Commentary

Let’s Talk About Sex

BRUSSELS – Last week, at the “She Decides” conference in Brussels, government ministers met with representatives from NGOs, United Nations agencies, and foundations from around the world to talk about an issue that is rarely discussed in such dignified settings: sex.


Too many young people – especially girls – lack access to quality sex education. They do not know what sex is, much less that unprotected sex can lead to pregnancy or put them at risk of sexually transmitted infections, like HIV. Even girls who know about sex often lack the information they need to avoid pregnancy, or don’t have access to contraceptives. As a result, millions of girls around the world are disempowered.

Gender inequality exacerbates the situation. In most societies, girls are valued less than boys. Often, they are viewed as the property of men. Decisions related to sex, marriage, and reproduction are out of their control.

The practice of child marriage is closely linked to sexual autonomy and health. As it stands, 15 million girls per year – an average of 28 per minute – are married before they reach the age of 18. Girls may be forced to marry because they become pregnant, because of concerns about their security or their family’s honor, or because there is a financial transaction involved, such as a dowry or bride price. These child brides are forced into sexual activity when their bodies are still developing, and most lack the knowledge, confidence, and power to negotiate safe sex.

I have met many girls and women around the world who have suffered for this lack of education and decision-making power. In Zambia, I met Cynthia, a 12-year-old girl who was shocked when she found out that she was pregnant. Growing up in a community that considers talk about sex taboo, she hadn’t known what sex was, let alone that it could lead to pregnancy. When she found out she was going to have a child, while still a child herself, she was devastated. Marriage was now her only option. Unable to continue her education, she had lost any chance of escaping poverty.

In India, I met Meera who, in keeping with her village’s tradition, had been forced to leave school and marry an older man by the time she was 15. Never having learned about contraception, she had already had multiple pregnancies. Then there was Amal, a Syrian refugee girl whose parents had married her off, in order to protect her (and her family’s honor) from becoming a victim of the sexual desires of unknown men.

Child brides have an enormous unmet need for contraception. They are vulnerable to the complications of early pregnancies, sexually transmitted infections, fistulas, and death in childbirth. Globally, complications related to pregnancy and childbirth are the second leading cause of death among those aged 15 to 19, after suicide.

The She Decides conference – hosted by the Belgian, Danish, Dutch, and Swedish governments – focused on securing financial and political commitments to support the sexual and reproductive health and rights of girls and women. There was universal recognition that girls and women should have the right to decide whether, when, and with whom to have children. Participants pledged more than €181 million ($192 million) of new funding to support the provision of contraceptives, sex education, maternal health programs, and other initiatives. With the funding gap growing wider, fulfilling these pledges is crucial.

But more than money is needed. We must change the attitudes that make talking about sex taboo. We need to address the power dynamics that limit access to reproductive health services, even when they are available. And we must recognize the damage caused by child marriage, including to girls’ sexual and reproductive health.

Many of the organizations engaged in the Girls Not Bridesglobal partnership to end child marriage are focused on tackling these issues. We know that progress is possible only with the engagement of civil society, which has a huge role to play in changing norms, driving policy reform, and providing services. Small local organizations are often in the best position to understand and respond to the needs of girls and families.

To live happier and healthier lives, girls everywhere need to be able to make informed decisions about their bodies, their sexual and reproductivechoices, and their future. So let’s talk about sex. Mabel van Oranje is the initiator and chair of Girls Not Brides.

By Mabel van Oranje

The Coming Ban on Nuclear Weapons

PRINCETON – On March 27, the United Nations will start negotiations on an international treaty to ban nuclear weapons. It will be a milestone marking the beginning of the end of an age of existential peril for humanity.


This day was bound to come. From the beginning, even those who set the world on the path to nuclear weapons understood the mortal danger and moral challenge confronting humanity. In April 1945, US Secretary of War Henry Stimson explained to President Harry Truman that the atomic bomb would be “the most terrible weapon ever known in human history.” Stimson warned that “the world in its present state of moral advancement compared with its technical development would be eventually at the mercy of such a weapon. In other words, modern civilization might be completely destroyed.”

Soon afterwards, the newly created UN, established with the express purpose “to save succeeding generations from the scourge of war,” took the threat posed by nuclear arms as its first priority. In January 1946, in its very first resolution, the UN called for a plan “for the elimination from national armaments of atomic weapons.”

The Soviet Union submitted such a plan that June. Now largely forgotten, the Gromyko Plan included a “Draft International Convention to Prohibit the Production and Employment of Weapons Based on the Use of Atomic Energy for the Purpose of Mass Destruction.” At the time, only the United States had nuclear weapons, and it chose to maintain its monopoly. But it couldn’t hold onto it for long. Where it led, others soon followed, forcing humanity to endure the decades of weapons development, arms races, proliferation, and nuclear crises that followed.

Anti-nuclear movements took root, and, in a phrase made famous by the historian E.P. Thompson, began to protest to survive. They found allies in a growing number of countries. In November 1961, the UN General Assembly declared that “any state using nuclear and thermonuclear weapons is to be considered as violating the Charter of the United Nations, as acting contrary to the laws of humanity, and as committing a crime against mankind and civilization.”

As the number and destructive power of nuclear weapons grew, and as even developing countries began to acquire them, recognition of the danger gave rise to the Nuclear Non-Proliferation Treaty, which entered into force in 1970. “Considering the devastation that would be visited upon all mankind by a nuclear war,” the NPT begins, there is a “consequent need to make every effort to avert the danger of such a war and to take measures to safeguard the security of peoples.”

To this end, the treaty committed all signatories to “undertake negotiations in good faith on effective measures relating to cessation of the nuclear arms race at an early date and to nuclear disarmament.” The US, the Soviet Union, and Britain signed the NPT. France and China, the only other nuclear weapon states at the time, held out for more than 20 years, until 1992. Israel, India, and Pakistan have never signed, while North Korea signed and then withdrew. Although all professed support for achieving a nuclear-weapon-free world, disarmament negotiations never began.

Countries without nuclear weapons – the overwhelming majority – took matter into their own hands. Through the UN General Assembly, they asked the International Court of Justice to rule on the legality of the threat or use of nuclear weapons. In July 1996, the ICJ issued an advisory opinion, with two key conclusions. First, “the threat or use of nuclear weapons would generally be contrary to the rules of international law applicable in armed conflict, and in particular the principles and rules of humanitarian law.” And, second, “There exists an obligation to pursue in good faith and bring to a conclusion negotiations leading to nuclear disarmament in all its aspects under strict and effective international control.”

But, in the 20 years since the highest court in the international system issued its judgment, the states affected by it have still failed to launch “negotiations leading to nuclear disarmament.” Instead, they have set out on long-term programs to maintain, modernize, and in some cases augment their nuclear arsenals.

Non-weapon states began to take action through a series of international conferences and UN resolutions. Finally, in October 2016, the UN General Assembly’s First Committee, which is responsible for international peace and security, voted “to convene in 2017 a United Nations conference to negotiate a legally binding instrument to prohibit nuclear weapons, leading towards their total elimination.” On December 23, the General Assembly ratified the decision, with 113 countries in favor, 35 opposed, and 13 abstentions.

The new resolution’s instructions are straightforward: “States participating in the conference” should “make their best endeavors to conclude as soon as possible a legally binding instrument to prohibit nuclear weapons, leading towards their total elimination.” The treaty could be ready before the end of the year.

The nine nuclear weapon states will finally be put to the test. Will they keep their promises to disarm and join the treaty, or will they choose their weapons over international law and the will of the global community? The non-weapon states that join the treaty will be tested, too. How will they organize to confront those countries in the world system that choose to be nuclear outlaws? Zia Mian is Co-Director of the Program on Science and Global Security at the Woodrow Wilson School of Public and International Affairs, Princeton University.

By Zia Mian

Donald Trump’s Little Women

NEW YORK – A non-profit women’s health organization in Kenya is confronting an impossible dilemma. Kisumu Medical and Education Trust receives $200,000 per year from the United States government to train doctors to treat postpartum hemorrhaging. KMET also receives money from European donors and other sources to provide comprehensive reproductive health services, including abortion counseling. After US President Donald Trump’s recent executive order reinstating and expanding the so-called “global gag rule,” KMET – and many more organizations like it – will have to choose between life-saving programs.


The global gag rule, officially known as the Mexico City policy, prevents official US funding for development aid from going to non-US organizations that provide any kind of abortion services to women – even information or referrals – regardless of how those services are financed. Organizations that advocate expanded abortion access in their own countries are also barred from US funding.

This means that, if KMET continues to provide abortion services to women in Kenya, where 30-40% of hospitalizations of women are associated with unsafe abortions, it will lose the funding it needs to perform the similarly lifesaving work of teaching doctors how to handle complications associated with childbirth. Never mind that rates of maternal mortality throughout the region are extremely high. Whichever option it chooses, KMET will be forced to curtail health services in regions where it is the principal provider.

The global gag rule is not new. First introduced by President Ronald Reagan in 1984, it has been a political football ever since, with Democratic presidents rescinding it and Republicans reinstating it.

But this latest manifestation of the rule goes further than its predecessors. Whereas previous versions affected US family-planning funding, Trump’s rule affects all US health aid, including for HIV, malaria, maternal and child health, tuberculosis, and nutrition programs – up to $9 billion per year.

The President’s Emergency Plan for AIDS Relief comprises the largest portion of US global health spending, currently $6.8 billion per year. Organizations that have long combined PEPFAR aid with other funds to provide comprehensive reproductive health care to women living with HIV, and to prevent mother-to-child transmission of HIV, will now be placed in an untenable position.

Even the narrower iterations of the global gag rule backed by previous Republican presidents had devastating consequences. Under George W. Bush, the rule forced the closure of eight clinics – most of which were the sole providers of health care in their communities – in Kenya alone. Some of these clinics were run by the Family Planning Association of Kenya, which served 56,000 people and did not provide abortions. One of the clinics that was shuttered had been providing comprehensive infant and postpartum care.

But the global gag rule is not just devastating to women’s health; it is actually counter-productive. Without family-planning services, including access to contraception, women are worse equipped to avoid unwanted pregnancies. A Stanford University study found that abortion rates actually increased in countries most affected by the global gag rule during the Bush era.

Trump’s version of the rule threatens to have an even more devastating impact. Over the last few decades, many developing countries – such as Colombia, Nepal, Ethiopia, and Mozambique – have

liberalized their abortion laws to save women’s lives and to reduce the costs to their health budgets of treating injuries caused by unsafe abortions. In this sense, the global gag rule undercuts local government policy and interferes with democratic debate.

With the reinstatement of the global gag rule, hard-won progress in women’s health could be stunted, or even reversed, all while violating women’s legal and human rights. For example, if KMET takes US aid, the organization will be obligated to withhold information from women about a critical health service, breaching the trust between a woman and her health care provider and violating a fundamental human right.

In Nigeria, the organization Education as a Vaccine – a partner of the International Women’s Health Coalition – could face a similarly unmanageable situation if they accept US HIV funding. EVA hosts the country’s longest-running hotline providing sexual and reproductive health information to young people, and is one of the few platforms enabling young people to ask questions without stigma and shame.

Abortion is already highly restricted in Nigeria, and the few abortion providers available face substantial risks. With unsafe abortion a major cause of maternal mortality, particularly among adolescents and young women, the services EVA provides could not be more important. Not surprisingly, EVA’s executive director, Fadekemi Akinfaderin-Agarau, worries that the global gag rule “is going to be a big blow in Nigeria,” because accepting US funding would then impede her organization’s ability even to discuss post-abortion care with the young women it serves.

Every day, 830 women die during childbirth and pregnancy, and each year, 6.9 million women are treated for complications from unsafe abortion, almost all of them in developing countries. To prohibit funding to organizations committed to providing quality health care and information to these women and girls is punitive, and a violation of their human rights. To impose the gag rule despite clear evidence of the harm it causes is a transparent attempt to control women’s bodies and health.

Trump promised during his campaign to punish women who had abortions. That would be bad enough. But the global gag rule goes much further, punishing millions of women throughout the developing world simply for being women.

How Corruption Fuels Climate Change


LONDON, BERLIN – Anti-corruption campaigners achieved a number of crucial victories in 2016, not least by ensuring accountability for one of Big Oil’s most crooked deals: the acquisition of Nigerian offshore oil block OPL 245 in 2011 by Royal Dutch Shell and Eni, Italy’s largest corporation. Last December, Nigeria’s Economic and Financial Crimes Commission indicted some of the Nigerians involved, and Italian prosecutors then concluded their own investigation, bringing the executives and the companies responsible for the deal closer to standing trial.


Several months earlier, in June 2016, the US Securities and Exchange Commission published a rule, under Section 1504 of the 2010 Dodd-Frank Act, requiring oil, gas, and mining companies to disclose all payments made to governments on a project-by-project basis. If the SEC had issued its rule earlier, Shell and Eni most likely would not have gone ahead with the OPL 245 deal, because they would have had to disclose their payment. But opposition from the oil industry delayed the rule, so the companies were able to conceal their payment.

Last year also marked the first time in millions of years that the concentration of CO2 in the atmosphere reached 400 parts per million (ppm). While the Paris climate agreement was hailed as a major success when it was concluded in December 2015, many signatories have displayed a remarkable lack of ambition in upholding their carbon-reduction commitments. To understand why is to see the sheer extent to which our systems of government have been captured by the corrupting influence of vested interests.

The story of OPL 245 began in 1998, when the Nigerian dictator Sani Abacha awarded the block to Malabu Oil and Gas, which was secretly owned by Dan Etete, Abacha’s own oil minister. Thus, Etete had essentially given OPL 245 to himself. But after the Abacha regime fell, the block was taken from Malabu and awarded to Shell. This triggered a series of legal battles between Malabu, Shell, and the Nigerian government that ended only with the corrupt Shell-Eni deal in 2011.

Public documents show that the $1.1 billion that Shell and Eni paid to the Nigerian government for the deal was, in reality, being paid to Malabu. Both companies knew that this payment method, through an account created by J.P. Morgan in London, was in breach of the Nigerian constitution, and that the funds would end up in private hands.

Eni claims that it investigated the deal and found “no evidence of corrupt conduct in relation to the transaction.” Shell, for its part, says that it only paid the Nigerian government, and that it does “not agree with the premise behind various public statements made by Global Witness about Shell companies in relation to OPL 245.” But Italian prosecutors have now requested a trial for several senior Eni executives – including the current CEO, Claudio Descalzi, and his predecessor – as well as Etete and several others; and they are pursuing separate charges against four senior Shell executives.

Whether or not these prosecutions succeed, for now we can no longer celebrate the SEC’s disclosure rule, or the United States’ renewed support in creating a global standard of transparency for the extractive industries. With Donald Trump’s presidency and a Republican-controlled Congress, the SEC rule was immediately vacated under the Congressional Review Act, an obscure law that had been used only once before.

Trump’s frequently racist and misogynist campaign promised to “drain the swamp” of corruption in Washington politics. But congressional Republicans’ decision to scrap the SEC rule, which Trump quickly signed into law, was an act of pure cynicism that helps perpetuate the “corrupt” system that Trump claims he ran against.

After the oil and gas industry failed to block Section 1504 through legal action, it appealed to its friends in Congress for help. And the arguments used by its congressional proxies would be risible had the consequences not been so tragic. Senator James Inhofe, a notorious climate-change denier who has received more than $3 million in campaign contributions from the fossil-fuel industry, led the charge: the disclosure rule was an imposition from the Obama era that would be too costly to implement and add needless bureaucratic red tape. No mention was made of the costs borne by citizens when their national wealth is sold off through dirty deals, or by investors when corruption leads to prosecutions and massive fines.

To fulfill the Paris agreement, efforts to combat corruption and climate change must go hand in hand. Corruption, in the widest sense of the word, is the glue that holds the “system” together, that ensures that moneyed and powerful interests are free from rules that are meant to hold them in check. It is why governments that pledged to make large reductions in greenhouse-gas emissions have been unable to meet their commitments.

Shell, Exxon, and most other major oil and gas companies knew decades ago that their products were fueling climate change. But instead of acting on that knowledge, and changing their business model, they embarked on a massive campaign to deceive the public and lure policymakers into complacency. Not surprisingly, Shell is one of 47 major hydrocarbon producers now being investigated by the Filipino government for its role in contributing to human-rights violations stemming from climate change.

To sustain progress in the fight against climate change and corruption, environmental and anti-corruption movements will have to work together, and play to their respective strengths. If nothing else, Trump’s election, and the possibility of more populist victories in Europe this year, have given us a wake-up call.

Lili Fuhr heads the Ecology and Sustainable Development Department of the Heinrich Böll Foundation in Berlin. Simon Taylor is Co-Founder and Director of Global Witness and Co-Founder of the 2002 “Publish What You Pay” campaign for mandatory disclosure mechanisms in extractive industries.

By Lili Fuhr and Simon Taylor

American Teachers Unions Oppose Innovative Schools—in Africa

No longer content to oppose educational innovation at home, the unions representing America’s teachers have gone abroad in search of monsters to slay.  For nearly a decade, Bridge International Academies has run a chain of successful private schools in the slums of Kenya and Uganda. A for-profit company, Bridge has shown that it’s possible to provide high-quality, low-cost primary education to poor children in the developing world. Naturally, the teachers unions are outraged.

“Bridge’s for-profit educational model is robbing students of a good education and depriving them of their natural curiosity to imagine and learn,” said National Education Association president Lily EskelsenGarcía in October. “This is morally wrong, and professionally reprehensible.”
According to Unesco, the literacy rate among second- and third-graders in Kenya is 32%; in Uganda it’s 27%. The teachers unions blame poverty. Only students who are free from want, they say, can be free to learn.

An alternative explanation is that poor-performing schools in Africa—and India, where Bridge expanded in 2017—are simply not geared for learning. In parts of the developing world, a rigid curriculum leaves many students hopelessly behind. No real attempts are made to monitor school performance. Teachers often lack appropriate skills and frequently fail even to show up to work.

In 2013 the World Bank determined that teachers in Kenya’s government schools were absent 47% of the time, teaching an average of only two hours, 19 minutes a day. A government audit showed that 80% of the primary-school teachers certified by Uganda last year could not themselves reliably perform at the primary-school level in reading and mathematics.

African and Indian parents are no different from American parents. They know that poor-performing government schools are letting their children down. Even the desperately poor in slums and rural areas are willing to pay for a better option.
Bridge is a Silicon Valley-style startup. Its founders hope to revolutionize education, taking inspiration from the way Tesla and Uber disrupted their industries. With more than $100 million in support from Bill Gates, Mark Zuckerberg, the World Bank’s International Finance Corp. and Learn Capital, Bridge has developed a new model of private education.

Bridge school teachers are provided with lesson plans and teaching scripts. They work eight-hour days. Their attendance is monitored; absences are rare. Student performance data are collected, analyzed and used to improve outcomes.
In Kenya, progress has been notable. After two years in Bridge schools, 59% of students pass the national primary school exam. That’s 15 percentage points higher than the estimated public-school pass-rate. In 56 communities from 23 rural and urban counties, Bridge had a 100% pass rate among pupils who attended their schools for at least two years.

These unprecedented gains led World Bank president Jim Yong Kim in 2015 to single out Bridge for helping lift students in the developing world into the modern age. His words of praise enraged Randi Weingarten, president of the American Federation of Teachers.

“The World Bank’s promotion of the fee-charging, for-profit Bridge International Academies in Kenya and Uganda is not an appropriate role for the institution,” she said. In late 2016, Education International, a global consortium of teachers unions, issued detailed reports attacking Bridge’s work in Kenya and Uganda. While never mentioning the improvement in student learning, the reports maligned Bridge’s use of teaching scripts, claiming that they hindered teacher flexibility and creativity. Not surprisingly, a main concern was that teacher salaries are lower at Bridge schools than they are at government schools. But it seems educational innovation anywhere is a threat to union control everywhere.

American Teachers Unions Oppose Innovative Schools—in Africa

No longer content to oppose educational innovation at home, the unions representing America’s teachers have gone abroad in search of monsters to slay.  For nearly a decade, Bridge International Academies has run a chain of successful private schools in the slums of Kenya and Uganda. A for-profit company, Bridge has shown that it’s possible to provide high-quality, low-cost primary education to poor children in the developing world. Naturally, the teachers unions are outraged.

“Bridge’s for-profit educational model is robbing students of a good education and depriving them of their natural curiosity to imagine and learn,” said National Education Association president Lily EskelsenGarcía in October. “This is morally wrong, and professionally reprehensible.”
According to Unesco, the literacy rate among second- and third-graders in Kenya is 32%; in Uganda it’s 27%. The teachers unions blame poverty. Only students who are free from want, they say, can be free to learn.

An alternative explanation is that poor-performing schools in Africa—and India, where Bridge expanded in 2017—are simply not geared for learning. In parts of the developing world, a rigid curriculum leaves many students hopelessly behind. No real attempts are made to monitor school performance. Teachers often lack appropriate skills and frequently fail even to show up to work.

In 2013 the World Bank determined that teachers in Kenya’s government schools were absent 47% of the time, teaching an average of only two hours, 19 minutes a day. A government audit showed that 80% of the primary-school teachers certified by Uganda last year could not themselves reliably perform at the primary-school level in reading and mathematics.

African and Indian parents are no different from American parents. They know that poor-performing government schools are letting their children down. Even the desperately poor in slums and rural areas are willing to pay for a better option.
Bridge is a Silicon Valley-style startup. Its founders hope to revolutionize education, taking inspiration from the way Tesla and Uber disrupted their industries. With more than $100 million in support from Bill Gates, Mark Zuckerberg, the World Bank’s International Finance Corp. and Learn Capital, Bridge has developed a new model of private education.

Bridge school teachers are provided with lesson plans and teaching scripts. They work eight-hour days. Their attendance is monitored; absences are rare. Student performance data are collected, analyzed and used to improve outcomes.
In Kenya, progress has been notable. After two years in Bridge schools, 59% of students pass the national primary school exam. That’s 15 percentage points higher than the estimated public-school pass-rate. In 56 communities from 23 rural and urban counties, Bridge had a 100% pass rate among pupils who attended their schools for at least two years.

These unprecedented gains led World Bank president Jim Yong Kim in 2015 to single out Bridge for helping lift students in the developing world into the modern age. His words of praise enraged Randi Weingarten, president of the American Federation of Teachers.

“The World Bank’s promotion of the fee-charging, for-profit Bridge International Academies in Kenya and Uganda is not an appropriate role for the institution,” she said. In late 2016, Education International, a global consortium of teachers unions, issued detailed reports attacking Bridge’s work in Kenya and Uganda. While never mentioning the improvement in student learning, the reports maligned Bridge’s use of teaching scripts, claiming that they hindered teacher flexibility and creativity. Not surprisingly, a main concern was that teacher salaries are lower at Bridge schools than they are at government schools. But it seems educational innovation anywhere is a threat to union control everywhere.

Is the Deflation Cycle Over?

CAMBRIDGE – Until the global financial crisis of 2008-2009, deflation had all but disappeared as a concern for policymakers and investors in the advanced economies, apart from Japan, which has been subject to persistent downward pressure on prices for nearly a generation. And now deflationary fears are on the wane again.


By the mid-1960s, the advanced economies began an era of rising inflationary pressures, ignited largely by expansionary fiscal and monetary policies in the United States, and acutely compounded by the oil price hikes of the 1970s. Stagflation, the combination of low economic growth and high inflation, became a buzzword by the end of that decade. Most contemporary market forecasts extrapolated those trends, predicting an uninterrupted upward march in oil and commodity prices. Inflation came to be seen as chronic, and politicians looked toward price controls and income policies. Real (inflation-adjusted) short-term interest rates were consistently negative in most of the advanced economies.

Federal Reserve Chairman Paul Volcker’s monumental tightening of US monetary policy in October 1979 ended that long cycle. Stagflation gave way to a new buzzword: disinflation, which accurately characterized many advanced economies, as inflation rates fell from double digits.

But disinflation is not the same as deflation. As shown in the figure, between 1962 and 1986, not a single advanced economy recorded an annual decline in prices. In many emerging markets, inflation rates soared into triple digits, with several cases of hyperinflation. As late as 1991, Greece had an inflation rate of about 20%. Even in historically price-stable Switzerland at that time,inflation was running above 5%.

[chart]

This seems a distant memory after the steady decline in prices in Greece since 2013, alongside a debt crisis and collapse in output. The Swiss National Bank, for its part, has been battling with the deflationary effects of the franc’s dramatic appreciation over the past few years.

The deflationary forces were unleashed by the major economic and financial dislocations associated with the deep and protracted global crisis that erupted in 2008. Private deleveraging became a steady headwind to central bank efforts to reflate. In 2009, about one-third of advanced economies recorded a decline in prices – a post-war high. In the years that followed, the incidence of deflation remained high by post-war standards, and most central banks persistently undershot their extremely modest inflation objectives (around 2%).

Because US President Donald Trump’s stimulus plans are procyclical – they are likely to gain traction when the US economy is at or near full-employment – they have reawakened expectations that the US inflation rate is headed higher. Indeed, inflation is widely expected to surpass the Federal Reserve’s 2% objective. But tighter monetary conditions act to mitigate the magnitude of the inflation spurt: while the expected rise in US policy rates is the most modest and gradual “normalization” in the Fed’s history, sustained dollar appreciation should limit price gains for a broad range of imported goods and their domestic competitors.

This expected turning point in the behavior of prices is not unique to the US. If the International Monetary Fund’s projections for 2017 are approximately correct, this year will be the first in a decade that no advanced economy is experiencing deflation (figure). Perhaps the long-awaited effects of the historic monetary expansion are finally yielding fruit. Most likely, currency depreciation in the UK, Japan, and the eurozone has been a catalyst.

If 2017 really does mark a broad reversal of a decade of deflation, it is reasonable to expect that most major central banks will be not be inclined to overreact if, after a decade or so (longer for Japan) of mostly downside disappointments, inflation overshoots its target. Furthermore, the view that higher inflation targets (perhaps 4%) may be desirable (because they would provide central banks with more space to lower interest rates in the advent of a future recession) has gained ground in some academic and policy quarters.

Of course, there may be yet another factor motivating major central banks’ tolerance for higher inflation. But their leaders may be unwilling to acknowledge it openly: as I have argued elsewhere, a steady dose of even moderate inflation will help to erode the mountains of public and private debt advanced economies have built up in the past 15 years or so. Carmen Reinhart is Professor of the International Financial System at Harvard University’s Kennedy School of Government.

By Carmen M. Reinhart

Who’s Really Threatening Europe?

YAOUNDÉ – Opponents of immigration into the EU typically make one or more of four arguments: immigrants are weakening Christian values, undermining liberal democratic institutions, bringing terrorism, and burdening public budgets. If these claims were true, the EU would be justified – if not obliged – to close its borders. In fact, none of them withstands scrutiny.


Begin with the loss of Christian cultural values, which has lately received a lot of attention in scholarly, political, and policy circles. Immigration opponents often point to the precipitous drop in the share of Europe’s population that identifies as Christian – from 66.3% in the early twentieth century to 25.9% in 2010 – which they blame partly on the combination of high immigration from Muslim-majority countries and declining birth rates among native Europeans.

But anti-immigration groups have offered no significant empirical evidence to support this claim. In fact, when one actually looks at the data, the holes in their argument quickly become apparent.

For starters, the decline in the share of Christians in Europe does not correlate with an equivalent rise in the share of Muslims. According to Pew Research, the Muslim share of Europe’s population has been growing at a rate of about one percentage point per decade, from 4% in 1990 to 6% in 2010. In 2030, Muslims are projected to make up just 8% of Europe’s population.

In any case, immigrants to Europe aren’t all Muslim. Plenty of them, including from Sub-Saharan Africa and Latin America, are Christian. Add to that religious shifts among “native” Europeans, with many choosing not to attend church or identify as religious, and it seems clear that claims about immigrants diluting Christianity in Europe are not rooted in reality.

Of course, immigration opponents might argue that the threat to Europe is not so much a matter of official religion as of the values, cultivated in Europe’s Christian societies, that underpin liberal democratic institutions. Citing retrograde cultural practices – from the subjugation of women to violence against religious and sexual minorities – in the autocratic and crisis-prone countries from which immigrants often hail, their opponents often argue that people from these cultures cannot assimilate properly in Europe. According to figures like France’s Marine Le Pen, the Netherlands’ Geert Wilders, and Belgium’s Filip Dewinter, immigrants will bring their culture with them, thereby undermining European institutions. But, again, they offer no compelling evidence for this; nor do they differentiate among immigrant groups.

The truth is that some secular developing countries have their own democratic values and institutions, comparable to those in Europe; they may simply lack some of the economic opportunities Europe offers. Even immigrants who come from countries with autocratic governments and problematic cultural norms are, once in Europe, held to the same legal standard as Europeans. And they rarely run for any political office that would enable them to reshape European institutions.

Nonetheless, these immigrants, Europe’s right-wing politicians declare, could still bring religious fundamentalism with them, threatening Europeans with the terrorism that is tearing apart their home countries. This, too, is a flawed argument, for it conflates Islam and Islamist terrorism.

In fact, a very low proportion of the Muslim population is sympathetic to radical Islamic fundamentalism. As of 2010, there were an estimated 1.6 billion Muslims worldwide; there are obviously far fewer Islamist terrorists.

Even more damning for the populists’ argument is that individuals who were born and raised in the EU, not immigrants, have been largely responsible for recent terrorist attacks in Europe. And even they – often self-radicalized online – were not necessarily motivated by religion so much as by grievances over economic marginalization and stalled social mobility.

The final common argument against immigration to the EU is economic. Surveys show that a majority of Europeans believe that immigrants represent a heavy economic burden, owing to generous social-welfare schemes in many EU countries, and contribute little in return. And when immigrants aren’t sponging off the taxpayers, they’re suppressing their wages and taking their jobs.

So what is the truth? In the first few years after arrival, most immigrants do not pay taxes and depend on public services. But once immigrants have had a chance to settle into their new countries and acquire the relevant knowledge and training, they begin to contribute economically.

For Europe, where the population is aging fast, these contributions will prove critical. Indeed, in the longer term, today’s immigrants will become a vital engine of growth and source of tax revenues needed to fund social-welfare entitlements. Europeans simply must be willing to incur the short-term costs of integrating and training these individuals.

When arguing to keep people – especially refugees who are fleeing violence and persecution – out of the EU, one should at least have a solid case. After all, closing the borders to those in need is an extreme response – and one that runs counter to the Christian and European values immigration opponents claim to be defending. Yet no anti-immigrant political leader or group has managed to produce credible evidence to support such a response. So who is the real threat to the European way of life? Simplice A. Asongu is Lead Economist in the research department of the African Governance and Development Institute.

By Simplice A. Asongu

America’s Confidence Economy

LAGUNA BEACH – Financial markets seem convinced that the recent surge in business and consumer confidence in the US economy will soon be reflected in “hard” data, such as GDP growth, business investment, consumption, and wages. But economists and policymakers are not so sure. Whether their doubts are vindicated will matter for both the United States and the world economy.


Donald Trump’s election as US president has triggered a surge in positive economic sentiment, because he pledged that his administration would aggressively pursue the policy trifecta of deregulation, tax cuts and reform, and infrastructure construction. Republican majorities in both houses of Congress reinforced the positive sentiment, as they signaled that Trump would not face the kind of paralyzing gridlock that Barack Obama confronted for most of his presidency.

The surge in business and consumer sentiment reflects an assumption that is deeply rooted in the American psyche: that deregulation and tax cuts always unleash transformative pro-growth entrepreneurship. (To some outside the US, it is an assumption that sometimes looks a lot like blind faith.)

Of course, sentiment can go in both directions. Just as a “pro-business” stance like Trump’s can boost confidence, perhaps even excessively, the perception that a leader is “anti-business” can cause confidence to fall. Because sentiment can influence actual behavior, these shifts can have far-reaching impacts.

In his groundbreaking General Theory of Employment, Interest, and Money, John Maynard Keynes referred to “animal spirits” as “the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism, rather than mathematical expectations, whether moral or hedonistic or economic.” Jack Welch, who led General Electric for 20 years, is a case in point: he once stated that many of his own major business decisions had come “straight from the gut,” rather than from analytical models or detailed business forecasts.

But sentiment is not always an accurate gauge of actual economic developments and prospects. As the Nobel laureate Robert J. Shiller has shown, optimism can evolve into “irrational exuberance,” whereby investors take asset valuations to levels that are divorced from economic fundamentals. They may be able to keep those valuations inflated for quite a while, but there is only so far that sentiment can take companies and economies.

So far, the exuberant reaction of markets to Trump’s victory – all US stock indices have reached multiple record highs – has not been reflected in “hard data.” Moreover, economic forecasters have made only modest upward revisions to their growth projections.

It is not surprising that equity investors have responded to the surge in animal spirits by attempting to run ahead of a possible uptick in economic performance. After all, they are in the business of anticipating developments in the real economy and the corporate sector. In any case, they believe that they can quickly reverse their portfolio positions should their expectations change.

That is not the case for companies investing in new plants and equipment, which are less likely to change their behavior until announcements begin to be translated into real policies. But the longer they wait, the weaker the stimulus to economic activity and income, and the more consumers must rely on dissaving to translate their positive sentiment into actual purchases of goods and services.

It is in this context that the economy awaits a solid timeline for policy announcements to evolve into detailed design and durable implementation. While there is often some delay when political negotiations and trade-offs are involved, in this case, the sense of uncertainty may be heightened by policy-sequencing decisions. By deciding to begin with health-care reform – an inherently complicated and highly divisive issue in US politics – the Trump administration risks losing some of the political goodwill that could be needed to carry out the kinds of fiscal reform that markets are expecting.

Even if a bump in the economic data does arrive, it may not last, unless the Trump administration advances policies that enhance longer-term productivity, through, for example, education reform, apprenticeship programs, skills training, and labor retooling. The Trump administration would also have to refrain from pursuing protectionist trade measures that would disrupt the “spaghetti bowl” of cross-border value chains for both producers and consumers.

If improved confidence in the US economy does not translate into stronger hard data, unmet expectations for economic growth and corporate earnings could cause financial-market sentiment to slump, fueling market volatility and driving down asset prices. In such a scenario, the US engine could sputter, causing the entire global economy to suffer, especially if these economic challenges prompt the Trump administration to implement protectionist measures.

The US is on relatively strong footing to achieve higher economic growth. Indeed, by animating the economy’s animal spirits, the Trump administration has laid the groundwork for the private sector to do a lot of the heavy lifting. But there is more to do. Unless the Trump administration can work well with a cooperative Congress to translate market-motivating intentions into well-calibrated actions soon, the lagging hard data risks dragging down confidence, creating headwinds that extend well beyond financial volatility.

Mohamed A. El-Erian, Chief Economic Adviser at Allianz, was Chairman of US President Barack Obama’s Global Development Council and is the author of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse.

By Mohamed A. El-Erian

The Mispriced Risk of Infectious Diseases

NEW YORK – Global business leaders and investors are largely transfixed by two kinds of risk: macroeconomic and geopolitical. In the near term, this means a focus on the US Federal Reserve’s impending rate hikes and the upcoming elections in France and Germany.


Over the longer term, it means awareness of structural risks like high sovereign debt, demographic shifts, and natural-resource scarcity. But there is a third, arguably more pernicious, risk lurking below most decision-makers’ radar: infectious diseases.

According to the former director of the US Centers for Disease Control and Prevention, Tom Frieden, the world is at greater risk than ever from global health threats. People travel farther and more often. Supply chains, including for food and medicines, extend across the world. A poorly treated case of, say, tuberculosis (TB) in Asia or Africa can present in a hospital in the United States within days.

Against this background, scientists are concerned about the recent uptick in epidemics of diseases such as Zika, Ebola, and avian flu. And they are alarmed by the resurgence of life-threatening diseases such as influenza, HIV, malaria, and TB.

To be sure, in terms of fatalities, recent disease outbreaks and pandemics are a far cry from past global flu epidemics. Whereas the 2003 SARS epidemic resulted in 774 deaths, and the Ebola outbreak of 2014-2015 left 11,310 dead, the 1918-1920 flu epidemic claimed the lives of 100 million people – more than five times the number killed in the world war that had just ended. Indeed, some 5% of the world’s population perished.

But the risks from infectious diseases that we face today could intensify substantially, owing to the rise of anti-microbial resistance (AMR). According to the World Health Organization, “480,000 people develop multi-drug resistant TB each year, and drug resistance is starting to complicate the fight against HIV and malaria, as well.” Antibiotic resistance, the WHO cautions, is now present in every country, putting patients at risk of worse clinical outcomes and at greater risk of death, while increasing the burden on health systems.

England’s chief medical officer, Sally Davies, has warned that, if left unchecked, the growing impotence of drugs could be catastrophic. By 2050, she estimates, drug-resistant infections could be killing someone “every three seconds.” The Review on AMR estimates that, at that point, some ten million lives could be lost each year, at a cumulative cost to global economic output of $100 trillion. To put that into perspective, world GDP today totals $74 trillion per year.

Yet the potential long-term human and economic consequences of AMR of are not widely appreciated by the public and, in particular, by financial markets. In fact, protection from public health threats is one vital area where markets do not deliver efficiently. As a result, it is governments that usually bear the costs of prevention and treatment.

With government budgets already overstretched, coping with the intensifying health burden from AMR will be difficult, to say the least. Yet governments are unlikely to move fast to mitigate this risk. On the contrary, experience indicates that governments often struggle to align public spending with underlying or mounting problems, such as public-health threats, until they reach a crisis point.

More people died of cancer in the US last year than in combat. In fact, last year’s 580,000 cancer deaths exceed the roughly 430,000 battle deaths, on average, in World War I, World War II, the

Korean War, the Vietnam War, and the Gulf War. Yet government spending on cancer averages approximately $4 billion per year. That is just over 0.5% of the annual military budget of roughly $718 billion.

Of course, government budget-allocation decisions are complicated and dogged by political imperatives. The US military employs some three million people, making it the single largest employer in the world, and there is substantial political pressure from some constituencies to place the highest priority on America’s military dominance.

But it is not just a matter of how much is spent; it is also a matter of when. Governments don’t wait for war to break out before investing in the military. Yet they do tend to wait for crises to erupt before they invest in fighting infectious diseases.

The world spent $15 billion on its emergency response to the SARS epidemic and $40 billion on its response to Ebola. In 1918, the crisis response to the flu pandemic cost some $17.5 trillion. Had countries spent more on mitigating the risk of such disease outbreaks – for example, by fortifying their health-care systems and promoting responsible use of antibiotics – those huge emergency payouts may not have been necessary. At the very least, they probably would have been smaller.

In this sense, the fight against infectious diseases closely resembles the fight against climate change. Though the threat is substantial, it is not immediate, so governments continue to pursue other priorities, allowing the threat to grow, largely out of sight. As a result, it is not adequately priced into the markets.

When the crisis finally erupts, the true scale of the threat will become clear. But by that point, it will be much more difficult and expensive to contain, resulting in far more casualties. Unfortunately, that point may be closer than anyone – government or investor – expects.

Dambisa Moyo, an economist and author, sits on the board of directors of a number of global corporations.

 

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