Counting What Counts in Development

NEW YORK – To most people, “development” is best measured by the quantity of change – like gains in average income, life expectancy, or years spent in school. The Human Development Index (HDI), a composite measure of national progress that my office at the United Nations Development Programme oversees, combines all three statistics to rank countries relative to one another.

What many do not realize, however, is that such metrics, while useful, do not tell the entire story of development. In fact, to understand how developed a country is, we must also grasp how people’s lives are affected by progress. And to understand that, we must consider the quality of the change that is being reported.

When statisticians compare countries, they require commensurate data. To compare school attendance, for example, researchers would count the number of registered students in each country, relative to all school-age children (although even this can be a challenge in many developing countries, where record keeping is not always standardized).

But to gauge the relative quality of a country’s education system, researchers would want to determine whether students are actually learning. For those numbers, statisticians would need to test students across a range of subjects, a project that is far more ambitious than simply taking attendance.

Statisticians have always recognized that comparing quantities is far easier than comparing quality. But, because existing measures are all we have, the weaknesses are often overlooked when ranking relative gains or making policies, even though “progress” according to a given indicator is not necessarily genuine. If the world is ever to reach parity in development, we must change how we gauge and catalogue the quality of policy initiatives.

Consider the statistics measured by the HDI – life expectancy, education, and per capita income. Life expectancy statistics suggest that the world is getting healthier, and data show that people are living longer than ever before; since 1990, average life expectancy has increased by around six years. But the increase in quality of life has not been as dramatic. Those extra years are often accompanied by illness and disability – such as dementia, which the World Health Organization now estimates affects 47.5 million people worldwide.

While life expectancy can be calculated based on birth and death records, indices that measure quality of life, like the WHO’s disability-adjusted life year estimates, require considerable amounts of information on a wide range of illnesses and disabilities in every country. And, unfortunately, the difficulty of gathering such data means that many life-quality datasets are incomplete or infrequently compiled.

It’s a similarly mixed picture for education. The world is no doubt making progress in extending access to schools, with more children are enrolled and attending than ever before. But how do we measure the gaps in educational quality? Some 250 million children worldwide do not learn basic skills, even though half of them have spent at least four years in school. It will come as no surprise that in most countries, schools in wealthier neighborhoods typically have better facilities, more qualified teachers, and smaller class sizes. Addressing inequality requires measuring educational outcomes, rather than school enrollment rates.

The OECD’s Program for International Student Assessment (PISA), which relies on tests not directly linked to curricula, is one approach to making cross-country comparisons. The results for 2015 paint a much richer picture of educational performance across participating countries, while highlighting stark disparities. For example, PISA found that “socio-economically disadvantaged students across OECD countries are almost three times more likely than advantaged students not to attain the baseline level of proficiency in science.”

Data on employment – critical for policymakers, as they prepare for the future – tell a similar story. The 2015 Human Development Report recognized that as the world moves toward a knowledge economy, low-skill or marginal workers are at greater risk of losing their jobs, and opportunities for exploitation of informal or unpaid workers increase.

To put this in perspective, consider employment projections for the European Union, which foresee the addition of 16 million new jobs between 2010 and 2020. But over the same period, the number of jobs available for people with the least formal education is anticipated to decline, by around 12 million.

“Not everything that can be counted counts. Not everything that counts can be counted,” the sociologist William Bruce Cameron wrote in 1963. His dictum remains true today, though when it comes to measuring human development, I would suggest a slight revision: “Not everything that is counted counts for everything.”

Equitable human development requires that policymakers pay more attention to the quality of outcomes, rather than focusing primarily on quantitative measures of change. Only when we know how people are being affected by development can we design policies that bring about the most valuable improvements in their lives. “The intention to live as long as possible isn’t one of the mind’s best intentions,” the author Deepak Chopra once observed, “because quantity isn’t the same as quality.”

Selim Jahan is Director of the Human Development Report Office and lead author of the Human Development Report.

By Selim Jahan

Data-Driven Gender Equality

NEW YORK – A key agenda item at this year’s annual meeting of the United Nations General Assembly, under way this week, will be to assess global progress on the Sustainable Development Goals (SDGs), the UN’s consensus roadmap for solving the world’s biggest challenges by 2030.

I was part of the UN team that helped create the Millennium Development Goals, which preceded the SDGs. By the time the MDGs concluded in 2015, they had fueled some of the fastest and most extensive gains in global health and development the world has ever seen. The MDGs paved the way for the SDGs, and I have been encouraged by the commitment the global community has shown to sustaining the post-2015 development agenda.

But it has also become clear to me and others that without a more deliberate, data-driven focus on the needs of women and girls in particular, progress toward a wide range of objectives will suffer. If we fail to achieve universal gender equality, we will fall short of many other goals, from ending poverty to ensuring good health.

One of my personal frustrations with the MDGs was that gender equality was more a matter of rhetoric than of action. Despite their promise of empowerment, the MDGs didn’t adequately target many of the biggest challenges that women and girls face, such as gender-based violence and economic discrimination. These gaps have persisted, because in the 1990s, when the MDGs were being formulated, most people, including me, did not adequately understand the scale or complexity of the problem.

We must avoid a similar fate with the SDGs. Achieving gender equality is more than a once-in-a-generation opportunity; it is also the best way to make progress on nearly all of the SDGs, and to build a world where everyone can thrive. As Bill and Melinda Gates will discuss at a gathering of world leaders next week in New York, and show in a new report, collective action is needed to address the various dimensions of gender inequality and drive progress.

One of the biggest impediments is a dearth of good data on issues that disproportionately affect women and girls, such as land rights, access to education, family planning, or health care. Data are essential to understanding what is working and how to track progress. Yet up-to-date data exist for only a small fraction of the indicators that were developed to assess progress on the 17 SDGs – including the more than 40 that directly relate to gender equality. Of the 14 indicators of progress associated with the primary gender equity goal, SDG 5, most countries are measuring just three.

To help fill these critical gaps, the Bill & Melinda Gates Foundation has created a three-year, $80 million initiative to generate more reliable data that can improve the design and targeting of programs and policy interventions. As part of that effort, the foundation recently launched a $10 million partnership with UN Women to help countries improve the quality of the gender-specific data they collect. The foundation is also supporting Equal Measures 2030, an initiative to empower advocates and civil-society groups with easy-to-use evidence to assess progress toward targets and keep the SDGs for women and girls on track.

These and other efforts will provide gender-equality advocates and decision-makers with better information about the nature and scale of the social and economic barriers holding women and girls back, and help identify who is falling through the cracks.

We know from existing evidence that empowering women and girls can accelerate progress. For example, when girls attend secondary school (SDG 4), they are up to six times less likely to be married as a child. And higher literacy rates among adolescent girls are associated with lower adolescent birth rates and improved health (SDG 3). Likewise, women are much more likely than men to invest surplus income in ways that improve the lives of their children.

The benefits of gender equity are also apparent when women have access to basic financial services, like credit and savings accounts, which enable them to start businesses and save money for family essentials.

Closing the gender gap in agriculture, meanwhile, could have an even more profound impact on families and productivity in the developing world. Today, for example, women make up nearly half of the agricultural workforce in Sub-Saharan Africa. Yet, they typically work smaller, less productive plots of land than men, and often lack access to the best seeds, fertilizer, credit, and training opportunities. Studies show that giving women more decision-making power over productive assets has the potential to increase farm yields by more than 20%, which is essential to “end poverty in all its forms everywhere” by 2030 (SDG 1).

When we remove the barriers confronting the most vulnerable in society, the effects are transformational. But to do that, donors, development partners, governments, and the private sector must invest in more and better data that are sorted by age and sex. Doing so will allow programs to be tailored to the needs of women and girls everywhere.

Our challenge – and opportunity – is to overcome the deeply entrenched barriers that impede progress for women and girls. The SDGs are a huge step in that direction. But goals without actionable strategies are just good intentions. The SDGs provide the roadmap to ending poverty and creating a better, healthier, more secure world for everyone. Ensuring that we have quality data is the best way to ensure that no one gets lost along the way.

Mark Suzman is Chief Strategy Officer and President of Global Policy and Advocacy at the Bill & Melinda Gates Foundation.

By Mark Suzman

Transparency’s Diminishing Returns

PARIS – Transparency was a central theme in the 2017 French presidential election. Even before François Fillon of the conservative Les Républicains was reported to have paid his wife public funds for unperformed tasks, the eventual victor, Emmanuel Macron, had made transparency a central issue of his campaign.

It is thus ironic that four of Macron’s 15 initially selected cabinet members – including one of the president’s closest advisers – have been forced to resign following reports of alleged misconduct or misuse of public funds, even before any judicial ruling. A freshly appointed member of France’s Constitutional Council has also been forced to resign as well, after news reports alleging that he had employed his daughter in a fake job while serving in the Senate.

The French media have continued to investigate other potential scandals. But, for the time being, the recent series of mishaps seems to have ended. In accordance with his campaign promise, Macron has signed new government ethics rules into law. Under the “Act to Reestablish Confidence in Public Action,” public officials face a raft of new restrictions. They may no longer employ family members on their staff. They have been stripped of their lump-sum allowance for professional fees. And they are barred from using a “parliamentary reserve fund” to finance local initiatives.

Of course, Macron’s ethics law is hardly the first of its kind. In 1988, new transparency rules were enacted in response to a series of political scandals the previous year. The 1988 reforms established France’s system of publicly funded political parties, and required all elected members of the National Assembly to provide full financial disclosure to a newly created commission.

Then, in 2013, after a high-level minister was found to have stashed funds in an overseas bank account, another ethics law was enacted, requiring that members of the government publicly disclose their investments and assets. A new High Authority for Transparency in Public Life was given far-reaching powers to audit and publish public officials’ disclosures, issue rulings on misconduct and conflicts of interest, and refer violations to the solicitor general’s office.

In 2017, the High Authority, for the first time, published all presidential candidates’ asset-disclosure forms on its website. But, more important, it postponed the new government’s appointment by a day so that it could vet the incoming ministerial candidates. And yet this process still somehow cleared the four ministers who had to resign soon after taking office.

Of course, such checks exist in most democratic countries, not least the United States, where the US Senate performs due diligence on most of the president’s appointments. And in many Western countries, there has been significant progress over the past few decades to improve governmental and institutional transparency, ensure competitive bidding for government contracts, and so forth. It is widely understood that democratic citizens have a right to access governmental and administrative documents, and to be informed of the reasons behind decisions that affect them. These norms are in keeping with the principle of sound governance embodied in the European Union’s Charter of Fundamental Rights.

In France, the most recent example of this shift toward greater transparency relates to Brigitte Macron. After public outcry at the possibility that she would acquire the legal status of French “First Lady,” the Macron administration published on the Elysée website a “Charter of Transparency Concerning the Wife of the Head of State,” confirming that she will receive no compensation or budget of her own. It was no accident that this document included the magic word: transparency.

Prior to this, a number of other steps were taken to strengthen transparency in public life: enacting new anti-corruption rules, eliminating patronage in government contracts or civil-servant jobs, and making ongoing debates more open to the public. These efforts, it is hoped, will boost public confidence in French institutions.

And yet polls show nothing of the kind. On the contrary, the French public has continued to demand even greater accountability from those in power. One reason is that emerging digital media, and the race for scoops among news organizations, investigative journalists, increasingly active NGOs, are providing a constant stream of reasons for mistrust. More broadly, citizens who struggle to make ends meet have become increasingly resentful and suspicious of those perceived to be privileged, moneyed elites – especially politicians.

At the same time, the automatic tax audits and asset-disclosure requirements that have been in place since 2016 have been expanded to apply to a greater number of civil servants; and the definition of “conflict of interest” has been stretched ever further. These embodiments of public suspicion do not betoken a healthy political climate.

To be sure, stricter transparency requirements have improved democratic practices across many Western countries in recent decades. But defending personal privacy is still a valid objective, and maintaining secrecy in some domains, such as national security, diplomacy, and human rights, is essential.

Striking a balance between the conflicting imperatives of transparency and privacy will never be easy, especially when the political landscape is tilting toward ever-greater accountability. But decision-makers in any democracy have the crucial, albeit thankless, job of doing precisely that.

Raphaël Hadas-Lebel, President of the Honorary Section of the State Council, is a former Professor at the Political Studies Institute of Paris.

By Raphaël Hadas-Lebel

Trump’s 3% Growth for the 1%

CAMBRIDGE – US President Donald Trump has boasted that his policies will produce sustained 3-4% growth for many years to come. His prediction flies in the face of the judgment of many professional forecasters, including on Wall Street and at the Federal Reserve, who expect that the US will be lucky to achieve even 2% growth.

But is there any chance that Trump might be right? And if he is, to what extent will his policies be responsible, and will faster growth entail grave long-term costs to the environment and income inequality? The stock market may care only about the growth rate, but most Americans should be very concerned about how growth is achieved.

Trump’s forecast for the United States’ overall economic-growth rate is hardly wild-eyed. A steady stream of economic data suggests that the annual rate has now accelerated to 2.5%, roughly splitting the difference between Trump and the experts. Moreover, employment gains have been robust during the first six months of Trump’s presidency, with more than a million jobs created, and stocks are soaring to new highs, both of which are fueling higher consumption.

Given this performance, getting to 3% annual growth would hardly be a miracle. And achieving Trump’s target would be even more likely if his administration suddenly became more coherent (which could indeed require a miracle).

Of course, growth this year is in many ways a continuation of that achieved during Barack Obama’s presidency. Altering the course of a giant ship – in this case, the US economy – takes a long time, and even if Trump ever does manage to get some of his economic agenda through the US Congress, the growth effects are not likely to be felt until well into 2018.

To be sure, Trump has eviscerated the Environmental Protection Agency (which has helped coal mining), softened financial oversight (great for bank stocks), and has shown little interest in anti-trust enforcement (a welcome development for tech monopolies like Amazon and Google). But his main policy initiatives for corporate tax reform and infrastructure spending remain on the drawing board.

Moreover, Trump’s plans to increase protectionism and sharply reduce immigration, if realized, would both have significant adverse effects on growth (though, to be fair, the proposal to have the composition of immigration more closely match the economy’s needs is what most countries, including Canada and Australia, already do).

Perhaps the single most important decision Trump will make on the economy will be his choice of who should replace Janet Yellen as Chair of the Federal Reserve Board. In other appointments, Trump has preferred generals and businesspeople to technocrats. By and large, the most successful bankers in recent years have been exactly the types of experts Trump seems to avoid.

Whoever Trump appoints is likely to face major challenges immediately. Subdued wage growth in the face of a tightening labor market is unlikely to continue, and any big rise in wages will put strong upward pressure on prices (though this might not happen anytime soon, given the relentless downward pressure on wages coming from automation and globalization).

How the Fed handles an eventual transition to higher wage growth will be critical. If policymakers raise interest rates too briskly, the result will be recession. If they raise rates too slowly, inflation could become uncomfortably high and ingrained.

So, yes, Trump just might get his growth number, especially if he finds a way to normalize economic policymaking (which is highly uncertain for a president who seems to prefer tweet storms to patient policy analysis). But even if the US hits the 3% target, it might not be the panacea the Trump hopes it will be.

For starters, faster growth is unlikely to reverse the current trend toward inequality, and a few small, targeted presidential interventions into the actions of specific states or companies are hardly going to change that. On the contrary, there is no reason to presume that owners of capital will not continue to be the main beneficiaries. Eventually, that trend could reverse, but I wouldn’t bet on it happening just yet.

If environmental degradation and rising inequality make economic growth such a mixed blessing, is the US government wrong to focus on it so much? Not entirely. Higher growth rates are particularly good for smaller businesses and startups, which in turn are a major contributor to economic mobility.

Recent low growth rates have made potential entrepreneurs far more reluctant to move across states or to change jobs, and have reduced economic mobility in general. And if the US economy were to weaken substantially for a prolonged period, it could bring forward considerably the day when the US no longer has significant military superiority over its rivals.

Those who, like Trump, want to reduce US military involvement overseas may argue that this is nothing to worry about, but they are wrong. Still, policies that produced more broadly shared and environmentally sustainable growth would be far better than policies that perpetuate current distributional trends and exacerbate many Americans’ woes. Even if Trump hits his growth targets in 2018 and 2019 – and he just might – only the stock market may be cheering. Kenneth Rogoff, a former chief economist of the IMF, is Professor of Economics and Public Policy at Harvard University.

By Kenneth Rogoff

Killing Killer Mosquitoes

SINGAPORE – Mosquitoes may be tiny, but they have a powerful bite. They spread a number of diseases – such as chikungunya, dengue, malaria, yellow fever, West Nile fever, and Zika virus – which together kill millions of people each year. Malaria alone is one of the world’s top infectious killers (behind only tuberculosis and AIDS), responsible for 429,000 deaths in 2015. Given the scale and scope of the problem, stronger action to eliminate mosquitos – and the diseases they carry – is a development imperative.

The World Health Organization ranks mosquitoes among the top threats to public health, especially in developing countries. As a graphic on Bill Gates’ blog last year highlighted, mosquitos are responsible for 830,000 human deaths annually – 250,000 more than are caused by our fellow humans.

Beyond the massive human costs, mosquito-borne diseases carry large economic costs. For an infected individual, those costs include treatment and hospital expenses, transportation to and from a health clinic or hospital, time spent out of work, and insect sprays or bed nets to protect against more disease-spreading mosquito bites.

For countries, mosquito-borne diseases cost millions – even billions – of dollars each year. Governments must fund mosquito-control and prevention programs, from the use of insecticides to the distribution of mosquito nets, as well as public-education campaigns and vaccination initiatives. (Although there is no widely available vaccine for malaria, three countries are set to take part in a pilot immunization program starting in 2018, and some mosquito-borne diseases – such as yellow fever, Japanese encephalitis, and dengue – are vaccine-preventable.)

Governments may also have to compensate communities affected by epidemics, fund research to treat illness or prevent future outbreaks, cover increased health-care costs, and sustain programs to help patients. Meanwhile, the economy suffers from reduced productivity.

Eradicating mosquito-transmitted diseases must therefore be a top priority, eliciting not just effective government stewardship, but also the involvement of civil society, private-sector engagement, and the participation of affected communities. Beyond effective collaboration, success will demand improved surveillance and greater innovation, particularly in diagnostics, drugs and vaccines, insecticides, and vector control.

The good news is that, on vector control – that is, mosquito eradication – promising innovations are already emerging. One such innovation uses a bacterium called Wolbachia, either to stop deadly viruses from growing or to reduce mosquito populations.

Wolbachia is present in about 60% of species of insects, including some mosquitoes. One species where Wolbachia is not present naturally is the Aedes aegypti mosquito, which is responsible for transmitting human viruses like dengue, chikungunya, yellow fever, and Zika. Studies show that when Wolbachia is introduced into the Aedes aegypti mosquito, it can prevent the growth of human viruses within the insect. Another approach would be to release a large number of male mosquitos with the Wolbachia bacteria; females with which they mate would be unable to reproduce.

Another innovation is a vaccine called AGS-v, developed by the London-based pharmaceutical company SEEK to provide broad protection against a range of mosquito-borne diseases. The vaccine is designed to trigger an immune response to mosquito saliva, thereby preventing infection from whatever virus the saliva contains.

As with Wolbachia, researchers believe that AGS-v could also curb mosquito populations. After a mosquito takes a blood meal from a vaccinated person, the antibodies may attack the mosquito’s salivary proteins, affecting its ability to feed and to lay eggs – and thereby leading to its premature death. Phase I clinical trials of the vaccine, sponsored and funded by the National Institute of Allergy and Infectious Diseases, began in February.

A third innovation is essentially a smart mosquito trap, capable of capturing only the mosquito species capable of spreading the Zika virus and other diseases. Part of Microsoft’s Project Premonition research initiative, the prototype trap uses an infrared light beam to identify specific mosquito species with more than 80% accuracy. When the trap captures a mosquito of interest, it saves related data, such as the time, temperature, humidity, and light levels, in order to enhance researchers’ understanding of mosquito behavior and, thus, their ability to address potential outbreaks.

Such innovations promise to accelerate substantially efforts to curb deadly mosquito-borne diseases. The question is the extent to which they will be applied. After all, far more basic measures that individuals can take to protect themselves and their families are not being implemented nearly enough.

For example, because mosquitos need water to breed, people should be removing puddles or other collections of standing water around their homes, puncturing unused tires, regularly cleaning birdbaths, and draining swimming pools. Liquid larvicides can be applied directly to water using backpack sprayers, and introducing fish into ponds, particularly in residential areas, can also help to eliminate larvae.

As for adult mosquitoes, keeping grass and shrubs short limits resting places, thereby helping to control populations. Window and door screens should be installed and maintained, and the outdoors should be avoided in the morning and evening, when mosquitos tend to be most active. Long-sleeve shirts, long pants, and insect repellants can help minimize bites when staying inside isn’t an option.

Such techniques aren’t foolproof, but they can go a long way toward protecting individuals. But people need to use them. And, for that, information must be shared widely, and the relevant tools made available to the public.

Last month marked the 120th anniversary of the discovery that female mosquitoes transmit malaria among humans. Since then, malaria and other mosquito-borne diseases have been controlled and even eliminated in the developed world. Yet, in developing countries, the fight is far from over.

Melvin Sanicas, a public health physician and vaccinologist, is a regional medical expert at Sanofi Pasteur.

By Melvin Sanicas

This Thing Called the American Dream

NEW YORK – In 1968, gonzo journalist Hunter S. Thompson mused about “this Death of the American Dream thing.” But what was this thing called the American Dream? What made it uniquely American?

For some, the Dream was Americans’ belief that their economy was a cornucopia of goods sure to bring a standard of living unimaginable in other economies: the dream of unrivaled plenty and comfort. But, while America had a superior wage level in the 1700s, Britain nearly closed the wage gap with America by the 1880s, and Germany came almost as close by 1913. Germany and France caught up with America by the 1970s.

For some economists, the Dream was the hope of an improving standard of living: the dream of progress. The economist Raj Chetty has been gauging the improvement people have made over what their parents had. He found that in 1940, nearly all young Americans – 90% of them, to be precise – had a household income higher than their parents had when they were young. That high percentage largely reflects America’s rapid productivity growth, which boosted wage rates. Yet from 1890 to 1940, rapid productivity growth was normal in Britain, Germany, and France as well – as it was in the “30 Glorious Years” from 1945 to 1975. So if the Dream was progress, Europeans could have dreamed of progress, too.

For many others, the Dream referred to the hope of America’s deprived – stirred by Eleanor Roosevelt, Martin Luther King, Jr., John Rawls, and Richard Rorty – that their country would somehow end the injustice of pay so low that it isolates them from the life of the country: the dream of inclusion. Yet such a dream could not be unique to the poor and marginalized in America. Certainly Arabs and Roma in Europe have dreamed of being integrated into society.

For other scholars, such as Richard Reeves and Isabel Sawhill, the American Dream is about mobility more generally. It is a hope held by Americans, in the working and middle classes as well as the working poor, of being lifted to a higher rung on the socioeconomic ladder, not a rise of the ladder itself: the dream of a higher income or social station relative to the average. In fact, from the mid-nineteenth century well into the twentieth, structural shifts wrought by technological change and demographics in America’s market economy lifted many participants – while dropping others. Yet it is doubtful that this “musical chairs” was unique to Americans. From 1880 well into the 1920s, Germans and French saw their economies transformed by globalization; Britons had that experience even earlier.

What made the American Dream distinctive was neither the hope of winning the lottery nor of being buoyed by national market forces or public policy. It was the hope of achieving things, with all that that entails: drawing on one’s personal knowledge, trusting one’s intuition, venturing into the unknown. It reflected the deep need of these Americans to have the experience of succeeding at something: a craftsman’s gratification at seeing his mastery result in better work, or a merchant’s satisfaction at seeing “his ship come in.” It was success that mattered, not relative success (would anyone want to be the sole achiever?). And the process may have mattered more than the success.

There is abundant evidence of this goal, as Americans worked it into their books and plays. Mark Twain, though a dark writer, appreciated the quest for success of his young subjects. At the end of his 1885 classic, The Adventures of Huckleberry Finn, Finn aims to “light out for the Territory ahead of the rest...” Hollywood writers found other words for it. In the film Little Caesar (1931) Rico says, “Money’s okay, but it ain’t everything. Be somebody….Have your own way or nothing.” In A Star is Born (1937), the aspiring singer Esther Blodgett exclaims that “I’m going out and have a real life! I’m gonna be somebody!” And in On the Waterfront (1954), Terry Malloy laments to his brother Charley “I coulda had class. I coulda been a contender. I coulda been somebody...”

Of course, dreaming of success could not have been widespread – a national phenomenon – had working Americans not had an economy that gave participants the freedom to be enterprising: to try new ways and conceive new things. And dreams of success could not have become as widespread as they did had Americans not perceived that they could succeed regardless of their national origin and their social status.

Observing that enterprise, exploration, and creation could be engaging, even engrossing, and deeply gratifying, Americans came to view working in businesses, from rural areas to cities, as a path to the Good Life. And that life’s rewards were not just money. To suppose that money was their focus – even in their dreams – is to miss what was distinctive in American life.

From the early nineteenth century to the middle of the twentieth, Americans were proving the wisdom of philosophers from Montaigne and Voltaire to Hegel and –a hit in America – Nietzsche: that the good life is about acting on the world and making “your garden grow,” not padding your bank account.

Edmund Phelps, the 2006 Nobel Laureate in Economics and author of Mass Flourishing, is Director of the Center on Capitalism and Society at Columbia University.

By Edmund Phelps

Experts and Inequality

NEW YORK – Ten years ago this month, the world glimpsed the first clear signals of an economic crisis that, a year later, would be in full swing, creating economic hardship of a kind not seen since the Great Depression of the 1930s. The deep recession that followed the near-collapse of the global financial system in 2008 caught nearly everyone by surprise – including the experts who were presumably the best equipped to see it coming.

In November 2008, less than two months after the failure of the US investment bank Lehman Brothers, a visibly irate Queen Elizabeth II, visiting the London School of Economics, famously asked, “Why did nobody notice it?”

Over the last decade, a range of answers has been offered, with experts being blamed for arrogance, complicity, or being just plain overrated. And the context was dire, with jobs lost and balance sheets shrinking. The queen’s own personal wealth had fallen by £25 million ($32.1 million) since the start of the crisis (though the decline was from a very high base.)

Now, with the perspective offered by the post-crisis decade, we may be in a better position to answer Queen Elizabeth’s question. But we must first consider more broadly the challenges confronting economists and financial experts in today’s world – challenges that remain poorly understood, by contemporary economics’ critics and defenders alike.

The first problem is that for certain types of economic phenomena – such as financial recessions, stock-market crashes, or exchange-rate fluctuations – it is logically impossible for anyone to be known to be forecasting accurately far in advance. This does not mean that no one has the ability to foresee a crash, but rather that no one can be known for having that ability. If someone does have such a reputation, their predictions can become self-fulfilling prophecies: if they predict, say, a stock-market crash, everybody will begin to sell their shares, bringing about the predicted outcome.

A second problem of expertise arises from the fact that it is not always in the interest of experts to reveal what they do and do not know. Most people would prefer to show off their expertise, perhaps exaggerating how wide a field it covers.

Of course, this does not negate the value of experts. For example, when I was an adviser to the Indian government, a decision was taken to sell some 3G spectrum. Some of us argued that the government should use professionally designed auctions – an area where economists have expertise akin to engineers – instead of selling the asset for a pre-determined price. India’s political leaders listened, and the spectrum, which had been valued by bureaucrats at $7 billion, sold for an astonishing $15 billion.

But there are many fields where economists’ knowledge is highly imprecise and comes with significant provisos, which may not be fully understood. This may be because decision-makers choose not to pay attention; but it may also be because economists themselves do not spell out the risks.

This risk is all the more acute in a world where scientific and technological progress is taking us into uncharted territory. The decisions that must be taken in response to these developments – those related to the nature of the world or those we have created ourselves – require as much accurate information as possible.

Increasing complexity is reflected in contemporary law and policy. It is common nowadays for people to conclude contracts that are so long and convoluted that signatories do not know what they entail (this was a major factor contributing to the subprime mortgage crisis in the United States, which fueled the global economic crisis and subsequent Great Recession). Likewise, central banks nowadays intervene in ways that often are poorly understood by those most affected.

The upshot is that we are increasingly reliant on experts. And experts may decide to use their know-how not just to address the challenges ahead, but also to serve their own interests.

This is an age-old problem. In the seventeenth century, the economist and investor Sir William Petty was tasked with surveying large swaths of army land, much of which lay fallow, in Ireland. He did a good job, using some truly innovative methods. But he also ended up personally owning much of the land he had surveyed.

This “Petty problem” is likely to become worse, as the world’s complexity – and, thus, its reliance on expertise – increases. This will do nothing to endear experts to ordinary people. Already, many parts of the world, from the US to India, are experiencing a surge in right-wing populist sentiment that is rooted at least partly in mistrust of experts, who are perceived as self-serving.

It is not immediately clear how the Petty problem can be solved. But we must acknowledge its existence – and recognize that it is intimately connected to high and rising inequality in much of the world. Moreover, we must address inequality head on, by limiting the gap between the richest and poorest. If, for example, it becomes impossible for a CEO to earn more than a certain multiple of what the average worker in his or her firm is paid, there will be a limit to how much ingenuity the CEO directs toward pure self-enrichment.

Of course, imposing caps on executive compensation is a blunt instrument for fighting inequality. But more nuanced policymaking – often based on the misguided assumption that companies can be trusted, or induced, to self-regulate – has failed. The time has come for measures that everyone can understand. Kaushik Basu, a former chief economist of the World Bank, is Professor of Economics at Cornell University.

By Kaushik Basu

How African Scholarship Can Reduce African Unemployment

BRIGHTON – With two thirds of Africa’s population under 25 years of age, the continent’s youth may be its biggest competitive advantage. After all, countries’ long-term economic prospects are typically linked to the availability of a young, mobile labor force. A recent report by the Mo Ibrahim Foundation concluded that ten of the world’s 25 fastest-growing economies between 2004 and 2014 were in Africa. And yet, with many millions of young people unemployed in 2015, and many more underemployed, Africa has so far failed to reach its full potential.

The continent’s youth-employment challenge persists for many reasons. For starters, youth-focused policies and interventions are limited across the region. Programs that do exist lack adequate coordination, and often fail to incorporate lessons and feedback. Employment strategies have also tended to be largely theory-based; while well meaning, they can fail to deliver results when put into practice.

But in our view, an additional, often overlooked weakness is an academic environment that limits contributions from Africa’s youngest scholars – students just finishing their PhDs – who may in fact hold the keys to putting the continent to work. Experience shows that young African doctoral students produce research that is crucial to addressing the continent’s development challenges. And yet, far too often, these young minds lack the training, access, and support they need to bring their ideas from the field to the policymaking arena.

That is why we have joined a global initiative to provide young African researchers an opportunity to engage in policy-oriented solutions, through research collaboration and publishing opportunities. Launched in 2016 by The MasterCard Foundation and the Institute of Development Studies (IDS) in the United Kingdom, the Matasa Fellows Network aims to bring together the continent’s young academic talent to help solve Africa’s youth employment challenge.

Because that challenge is closely connected to other issues – like migration, conflict, rural development, and gender – policymakers must cast a wide net when considering solutions. Our fellows’ research on these issues poses vital questions to governments and development funders about how to design solutions and implement them in ways that ensure accountability.

The first cohort of fellows, who recently published their findings in the IDS Bulletin, included ten African doctoral students working in the social sciences. With coaching and mentorship from IDS staff, the fellows fine-tuned their ideas through peer mentorship and worked to generate policy ideas through interactions with government officials and NGOs professionals.

The fellows’ output so far has been remarkable: policy briefs on a diverse range of topics, including youth unemployment in Ghana, livestock production in Kenya, and regional strategies for improving youth-led entrepreneurship. The inaugural Matasa fellows also studied the political dimensions of youth employment and policy processes in Ethiopia; the social and cultural concerns underpinning employment choices across the continent; how mentorship affects entrepreneurship; and how young Africans view illicit industries, like gambling and sex work.

Some of the fellows’ research has generated remarkable results –all the more so for being counterintuitive. For example, Kampala-based researcher Nicholas Kilimani’s survey of employment strategies found that, contrary to commonly held assumptions, youth unemployment rates actually rise proportional to educational attainment. Solving the employment crisis will therefore require creative thinking, Kilimani argues. “The youth employment challenge requires policy action beyond basic education and labor markets,” he writes, “into areas such as credit markets, infrastructure, business regulation, and rural development.”

The work of Maurice Sikenyi, who studied Kenya’s Youth Enterprise Development Fund, a government-run microfinancing initiative, is equally innovative. Using primary interviews and secondary data, the University of Minnesota scholar concluded that the fund’s reach and impact was being weakened by corruption, vague eligibility criteria, long wait times for loan processing, and an underappreciation of the risks young people take when starting their own business. His paper explores how the development program could be strengthened through greater attention to accountability measures and a renewed focus on mentorship.

Africa can turn the corner on youth employment. To do so, however, African decision-makers need to engage more deeply with the continent’s youngest, brightest researchers – who often are uniquely positioned to lend key insights – and build new nodes of academic connectivity between the continent’s research, policy, and practice.

Seife Ayele and Jim Sumberg are research fellows at the Institute of Development Studies at the University of Sussex. Samir Khan is Senior Manager of Research and Policy Communications at The MasterCard Foundation.

By Seife Ayele, Samir Khan, and Jim Sumberg

How to Renew the European Project

BERLIN – The French presidential and legislative elections earlier this year have instilled new hope in the European integration project, by raising the prospect of deeper Franco-German cooperation. And yet some forms of cooperation, not least shared-liability schemes, would be a mistake. As long as member states have sovereignty over fiscal and economic policymaking, France and Germany should focus their efforts on making the eurozone itself more resilient.

French President Emmanuel Macron has started to pursue urgently needed reforms to boost economic growth, and it is crucial that he succeeds in this effort. France is suffering from high structural unemployment and low potential growth, and its public finances are unsustainable in the medium term. Improving this state of affairs will require factor- and product-market reforms, together with deep reductions in public-sector deficits.

From France’s standpoint, there is no better time than now to implement economic reforms. Although the eurozone is showing signs of a solid economic recovery, the European Central Bank is feeling increasing pressure to taper its ultra-expansionary monetary policies. Macron’s government thus has no time to lose, especially given that economic reforms can take time to deliver results, and the next elections are always just around the corner.

In light of this small window of opportunity, the last thing France needs is more joint investment schemes, as some have proposed. Economic growth requires not just capital investments, but also a business environment where innovation is encouraged and rewarded. And at any rate, it wouldn’t make sense for France to rely on other member states for investments. How can France claim to have restored its past grandeur if it is asking for Germany’s help?

Beyond implementing domestic reforms, France can still work with Germany to send a powerful message in support of European integration. But as both countries seek areas where they can cooperate, they must be careful to avoid policies that would threaten the eurozone’s long-term stability.

Unfortunately, some proposals currently being discussed would do precisely that. For example, establishing a shared eurozone-level budget or unemployment-insurance regime would, at this stage, sow the seeds of future conflicts. It is inconceivable that national policymakers, seeing to their countries’ own interests, would prevent these arrangements from mutating into permanent asymmetric transfer schemes.

To avoid distributional conflicts that would only poison the European project, any institutional reform that is proposed in the name of Franco-German cooperation should have to pass a strict sustainability test. European policymakers must ensure that there is congruence between the power to make decisions and the liabilities associated with any decisions that are made. It would be naive to think that member states will not offload the costs of their choices onto other member states if given the chance.

And besides, there are many other areas where France and Germany can strengthen cooperation and give new momentum to European integration. To determine where to focus their efforts, French and German leaders should keep three related principles in mind. First, any joint endeavor must respect diversity. The central strength of the European project is that it unites its member states in pursuit of peace and prosperity. But this requires a rich reservoir of ideas, not a single, unified approach.

The second principle is subsidiarity, which holds that decision-making should be decentralized whenever possible. This ensures that local and regional preferences are considered alongside the effects of eurozone-wide harmonization and economies of scale.

The last principle is congruity, to ensure that decision-makers are accountable for the outcomes of their decisions. This means that as long as European electorates insist on retaining sovereignty over fiscal and economic policymaking, shared liability will be a pipe dream.

With these principles in mind, France and Germany could take joint action on a variety of issues, such as climate change, the refugee crisis, and counter-terrorism. Coordinating efforts on these fronts would revitalize the integration process and contribute to Europe’s long-term stability and prosperity.

On economic policy, France and Germany should look for ways to fortify the eurozone and complete the single market. The privilege that government debt enjoys under current banking regulations should be eliminated, and an independent banking regulator, separate from the European Central Bank, should be established within the eurozone. Beyond that, it is time to start phasing in a viable sovereign-insolvency scheme for the bloc.

All of these initiatives could be implemented simultaneously with domestic reforms in France. But there is a risk that they will take a back seat to other proposals, such as shared-liability schemes. To avoid this pitfall, policymakers should consider the roots of the eurozone’s low growth potential, which is not a result of insufficient solidarity, but of individual member states abnegating their national responsibilities. Rather than provide a cure for these problems, shared liability would make them worse.

Proponents believe that more shared liability could pave the way for individual responsibility. But that is an illusion. Once in place, a shared liability scheme would reduce the incentives to deliver on structural reforms. And among German voters, nothing could undermine support for the European project more than yet another set of broken promises.

Christoph M. Schmidt is Chairman of the German Council of Economic Experts and President of the RWI – Leibniz Institute for Economic Research, one of Germany’s leading economic research institutes.

By Christoph M. Schmidt

The Rising Price of Trump’s Border Wall

WASHINGTON, DC – As a candidate, Donald Trump insisted on one signature issue above all: the United States will build a wall along its border with Mexico, and Mexico will pay for it. Seven months after taking office, however, Trump has made no progress on either front: political support for a new wall is diminishing, and the chance that Mexico will pay anything for it is essentially zero and seems to be off the agenda.

Now, Trump is doubling down – and threatening to shut down the government, or even default on the federal debt, unless Congress provides funding for a wall that he promised would cost US taxpayers nothing. If Trump escalates this confrontation, the costs for Americans – in terms of economic uncertainty and slower growth – are likely to pile up.

The amounts of money involved are not large relative to the overall size of the US government. In Trump’s first full-year budget, initial spending on the wall was put at $1.6 billion, with the president estimating that the total cost will be $12 billion (although other estimates are considerably higher). Compared to total US government spending of $3.9 trillion in 2016, that is a drop in the bucket. The argument here is about principles: what would a border wall really achieve from a practical standpoint, and what would it symbolize? But the precise rules about purse strings determine how this argument will play out.

The president does have some discretion on spending – and the Department of Homeland Security has already shifted funds from other programs to pay for the development of prototypes. But a fundamental principle of the US Constitution is that Congress controls the purse strings – meaning that discretionary spending, such as outlays for a border wall, is subject to the formal appropriations process. Building a border wall, or significantly extending what is already there, is not feasible without congressional approval.

The appropriations process is complex and not always transparent to outsiders. Regular appropriations are supposed to be enacted by October 1 (the beginning of the government’s fiscal year). But there is now a long tradition of “continuing resolutions,” which provide funding for just part of a year. And supplemental appropriations bills can provide additional funding at any time in response to particular situations – such as the aftermath of a major hurricane.

The Republicans control both the Senate and the House of Representatives. And the House already granted approval for exactly what Trump wanted on the wall – the $1.6 billion was included in a broader $788 billion spending package, so the wall did not have to be debated separately.

Under current rules, 60 votes would be needed in the 100-member Senate to fund the wall, and the Democrats, with 48 seats, already managed to exclude this item from the spending bill earlier this year, which funded the government through September 30.

Now Trump has issued an ultimatum: fund the wall, or face a shutdown of the federal government – meaning that he and the Republicans would refuse to conclude any appropriations deal by October 1. Or perhaps the wall will become part of a showdown over how the debt ceiling for the federal government should be raised, with the deadline for doing so also likely to come around the end of September.

Complicating the issue further, some congressional Republicans – such as Senator Paul Rand of Kentucky and Congressman Mark Meadows of North Carolina – seem not to oppose some form of partial default or other reneging on debt by the US government. And remember that John Boehner stepped down as Speaker of the House in 2015 in part over similar budget struggles with the right wing of his party.

The impact of a debt default would be cataclysmic, and it seems unlikely that Trump would be foolish enough to go so far. But Goldman Sachs, a politically well-connected bank, puts the odds of a government shutdown at 50/50 – up from around 30% in May.

Government shutdowns are costly, impacting services and potentially payments to suppliers and citizens. But politicians never know exactly who will be blamed, and how much, until the shutdown happens. Although this approach didn’t go well for Republicans in 1995-96 or in 2013, there are clearly some people in the party who would like to try it again.

The costs to the economy of a shutdown are definitely negative. But, whereas a debt default by the federal government would amount to falling off a cliff, the costs of a shutdown build more gradually over time. It seems entirely consistent with Trump’s personality and style that he would try such a maneuver and see how it plays with his (slowly dwindling) electoral base.

Of course, there are many wildcards – including the apparently bad relationship between Trump and Mitch McConnell, the Republican leader in the Senate. The massive flooding in Texas – and the important helping role that the federal government can play – may also convince the White House that now is not the time for further disruption.

One thing is certain: Mexico is not going to pay for the border wall. What is less clear is how much Americans will be forced to pay – with uncertainty, disruption, and even a government shutdown – if Trump’s version of the wall is ever built.

Simon Johnson is a professor at MIT’s Sloan School of Management and the co-author of White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.

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