

One of the more well known theories of Technology, “Moore’s Law“, states that the number of transistors per square inch on integrated circuits has doubled every year since their invention, and will continue to do so into the foreseeable future–this “law” has remained relevant for 50 years. While Moore’s law may sound like techno-babble that doesn’t affect the average person, it has a lot to do with our collective e-hoarding problem; due to some combination of technological innovation and planned obsolescence, the viable life of electronic products is incredibly short.

Between consumption patterns in developed countries and efforts to bridge the “digital-divide” in the developing world, the world’s e-waste problem will only get worse if left unaddressed. Absent a systematic way of dealing with our e-waste, we will continue hoarding rare-earth metals while simultaneously extracting them from the ground (with all the environmental degradations that accompany resource mining).

E-recycling can also help lower the costs of producing the stripped-down versions of smart-phones and tablets that play an important role in reducing poverty in poor countries. Due to the value of rare earth metals and the costs of extraction, e-recycling could potentially provide a revenue stream for cash strapped municipalities.

So we come to the need to promote global e-recycling efforts. To be effective, this movement should involve all concerned private and public sector actors. 

I would like to end this blog with a personal anecdote. I have a broken computer in my apartment that has been sitting there for weeks as I try to figure out how to dispose of it in a responsible way–What exactly should I do?

If your answer involves going online and researching how to dispose of e-waste where I live, then I say to you this unnecessary burden is representative of the exact problem I am railing against. Most people do not have the time or desire to take this extra step. Instead, they will just throw out their e-waste, trashing valuable resources, necessitating further extraction of rare earth materials, and endangering public health.

It is not as if we are waiting for some technological breakthrough to address this issue. A solution as simple as e-recycling bins or designated days for e-waste pickup could help solve this looming global problem.


1 Comment

Transparency Report: Parenting, Emotional Development, and Social Mobility

SGM benchmarks

Benchmarks for Success from the Social Genome Model

According to the Brookings Institute’s Social Genome Model Benchmarks for Success, the route to a successful life begins with a child’s emotional and cognitive development. Whether it is due to a lack of financial resources, time, or parental ability (or some function of the three), success in life is strongly influenced by the one stage a person has absolutely no control over–family formation.

As Brooking Institute’s Hugh B Price concludes in his recent paper “Social and Emotional Development: The Next School Reform Frontier”:

Of course parents, churches and communities bear primary responsibility for socializing children, but if in reality they are not up to it, what then? Consigning these youngsters to academic purgatory or, worse still, the criminal justice system serves neither society’s interests nor, obviously, theirs. Research and real-world experience demonstrate convincingly that investing in the academic and social development of youngsters left way behind pays welcome dividends. SEL deserves, at long last, a prominent place in school reform policy and practice.”

It is impossible to determine what single element holds back social mobility efforts, whether it is time, money, “values”, or some other variable. This is because the missing element is dependent upon the strengths and weaknesses of parents, which vary from couple to couple.

A multi-dimensional approach to social mobility, including paid maternity leave, universal pre-K, and investing in K-12 social and emotional learning (SEL) is needed to mitigate the effects of inadequate parenting (regardless of its cause). A child born to a wealthy family with strong values will always be at an advantage; this reality does not mean we cannot or should not ensure there is a developmental “floor” that supports all children.

America cannot afford a future where only children born to the wealthiest parents receive the attention and resources that nurture both cognitive and emotional development. One of the key factors that has sustained American exceptionalism over the course of our history has been our talented, innovative, and hard working labor force.

America’s historic commitment to freedom and human rights manifests itself in a creative and innovative spirit that has made American inventions and culture dominant on the global stage (even as our “Superpower” status wanes in other respects). But maintaining a large, skilled labor pool–the workers needed to bring great visions to reality–requires investments that promote a meritocratic society, one in which true equality of opportunity results in broad based economic growth and social mobility.   

Innovation is the ultimate engine of sustainable growth–not financial engineering or mining finite resources in ways that do not even pay lip service to the public costs resulting from their production. We cannot know who the next great innovators are, the ones who’s inventions will create new industries that employ future generations, contribute to solving the global issues of the 21st century, and develop medical breakthroughs that change peoples lives. Every child must be enabled to reach these heights if they are talented enough to do so.

Investing in people pays dividends, particularly during the early developmental stages of life. Furthermore, we cannot just wish away societies most vulnerable (try as we might). When one considers the increased welfare and criminal justice costs, as well as the general insecurity associated with systematically underinvesting in societies most vulnerable groups, the arguments for greater investment in SEL programs are bolstered.

Considering how low long-term borrowing rates are for the U.S and many foreign governments, these are certainly investments we can afford to make (and I would argue cannot afford not to make). But what about poorer countries with less resources and higher borrowing costs? In these cases, SEL targeted Flexible Credit Lines (FCLs) should be extended to low and middle income countries that are willing to adhere to certain oversight mechanisms.

Unfortunately, it appears that national policymakers are leading their citizens in the wrong direction when it comes to funding programs that promote human development. Even in wealthy places like America and Europe, politicians claim we cannot afford to make these investments, despite their alignment with our purported values, high long-run returns on investment, and low long-term borrowing costs.

Investing adequately in childhood development is a question of both social justice and long-term economic growth. Governments around the world must stop viewing impoverished youth as a liability and start embracing them as the future asset they are.


Leave a comment

Aftermath of The Baltimore Riots: Justice is Blind, Economics is Not

RIP Freddy Gray. Just 25 years old, a young man’s life was tragically cut short. We cannot let the ensuing chaos detract from this ultimate injustice.

I have seen people on social media try to justify what happened to Mr. Gray by bringing up his criminal history. Not only is his rap-sheet immaterial to his death, but it is despicable that people would drag a dead man’s name through the mud to make their politically / racially charged points. This man is dead, he cannot defend himself.

Furthermore, Mr. Gray’s criminal history of non-violent drug use / distribution is a common product of his environment. Not to make excuses for his past crimes, but his environment does offer some insight and context into his questionable choices.

Another meritless claim is that Mr. Gray’s spinal surgery led to his death. Mr. Gray did not die on the operating table, and without some outside trauma to his spine he would still be alive today.

Equally disgraceful to these meritless justifications of alleged officer misconduct are opportunists using Mr. Gray’s death to loot and riot. Mr. Gray’s family, for their part, has condemned the riots. Nothing fuels a counter-narrative like unlawful behavior; as the saying goes, with friends like these who needs enemies.

A Department of Justice investigation is ongoing, and I fully expect that after a transparent investigation those responsible for Mr. Gray’s death will be held accountable.

Yes America’s criminal justice system is flawed, particularly with respect to African American communities, but to assume that it is never capable of delivering justice belittles its many unsung successes. As of this posting, the 6 officers involved in Mr. Gray’s death have been charged with various crimes, including second degree murder and manslaughter, by Baltimore’s Chief Prosecutor.

I can understand rioting after an unfair ruling, but not before a ruling even takes place. Some will argue that as a white man it is not my place to understand, and while I like to think I am generally pretty good considering things objectively, they may have a point. I do however know this; when comparing the track records of violent and non-violent protests in achieving meaningful reform in America, the more effective approach has unquestionably been non-violent.

Those sympathetic to the rioters may argue that every successful non-violent protest was buoyed by a parallel violent movement. While it is impossible to completely decouple the effects of parallel violent and non-violent movements, I find this argument flawed. What positive role could violent protest possibly play in political decision-making when violent protests detract from public sympathy, and the state always has the overwhelming advantage in shows of force?

To the contrary, in my opinion meaningful change results from strong leaders utilizing their rights to publicly frame issues in ways that even those who may, in their private thoughts, be ideologically opposed cannot as publicly elected officials reasonably challenge.     

Regardless of my understanding, the riots have, in the words of Baltimore’s African-American Police Comissioner Anthony Batts, embarrassed Baltimore as a city. Fortunately the negative actions of a few misguided Baltimoreans should have no impact on either the Baltimore Country or DoJ investigations.

But ultimately it is not the short-term embarrassment or immediate economic consequences that should most worry those who wish to see Baltimore thrive. It is the long-term impact on investment that is most troubling, as the riots will likely exacerbate the very socioeconomic conditions which indirectly led to Mr. Gray’s death and the ensuing riots in the first place.

While properly served justice is “blind”, economic decision making considers every iota of information available:

The looting and burning of a CVS pharmacy and general store, which has been shown on just about every newscast in the past 24 hours, as well as the destruction of other shops, will tend to deter retailers from making new investments, economists warned.

“One of the things that’s been growing in the area has been the tourism aspect and nothing puts off tourists more than riots and curfews,” said Daraius Irani, chief economist at the Regional Economic and Studies Institute of Towson University in Baltimore.

“One of Baltimore’s credit strengths is it has a sizeable and diverse tax base,” said Moody’s analyst Jennifer Diercksen, noting the city’s universities, which provide thousands of very safe jobs – creating a stable base for Baltimore.

Still, the city lags the rest of the nation on a per capita income basis. Its per capita income was $24,155 for 2012, representing only 86.1 percent of the national median, according to Moody’s.

Its unemployment rate is higher than the U.S. average – according to the U.S. Bureau of Labor Statistics, Baltimore city’s unemployment rate in February was 8.4 percent versus the U.S. rate of 5.8 percent in that month.

Still, economists said one of Baltimore’s problems is the sharp demographic split between the successful elite and an underprivileged population.

“There is the vibrant, beautiful, urban community that is characterized by ongoing renaissance, and the poor, less educated, less visited, which faces more challenges,” said Basu. “Both Baltimores have been making progress in recent years.

“Despite the fact the destruction was in the other Baltimore, not the one visited by tourists, the damage economically in the near and mid term will affect both.”

When private investment lags, jobs and tax revenue for social programs and public goods take a hit. Regardless of your political affiliation or personal beliefs, one or more of these things are needed to promote social mobility and social justice.   

Baltimore’s leaders must now prove their mettle by utilizing the city’s strong fiscal position to attract investors. The city’s leaders must leverage both public money and the public relations boost private companies would realize by helping “rebuilding Baltimore” towards securing public-private partnerships that benefit Baltimore’s poorest areas.

The only silver-lining of these riots is that America is paying attention to Baltimore. While I think peaceful protests would have achieved this same outcome without the negative media coverage and economic backlash, the riots are now (hopefully) a matter of history. Moving forward, the attention Baltimore is currently receiving must be utilized as a positive.  

Another potential avenue for recovery runs through Federal government, which being within a stones-throw of Baltimore may be compelled to invest significantly in revitalizing the city. Of course these two sources of public funding–municipal and federal–should be carefully coordinated to ensure that maximum social benefits are realized.

It is exactly trying times like these when strong leadership is most needed. Let us hope elected officials in Baltimore and Washington D.C. are up to the challenge. Community and religious leaders also have an role to play, both immediately in catalyzing anger into a sustainable political movement, and in the long run by promoting the roles of strong social values, resilience, and personal and social accountability in poverty reduction.

I am confident that criminal justice will be served in the Freddy Gray case, and that this case will help spur more widespread criminal justice reform across America.

Unfortunately, I fear the riots may have exacerbated the very problems that need to be addressed for more comprehensive progress on the social justice front.


1 Comment

The Evolution of the Post-WWII International Order

As representatives from the IMF, World Bank, and the G20 converged on Washington last week, there was a sense that America may be losing its position as the main guarantor of international order:

As world leaders converge here for their semiannual trek to the capital of what is still the world’s most powerful economy, concern is rising in many quarters that the United States is retreating from global economic leadership just when it is needed most.

Washington’s retreat is not so much by intent, Mr. Subramanian said, but a result of dysfunction and a lack of resources to project economic power the way it once did. Because of tight budgets and competing financial demands, the United States is less able to maintain its economic power, and because of political infighting, it has been unable to formally share it either.

Other experts and historians, however, say too much can be made of the moment. Walter Russell Mead, a professor of foreign affairs at Bard College, noted that the rise of China as an economic force was inevitable, and that its establishment of a rival lending institution was far different from the international behavior of the Soviet Union and communist Chinese during the Cold War.

Then, he said, America’s rivals were trying to destroy and replace the economic order established by the United States and Britain after World War II. Now, emerging powers are emulating it, however imperfectly.

Sure other countries have risen in prominence since America stood as the lone super-power after the Cold War, but has this really resulted in America’s decline? I would argue that building up strong allies to help promote America’s vision of international order–one based on democracy, human rights, economic and defensive interdependence, and more recently environmentally sustainable economic development–was exactly why the U.S. took the lead in setting up the United Nations and the Brenton Woods Institutions (the World Bank, IMF, and GATT).

Therefore, in assessing America’s influence over international order, we should consider how these institutions have evolved. While they were all conceived with the best of intentions, good intentions do not always lead to good outcomes. Have these institutions been able to learn from their mistakes and make meaningful contributions to maintaining international order? Lets consider them on a case by case basis:

The International Monetary Fund (IMF):

The IMF was originally conceived to promote currency stability and help countries overcome short-term balance of payments issues. But as technological advances made the world smaller, the IMF took on a much larger mandate, and began extending loans to help developing countries modernize. The so called “Washington Consensus” linked development loans to “ex-post” (after the fact) conditions such as hitting fiscal targets (reducing the size of government) and liberalizing trade.

While these policies by and large do promote growth in already developed countries, they ignored the historic lessons of the world’s developed countries. Every advanced country relied on some degree of protectionism to cultivate its own industries and government spending to build both physical infrastructure and a skilled workforce as it modernized.

The “Washington Consensus” programs did not allow for policy space based on the historical experiences and current realities in the countries they intended to help. As I have often written, economics–particularly development economics–is highly context-sensitive; the “Washington Consensus” was simply to rigid and narrow-sighted to work.

The “Washington Consensus” was a consensus failure, and left many countries worse off than before they accepted this “help” (see “the lost decade” in Latin America). Thankfully the IMF abandoned this flawed set of policies.

The failure of the Washington Consensus led to IMF to reconsider how it does business–the “conditionality” attached to its loans. Instead of relying on a rigid set of targets a country must meet in order to continue to receive support, the IMF now focuses on pre-set “ex ante” conditionality. If a country has a sound macroeconomic position, it can tap into IMF financing while maintaining the policy space needed to address the needs of its citizens (and ultimately maintain its legitimacy).

The IMF will have to deal with the specter of the Washington Consensus for some time, but going forward it has evolved in meaningful ways.

The World Trade Organization (WTO):

The General Agreement on Tariffs and Trade (GATT) officially became the World Trade Organization (WTO) in 1995. The WTO sets rules for global trade and provides a forum for airing grievances. With membership covering 96.4% of global trade and 96.7% of global GDP, the WTO is unquestionably an important institution.

Critics often argue the WTO is ineffective, but any organization whose stated goal is the resolve international trade disputes is by definition going to be contentious. I would argue that the WTO has helped keep trade disputes trade disputes, and that without it many of these disputes could have ended in armed conflict.

In recent years, international trade news has been dominated by two proposed regional agreements, the trans-pacific partnership (TPP) between the U.S. and Asian economies, and the trans-atlantic trade and investment partnership (TTIP) between the U.S. and Europe.

There is no consensus as to whether regional free trade agreements (FTA) such as these undermine the global free trade movement, or if they are building blocks towards this goal. But one thing is for certain–free trade agreements create winners and losers. The winners tend to be the wealthy who are positioned to benefit from greater market access; the losers tend to be wage earners.

In the context of political dysfunction and simmering class-warfare in America and beyond, it is necessary that policies to transfer some of the gains from the “winners” to protect the “losers” of any FTA are baked into the agreements themselves. The ability of governments to address the inequality and environmental impacts of any FTA will greatly affect its historical legacy.

The United Nations (UN):

The United Nations is arguably the most important of the international institutions. In addition to providing a forum for countries to address one another, the UN also serves a global policy adviser, giving it the strongest normative mandate of any of these organizations.

The Millennium Development Goals (MDGs) are 8 specific goals whose intent is to guide the trajectory of the developing world. The successes of these goals has been uneven–some countries have a great record, while others not so much. As these goals are set to expire at the end of 2015, they are commonly viewed as beneficial but imperfect. Their successors, the Post-2015 Sustainable Development Goals (SDGs), aim to build on their successes while learning from their short-comings.

There are a number of ways the SDGs deviate from the MDGs. For one, they are much more inclusive and consultative. Seen as being drafted behind closed doors by the global elite, the MDGs were hampered from the start. Conversely, the SDGs are being drafted with input from numerous thematic and national consultations with the very people they are intended to benefit.

There is also greater emphasis on the roles of various stakeholders (governments, private sector, NGOs, civil society, and international organizations) with regards to both financing the agenda and being accountable for their operations in the developing world. “Who Will Be Accountable?” highlights these common but differentiated responsibilities, providing general guidelines for holding those who violate the SDGs accountable.

Between the launch of the Post-2015 Development Agenda (the SDGs) and the 2015 UN Climate Conference in Paris (which is expected to result in the first universal global climate treaty), 2015 will prove to be a pivotal year for sustainable human development initiatives.

One area the U.N. has not reformed sufficiently is in promoting global security. Given that security is a necessary precondition for sustainable human development, the significance of this shortcoming cannot be understated.

Nowhere has this problem been more acute than in the Middle East, where armed conflict has left 1 in 4 children out of school, led to immeasurable economic, physical, and psychological damage, and has completely overwhelmed the international humanitarian assistance network. The inability to protect children is especially alarming, as it plants the seeds for future conflicts.

The United Nations needs to respond more decisively against regimes that commit gross human rights violations. The concept of national sovereignty is meant to protect a country from outside invasion, not act as a shield for human rights abusers.

The Responsibility to Protect (R2P) was supposed to put peoples rights before national sovereignty, but it has proven to lack the teeth needed to provide meaningful protection. The need is clear, as I have called for in the past, for the UN General Assembly to have a mechanism for overruling UN Security Council vetoes. Such a reform would give the R2P the power it needs to fulfill its important mandate to prevent / end gross human rights violations.

The World Bank Group (WB):

The World Bank Group is responsible for financing development projects in the developing world. While its existence has been a “net benefit” for developing countries, the World Bank has had issues enforcing “good governance” standards on its projects, often resulting in adverse consequences for the worlds most vulnerable people:

The World Bank regularly fails to enforce its own rules protecting people in the path of the projects it bankrolls, with devastating consequences for some of the poorest and most vulnerable people on the planet, a new investigation by the International Consortium of Investigative Journalists, The Huffington Post and more than 20 other media partners have found.

The investigation’s key findings include:

  • Over the last decade, projects funded by the World Bank have physically or economically displaced an estimated 3.4 million people, forcing them from their homes, taking their land or damaging their livelihoods.
  • The World Bank has regularly failed to live up to its own policies for protecting people harmed by projects it finances.
  • The World Bank and its private-sector lending arm, the International Finance Corp., have financed governments and companies accused of human rights violations such as rape, murder and torture. In some cases the lenders have continued to bankroll these borrowers after evidence of abuses emerged.
  • Ethiopian authorities diverted millions of dollars from a World Bank-supported project to fund a violent campaign of mass evictions, according to former officials who carried out the forced resettlement program.
  • From 2009 to 2013, World Bank Group lenders pumped $50 billion into projects graded the highest risk for “irreversible or unprecedented” social or environmental impacts — more than twice as much as the previous five-year span.

Days after ICIJ informed the World Bank that the team’s investigation had found “systemic gaps” in the bank’s enforcement of its “social safeguard” rules, World Bank Group President Jim Yong Kim acknowledged “major problems” with the bank’s resettlement policies and vowed to seek reforms.

Being a “net benefit” for the developing world is not a high enough standard for the World Bank, it must adopt a “do no harm” principle in all its projects. To achieve this goal, the World Bank should emulate the UN in consulting with those who will be affected by their projects.

The World Bank has an important role to play in promoting the SDGs, but first it must get its own house in order.

Some may point to the recent rise of parallel international organizations such as the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB) as further signs of the deterioration of an American led international order. Indeed, there are serious governance questions these institutions must address, lest they be counter-productive in the pursuits of promoting peace and eradicating extreme poverty.

It would be most constructive to have the UN promote these values (accountability, good governance, etc.) to emerging international institutions, not the US. The UN has international legitimacy; the same message coming from the UN would likely be much more well received.

US-centric international organizations are free to work with these parallel institutions or not, and their positions can evolve as these new institutions reveal their values through their actions. But as professor Walter Mead aptly points out, these institutions are not challenging America’s Post WWII vision of international order, they are doubling-down on it. As the saying goes, imitation is the greatest form of flattery.

Follow

Get every new post delivered to your Inbox.

Join 2,935 other followers