Normative Narratives


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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.


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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.


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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.


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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.


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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.


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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.


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Technical Difficulties

NN Community,

My computer gave out on me, so I will be taking a forced break until I get t fixed. Hopefully that will be soon (I can’t put together high quality blogs on a mobile device, we ain’t runnin’ a fashion blog over here!).

In the iterim, feel free to check out my microblog on facebook, where I regularly post the articles that underpin Normative Narratives. 


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Transparency Report: Tunisia’s Test

On March 18th, terrorists took hostages at the Bardo Museum in Tunisia’s capital city of Tunis. When the dust settled, 22 innocent people had been murdered, mostly foreign tourists (20) but also Tunisian nationals (2).

Tunisia is to date the lone success story of the “Arab Spring”. This distinction, while undoubtedly a positive, makes Tunisia a target for extremist groups who are ideologically opposed to moderization, democracy, and human rights (“Western values”). It was not, therefore, a question of if extremists would try to scare the democracy out of Tunisia, but when and how.

That question was partially answered on March 18th, and unfortunately there are no guarantees that extremists groups will not attack again. Tunisia’s security forces must remain vigilant, and should receive substantial support from the international community. Seeing Tunisia succeed as a stable, functioning democracy is not only in the interest of Tunisians, but also the disenfranchised throughout the region and the world.

The Tunisian people, for there part, have proven themselves to be remarkably courageous and dedicated to democratic values:

World leaders joined tens of thousands of Tunisians on Sunday to march in solidarity against Islamist militants, a day after security forces killed members of a group blamed for a deadly museum attack.

“We have shown we are a democratic people, Tunisians are moderate, and there is no room for terrorists here,” said one of the demonstrators, Kamel Saad. “Today everyone is with us.”

“The Tunisian people will not bow,” President Beji Caid Essebsi said in a speech after the march. “We will stay united against terrorism until we wipe out this phenomenon.”

Tunisia’s leaders have passed every test of their commitment to democracy. They have transferred power peacefully and enshrined their dedication to liberal and pluralistic democracy in a new constitution. I am confident that the international community, understanding both the ethical and symbolic implications of Tunisia’s democratic success, will provide assistance as necessary.

But in the wake of these terrorist attacks, a new test to democratic values has emerged–preserving the rights of the accused:

Tunisian security forces have arrested 23 more suspected Islamist militants as part of a crackdown after last month’s Bardo museum attack in which two gunmen killed 21 foreign tourists, the interior ministry said on Friday.

The attackers gunned down foreign tourists visiting the national museum in Tunis, in one of the worst attacks in the country, which has mostly avoided violence since its 2011 uprising against autocrat Zine El-Abidine Ben Ali.

The interior ministry said in a statement that the 23 new suspects belonged to two terrorist cells. It said that so far 46 suspects have been arrested since the Bardo massacre.

“Members of these terrorist cells will be charged of being accomplices in the terrorist incident (Bardo attack) through providing weapons and logistics help,” the statement said.

I do not pretend to know the evidence against those arrested as accomplices–it is possible that all of the 46 suspects indeed are guilty of being accomplices to this heinous attack. But it is imperative that due legal processes are followed, and that trials are conducted in an open and transparent way.

People are angry, and rightfully so, but convicting people to placate public anger would be a misstep for Tunisia’s budding democracy. Tunisia’s government should resist urges to try all the defendants jointly (except when a joint trial is objectively prudent), and let the facts of the case determine the outcome.

Effective democratic governance is not only about majority rule, it is also about pluralism, personal rights, judicial transparency, due process and rule of law. Tunisia must show peaceful Muslim’s that there is a place for them in Tunisian society, that they won’t be unjustly punished because of their beliefs. Failure to do so would be counter-productive, pushing Muslims into extremists arms, resulting in greater future instability.

Tunisia’s leaders must stand behind democratic principles; the world–both those rooting for against Tunisian democracy–is watching. While Tunisia’s leaders have given us no reason to think they won’t rise to the challenge, the emotional nature of this situation raises some concerns. Enlisting help from UNDP Tunisia might not be a bad idea.

The Tunisian people, who have been unwavering democratic watchdogs throughout the Arab Spring, must remember the big picture and demand their government ensures fair trials for the accused.


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Economic Outlook: The High Cost(S) of Being Poor

I have previously written about different poverty traps in America, including our outdated criminal justice system (the “prisoner paradox”) and the developmental impacts of stress passed from mother to child. If these poverty traps seemed a bit abstract, consider a more traditional poverty trap–poor people shut out of traditional credit markets and relying on “payday” loans:

The Consumer Financial Protection Bureau, the agency created at President Obama’s urging in the aftermath of the financial crisis, took its most aggressive step yet on behalf of consumers on Thursday, proposing regulations to rein in short-term payday loans that often have interest rates of 400 percent or more.

“We are taking an important step toward ending the debt traps that are so pervasive in both the short-term and longer-term credit markets,” Richard Cordray, the director of the Consumer Financial Protection Bureau, said in a statement on Thursday.

The borrowing patterns speak to a stark reality underpinning the roughly $46 billion payday loan industry: The working poor in America, a group with virtually no savings and little access to traditional bank loans, borrow to cover basic expenses.

In drafting the rules, according to interviews with people briefed on the matter, the Consumer Financial Protection Bureau, and its director, Mr. Cordray, wrestled with how to protect some of the most vulnerable consumers, without choking off credit entirely.

Driving the proposal was an analysis of 15 million payday loans by the consumer bureau that found that few people who have tapped short-term loans can repay them. Borrowers took out a median of 10 loans during a 12-month span, the bureau said. More than 80 percent of loans were rolled over or renewed within a two-week period.

Nearly 70 percent of borrowers use the loans, tied to their next paycheck, to pay for basic expenses, not one-time emergencies — as some within the payday lending industry have claimed.

Until now, payday lending has largely been regulated by the states. The Consumer Financial Protection Bureau’s foray into the regulation has incited concerns among consumer advocates and some state regulators who fear that payday lenders will seize on the federal rules to water down tougher state restrictions. Fifteen states including New York, where the loans are capped at 16 percent, effectively ban the loans.

Martin Wegbreit, a legal aid lawyer in Virginia, called payday loans “toxic,” noting that “they are the leading cause of bankruptcy right behind medical and credit card debt.”

The current economic model of low minimum wages and high payday loan fees drives people into poverty, triggering welfare payments. The U.S. government is basically transferring welfare funds to the payday loan industry.

Proposed CFPB regulations don’t go far enough, a maximum cap on loan repayments is needed. There is room for generous profit margins to compensate for the risk of lending to low income individuals without creating a “debt-trap”.

The stress and time dedicated to satisfying debt collectors amplifies the cost of being poor. Surely it would be more effective to provide access to credit, instead of wringing societies least financially secure through the payday loan system. Perhaps more money would be spent on its intended purposes, instead of paying off predatory loans.

Part of the solution could be using Post Offices as low cost banks for the poor. Sure there would be costs associated with effectively providing financial services, but the physical infrastructure and a trustworthy brand already exist. Furthermore, such a plan would provide renewed social value to an American Institution constantly under budgetary scrutiny.

Postal Banks would inject competition into the credit market, leading to better services at more competitive rates. Even if Post Office banks operated at a loss (say, giving preferential rates to low income borrowers for certain purposes), this loss may be more than offset by reduced spending on entitlement programs. More research on the cross-section between welfare recipients and payday loan borrowers is needed.

It is not a question of which of these poverty traps exists–they all exist and for some people are mutually reinforcing. This is one of the reasons social mobility is such a difficult  issue to address. Countering these different reinforcing poverty traps require the right mix of regulation, fiscal policy (progressive taxation, adequate spending on welfare programs and public services), and livable minimum wages.

In the end, lower income Americans need to overcome negative perceptions of government and vote in large numbers. Again the time crunch associated with poverty rears its ugly head; voting isn’t just a decision to go to the polls, it is also a time commitment that many cannot afford.


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Transparency Report: Stress–America’s Inter-Generational Poverty Trap

The High Costs of Being Poor in America: Stress, Pain, and Worry:

Reported stress levels are higher on average in the U.S. than in Latin America. Importantly, the gap between the levels of the rich and poor is also much greater, with the U.S. poor reporting the highest levels of stress of all cohorts.

Pain, worry, sadness, and anger (reported as experienced the day before or not) are also all significantly higher among low income cohorts than among wealthy ones, while reported satisfaction with life as a whole is significantly lower, according to our analysis of Gallup data:

The cost and pain of poverty in the U.S. less about basic goods like water and electricity than nonmaterial factors: insecurity, stress, lack of opportunity and discrimination.

Stress impacts cognitive ability. Not only do poorer people have less resources to invest in human capital, due to higher levels of stress they may benefit less from every dollar they do invest. This is the stress-based poverty trap.

Furthermore, evidence suggests that this stress-based poverty trap may be inter-generational:

Stressful experiences for expectant mothers can have detrimental effects on their unborn children:

  1. “Prenatal insults,” such as harassment and discrimination, to pregnant Californian women with Arabic names after 9/11 resulted in higher rates of low birth weight babies, according to research by epidemiologist Diane Lauderdale. Babies who gestated in the weeks after 9/11 and who were given distinctive, Arabic names experienced a two-fold increase in underweight births compared to those who gestated before. Babies born to mothers with non-Arabic names experienced no such effect.
  2. Children in utero during a 40-day ice storm crisis in Québec  had lower scores on tests of vocabulary and psychological measures at age 5.
  3. Using the timing of Ramadan as a natural experiment, economists Douglas Almond and Bhashkar Mazumder find persistent effects of prenatal fasting on disability outcomes as an adult.


Why? One strong possibility is that mothers send biological signals to their fetuses, providing information about the outside world and thereby helping prioritize different aspects of fetal development. Some scientists now believe this process actually alters which genes get “switched on” in newborns.


Are We All “Born Equal”?

Ideally, people would only have children when they are financially secure and emotionally ready. In reality this is not the case, and I for one cannot think of a way of achieving this ideal without grossly invading peoples privacy. Given this reality, how can we reduce stress levels in pregnant women?

One obvious past-due reform is legislating paid maternity leave. The U.S. is the only developed country in the world that does not mandate paid maternity leave. Considering the potential link between maternal and fetal stress levels, perhaps maternity leave should begin earlier in pregnancy. This is not only a women’s rights issue, it is a social mobility issue as well.

Other avenues for progress could be informational. Poorer women are less likely to use contraception or have abortions. Abortions are also less common among poorer women, reflecting both the cost and perhaps the percieved stigma surrounding the practice (a source of stress itself). In  “Freakonomics” Steve Dubner and Steve Levner attribute dropping crime rates in the 90s primarily to the legalization of abortions in the 70s (Roe v. Wade). While abortion may be controvertial, the effects of having unwanted children are far more costly to society.   

When considering intentional pregnancy, it is common knowledge that women take great care concerning what they ingest during pregnancy. However, notably less attention is paid to stress levels. Should doctors be informing women about the impact of stress on their unborn children? Should they be promoting stress reducing activities like prenatal yoga / meditation?

Promoting equality of opportunity and social mobility requires support at all points in life. Some people need support from birth throughout young-adulthood, others need retraining later in life, while others at certain intervals in-between. This is why we see so many different programs and proposals targeting different age cohorts: universal pre-K, subsidized meals / greater school choice in primary and secondary schools, free community college / Pell Grants / “student bill of rights“.

While it may be ideal to promote policies that reduce everyone’s insecurity, early intervention is less politically contentious. A growing body of evidence suggests the earlier the intervention, the greater the “return on investment”. Furthermore, one cannot reasonably appeal to the  “personal accountability” argument when opposing welfare programs targeting unborn / young children.

Promoting equality of opportunity and social mobility are undoubtedly difficult and expensive, but they are at the root of the American Dream. Furthermore, enabling everyone to realize their full potential spurs innovation and economic growth, and would save money later in life on welfare and criminal justice spending.

As the natural and social sciences advance and become more cooperative, insights such as this will continue to present themselves. As Americans, it is up to us to reject anti-intellectualism and false budgetary restraints, and elect leaders who will turn these insights into effective public policies.

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