Opinion

New Life for the SDR?

WASHINGTON, DC – The rise of anti-globalization political movements and the threat of trade protectionism have led some people to wonder whether a stronger multilateral core for the world economy would reduce the risk of damaging fragmentation. After all, lest we forget, the current arrangements – as pressured as they are – reflected our post-World War II forebears’ strong desire to minimize the risk of “beggar-thy-neighbor” national policies, which had crippled growth, prosperity, and global stability in the 1930s.


Similar considerations fueled the launch, nearly 50 years ago, of the International Monetary Fund’s Special Drawing Right as the precursor to a global currency. And with renewed interest in the stability of the international monetary system, some are asking – including within the IMF – whether revamping the SDR could be part of an effective effort to re-energize multilateralism.

The original impetus for the SDR included concerns about a national currency’s ability to reconcile the need for global liquidity provision with confidence in its role as the world’s reserve currency – what economists call the “Triffin dilemma.” By creating an international currency that would be managed by the IMF, member countries sought to underpin and enhance the international monetary system with a non-national official reserve asset.

Legal and practical factors, as well as some countries’ political resistance to delegating economic governance to multilateral institutions, have prevented the SDR from meeting its creators’ modest expectations, let alone the grand role of a truly global reserve currency that anchors the cooperative functioning of a growth-oriented global economy. Information and other market failures have added to the challenges, as have weak institutional infrastructure and inadequate branding. The result is a substantial gap between the SDR’s potential and its performance.

That gap has meant missed opportunities for the global economy – particularly in terms of asset-liability management, responsive liquidity, adjustment between deficit and surplus countries – and thus a gap between actual and potential growth. With the SDR providing a stronger glue at the international monetary system’s core, prudential currency diversification could have been made easier, the need for costly and inefficient self-insurance could have been reduced, and the provision of liquidity could have been made less pro-cyclical.

So, do today’s anti-globalization winds – caused in part by poor global policy coordination in the context of too many years of low and insufficiently inclusive growth – create scope for enhancing the SDR’s role and potential contributions?

Addressing this question, were it to gain traction, would involve a focus on an ecosystem of SDR use, with the composite currency – which last year added the Chinese renminbi to the British pound, euro, Japanese yen, and US dollar – potentially benefiting from a virtuous cycle. Specifically, the SDR’s three roles – an official reserve asset, a currency used more broadly in financial activity, and a numeraire – could ensure greater official liquidity, expand the range of new assets used around the world in public and private transactions, and boost its use as a unit of account.

Of course, given the advanced economies’ embrace of more inward-looking, populist, and nationalist politics, a “big bang” approach to reinvigorating the SDR is highly unlikely. Even an incremental approach, starting with practical low-hanging fruit that does not require amendments to the IMF’s Articles of Agreement, would face political challenges. But it would be worth considering.

Areas of focus would include using the SDR for some bond issuance and trade transactions, developing market infrastructure (including payments and settlement mechanisms), improving valuation methodologies, and gradually developing a yield curve for SDR-denominated loans and bonds. This would also help to leverage the inter-connectedness of the SDR’s roles, in order to reach critical mass quickly and have a foundation for further incremental gains.

For the effort to succeed, the IMF’s approach would need to evolve – just like it did on country-specific issues.

When I joined the IMF in the early 1980s, discussions with non-government counterparts, whether on country or policy work, were discouraged. The situation today is very different. Broader national engagement – with NGOs, local media, and a broad set of politicians – is now viewed as an integral part of effective country advice and program implementation, as well as being essential for the Fund’s “surveillance” function under its Article of Agreements.

A similar pivot is needed if the IMF is to deliver better on the supra-national issues that are now migrating up its policy agenda. Specifically, the Fund would need to complement its traditional core constituency of governments and other multilateral institutions (particularly the World Bank) with systemically influential sub-national and private counterparts. The resulting public-private partnerships would enhance issuance, the development of market infrastructure, and liquidity provision for the SDR.

While it is not easy to combine developmental and commercial activities, the implications for global growth and stability of not doing so suggest that it is an effort that should be explored. Moreover, the IMF could start small, focusing on interactions with other official multilateral and regional institutions, sovereign wealth funds, and multinational financial companies – all anchored by an active coalition of the willing among the G20.

In an ideal world, the SDR would have evolved into more of a reserve currency during the era of accelerated trade and financial globalization. In the world as it is today, the international monetary system faces two options: fragmentation, with all the risks and opportunity costs that this implies, or an incremental approach to bolstering the global economy’s resilience and potential growth, based on bottom-up partnerships that facilitate systemic progress.

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

Enlisting Women in Africa’s Health Fight

BRAZZAVILLE– Neglected Tropical Diseases (NTDs) disproportionately affect women and girls. Female genital schistosomiasis (FGS) alone causes severe pain, bleeding, and lesions in more than 16 million women and girls in Sub-Saharan Africa.


Beyond causing widespread physical suffering, NTDs have a severe long-term socioeconomic impact on millions of women and girls. Women who have been scarred or disfigured from diseases such as FGS and lymphatic filariasis are often stigmatized to the point that they are unable to marry or are abandoned by their spouses. And even though disfigurement and social stigma are not lethal conditions, they can cause or exacerbate psychological disorders and limit the opportunities women and girls have.

Since 2000, enough pharmaceuticals for five billion preventive treatments against NTDs have been donated. And many people now recognize that controlling, and eventually eliminating, NTDs will be essential for achieving the Sustainable Development Goals, which apply to such diverse areas as nutrition, education, health, water, sanitation and hygiene, and economic growth. Because the SDGs are based on the principle of “leaving no one behind,” they cannot be considered a success until they have been met everywhere, and for all people – including women and girls.

SDG 5, in particular, calls for the world to “achieve gender equality and empower all women and girls” by 2030. Gender equity applies to both sexes, but special attention is needed to improve conditions for women and girls. In Africa, women are often disenfranchised, even though they account for more than half of the continent’s population. To ensure that they are not forgotten, we need to improve our understanding of how gendered power relationships operate, and address those social dynamics head on.

Because women and girls in their childbearing years suffer disproportionately from the health and social effects of NTDs, it is critically important that they be included in any large-scale health-policy interventions that are proposed. And, beyond making women the focus of NTD programs, we should acknowledge that they will play a central role in advancing the sustainable development agenda.

We need to empower women and girls to promote and lead social-mobilization efforts in Africa. Women are front-line partners for public-health advocates who are working to make essential medicines available across the continent. Moreover, women can help to control NTD vectors at the source, by ensuring that all members of their community are complying with anti-NTD drug distribution and treatment programs.

Ongoing efforts to control and eliminate NTDs in Africa have made some progress. But the time has come to develop more innovative policy tools. We urgently need integrated, inter-programmatic, and inter-sectoral approaches that address NTDs’ social, economic, and etiological dynamics. And we will need the full participation of the most vulnerable communities. Without that, no program aimed at ultimately eradicating NTDs can succeed.

This year marks the fifth anniversary of the World Health Organization’s Roadmap to eliminate NTDs, and of the London Declaration on Neglected Tropical Diseases. It is encouraging to see that the international community is recognizing not only the disproportionate burden that NTDs place on women, but also the essential role that women play in controlling and eradicating these diseases.

Now that an ever-growing international partnership has emerged, we have a unique opportunity to put an end to these debilitating diseases once and for all. In 2016, the WHO Regional Office for Africa launched the Expanded Special Project for Elimination of Neglected Tropical Diseases (ESPEN), which provides African countries with technical assistance and fundraising tools to fight the five NTDs that can be preempted with preventive chemotherapy: onchocerciasis, lymphatic filariasis, schistosomiasis, soil-transmitted helminthiasis, and trachoma.

ESPEN is an effort to bring together governments, the global public-health community, and other stakeholders. Our goal is to strengthen partnerships that are designed specifically to eliminate NTDs. Toward that end, ESPEN is actively supporting national-level anti-NTD programs that have been established to break the cycle of poverty that NTDs cause and sustain.

As the WHO works toward achieving the SDGs, we will continue to foster participatory approaches that include the most vulnerable populations – especially women and girls – in the fight against disease. Ultimately, the only way to ensure long-term success is to empower those who are most affected. MatshidisoMoeti is Regional Director for Africa at the World Health Organization.

By MatshidisoMoeti

Will Health Care Be Disrupted?

LEXINGTON, MASSACHUSETTS – Although intelligent machines are increasingly operating complex manufacturing systems and replacing humans on factory floors, they have not made significant inroads in health care. The sector’s most advanced machines, from ultra-high-resolution imaging instruments to surgical robots, are still fully controlled by humans.


But as robotic and artificial-intelligence (AI) systems become more advanced, will they eventually render doctors and nurses obsolete, with patients consulting a computer instead? The short answer is: not anytime soon. Health-care professionals will certainly become increasingly dependent on machines; but technology will augment, not replace, their abilities, and doctors will remain in charge of medical practices.

In his 2009 book The Innovator’s Prescription, Harvard Business School’s Clayton Christensen identified a spectrum of medical practices that range between “intuitive” and “precision.” Intuitive medicine describes when a doctor interprets a patient’s symptoms to arrive at a diagnosis and prescribe a treatment, the efficacy of which is often uncertain. Precision medicine – which should not be confused with personalized medicine – describes a rules-based process by which standardized treatments with predictable outcomes are applied to known health conditions.

According to Christensen, most of the medicine practiced today is closer to the intuitive side of the spectrum, and only a few diseases, primarily infections, can be treated using precision medicine. In fact, at the moment, the concept of precision medicine is incorrectly applied to improve only the outcomes of intuitive medicine, instead of identifying the causal mechanisms of diseases. As long as this is true, human know-how and engagement will remain integral to health care.

Treating unspecific symptoms without a prescribed roadmap requires effective decision-making and trust, which is a significant hurdle for machines. After millions of years of evolution, humans have developed a capacity for contextual intuition that enables trained doctors to make sensible and timely decisions in uncertain, data-scarce environments. Even the most sophisticated AI systems that we have today would need to be improved significantly in order to mimic this ability.

Communicating with patients poses an even greater challenge for machines. Explaining the many nuances of a mysterious disease such as cancer requires emotional intelligence and the ability to build trust with patients by delivering information effectively. Doctors also must exhibit cultural humility, so that they can take into account a patient’s social background when administering care. For the foreseeable future, machines probably will not be able to match humans in helping chronically ill patients whose prognosis remains uncertain.

Still, despite intelligent machines’ limitations, they will continue to play a bigger role in health care, even in the realm of intuitive medicine. Owing to their superior analytic power, machines are already providing more data upon which physicians base their diagnostic and treatment decisions. Machines are increasingly monitoring patients as well, helping to prevent human errors in hospitals and pharmacies. Soon, many more ancillary functions such as admissions, scheduling, and discharges will be automated.

But, again, until the scope of precision medicine surpasses that of intuitive medicine, health-care professionals will continue to make medical decisions and interpret the data. So, what are the prospects for such a shift?

Up until the mid-nineteenth century, bacterial and viral diseases were treated through intuitive medicine, because nobody had isolated the cause of patients’ symptoms. Then, Louis Pasteur and other scientists developed the germ theory, microscopes improved, and scientists began to identify the sizes and shapes of microbes.

Over the past century, our scientific understanding of germs has improved so much that every virus and bacteria can now be quickly diagnosed and isolated. This has enabled health-care professionals to switch from practicing intuitive medicine to precision medicine, where they can apply standardized processes that predictably cure diseases. With simple and inexpensive methods, we have eradicated deadly diseases such as polio and smallpox.More recently, researchers discoveredan Ebola vaccine that provides 100% protection against the virus.

One day, when we have gained a similar level of understanding of the biochemistry and physiology of the human body, precision medicine will be applied to all disease categories. We will be able to determine every disease’s cause and progression precisely, and machines will operate with more autonomy, within a standardized environment, to provide the exact treatment that every patient needs.

Just as rules-based processes have laid the groundwork for self-driving vehicles, rules-based precision medicine will steadily increase the importance of automated super-machines in health care. It already feels routine to be prescribed antibiotics for an infection. Eventually, patients will have the same confidence in machines to administer their care; and as our understanding of diseases improves, personal interactions will become less necessary.

We shouldn’t expect machines to replace health-care professionals for some time, but new technologies will continue to be introduced into the sector’s evolving landscape, and we should welcome them. Practicing more precision medicine than intuitive medicine will make health care simpler, more accessible, and less expensive. By understanding patients’ diseases precisely, we can push medicine one step closer to its ultimate goal: patient-centered care of the finest quality. Spencer Nam is a senior research fellow at the Clayton Christensen Institute for Disruptive Innovation.

By Spencer Nam

Enlisting Women in Africa’s Health Fight

BRAZZAVILLE– Neglected Tropical Diseases (NTDs) disproportionately affect women and girls. Female genital schistosomiasis (FGS) alone causes severe pain, bleeding, and lesions in more than 16 million women and girls in Sub-Saharan Africa.


Beyond causing widespread physical suffering, NTDs have a severe long-term socioeconomic impact on millions of women and girls. Women who have been scarredor disfigured from diseases such as FGS and lymphatic filariasisare often stigmatized to the point thatthey are unableto marry orare abandoned by their spouses. And even though disfigurement and social stigma are not lethal conditions, they can cause or exacerbate psychological disorders and limit the opportunitieswomen and girlshave.

Since 2000, enough pharmaceuticals for five billion preventive treatments against NTDs have been donated. And many people now recognizethat controlling, and eventually eliminating, NTDs will be essential for achieving theSustainable Development Goals, which apply to such diverse areas as nutrition, education, health, water, sanitation and hygiene, and economic growth. Because the SDGs are based on the principle of “leaving no one behind,” they cannot be considered a success until they have been meteverywhere, and for all people – including women and girls.

SDG5, in particular, calls for the world to “achieve gender equality and empower all women and girls” by 2030.Gender equity applies to both sexes, but special attention is needed to improve conditions for women and girls. In Africa, women are often disenfranchised, even though they account for more thanhalf of the continent’s population. To ensure that they are not forgotten, we need to improve our understanding of how gendered power relationships operate, and address those social dynamics head on.

Because women and girls in their childbearing years suffer disproportionately from the health and social effects of NTDs, it is critically important that they beincludedin any large-scale health-policy interventions that are proposed.And, beyondmaking women the focus of NTD programs, we should acknowledge that they will play a central role in advancingthe sustainable development agenda.

We need to empower women and girls to promote and lead social-mobilization efforts in Africa. Women are front-line partners for public-health advocates who are working to make essential medicines available across the continent. Moreover, women can help to control NTD vectorsat the source, by ensuring that all members of their community arecomplying withanti-NTD drug distribution and treatment programs.

Ongoing efforts to control and eliminate NTDs in Africa have made some progress.But the time has come to develop more innovative policy tools. We urgently need integrated, inter-programmatic, and inter-sectoral approaches that address NTDs’social, economic, and etiological dynamics. And we will need the full participation of the most vulnerable communities. Without that, no program aimed at ultimately eradicating NTDs can succeed.

This year marks the fifth anniversary of the World Health Organization’s Roadmapto eliminate NTDs, and of the London Declaration on Neglected Tropical Diseases. It is encouragingto see that the international community is recognizing not only the disproportionate burden that NTDs place on women, but also the essential role that women play in controlling and eradicatingthese diseases.

Now that an ever-growing international partnership has emerged, we have a unique opportunity to put an end to these debilitating diseases once and for all. In 2016, the WHO Regional Office for Africa launched the Expanded Special Project for Elimination of Neglected Tropical Diseases(ESPEN), whichprovides African countries with technical assistance and fundraising tools to fightthe five NTDs that can be preempted with preventive chemotherapy: onchocerciasis, lymphatic filariasis, schistosomiasis, soil-transmitted helminthiasis, and trachoma.

ESPEN is an effort to bring together governments,the global public-health community, and other stakeholders. Our goal is to strengthen partnerships that are designedspecifically toeliminateNTDs. Toward that end, ESPENis actively supportingnational-levelanti-NTD programs that have been established to break the cycle of poverty that NTDs cause and sustain.

As the WHOworks toward achieving the SDGs, we will continue to foster participatory approaches that include the most vulnerable populations – especially women and girls – in the fight against disease. Ultimately, the only way to ensure long-term success is to empower those who are most affected. MatshidisoMoeti is Regional Director for Africa at the World Health Organization.

By MatshidisoMoeti

A Big Bond for Africa

LAGOS – The countries of Sub-Saharan Africa have reached a critical juncture. Strained by a collapse in commodity prices and China’s economic slowdown, the region’s growths lipped to 3.4%in 2015 –nearly 50% lower than the average rate over the previous 15 years. The estimated growth rate for 2016 is lower than the population growth rate of about 2%, implying aper capitacontraction in GDP.


Sustained economic growth is essential to maintain progress on reducing poverty, infant mortality, disease, and malnutrition. It is also the only way to create sufficient good jobs for Africa’s burgeoning youth population – the fastestgrowing in the world. AsGerd Müller, Germany’s development minister,note data recent press conference, “If the youth of Africa can’t find work or a future in their own countries, it won’t be hundreds of thousands, but millions that make their way to Europe.”

One way to sustain growth and create jobs would be to collaborate on planning and implementinga massive increase in infrastructure investmentacross Africa. Public infrastructureis particularly important. This includes highways, bridges, and railways linking rural producersin landlocked countries to Africa’s urban consumers and external markets; mass transit and Internet infrastructure to accommodate greatercommercial activity; and electricity transmission linesintegratingprivately financed power plants and grids.

Major regional projects are also neededto knit together Sub-Saharan Africa’s many tiny economies. This is the only way to createthe economies of scale needed to increase theexport potentialofAfrican agriculture and industry, as well as to reducedomestic prices of food and manufactured goods.

While governments in Africa are spending more on public infrastructure themselves,outside finance is still required, especially for regional projects, which are rarely a top priority for national governments. Yet aid from Africa’s traditionally generousforeign donors,including the United States and Europe, is nowset to shrink, owing to political and economic constraints.

But there may be a solution that helps Africarecoverits growth in a way that Western leaders and their constituents find acceptable.We call it the “Big Bond” – a strategyfor leveraging foreign aid funds in international capital markets to generate financingfor massive infrastructure investment.

Specifically, donors would borrowagainst future aid flows in capitalmarkets. That way, they could exploit current low interest rates at home, as they generate new resources.With 30-year US Treasury rates of about 3%, donors would have to securitize only about $5 billion to raise $100 billion. That money could come from the $35 billion in annual official development assistance (ODA) to Africa (which totals about $50 billion)thattakes the form ofpure grants.

Donors would pass on the interest cost to African countries, reducing their own fiscal costs. For African countries, the terms would be better than those provided by Eurobonds. In fact, as audacious as it may sound, passing on the interest coststo recipient countries could actually bolstertheir debt sustainability.

According to a study of eightcountries by the African Development Bank’s Policy Innovation Lab,a 3% interest rate in US dollar terms would be lower than the marginal cost of commercial borrowings undertaken by several African countries over the last five years. Moreover, far longer maturities and grace periods,compared to market finance,would ease growing pressure on foreign-exchange reserves.

Frontloading aid in this way is not new. Doing so in the early 2000s to finance vaccines saved millions of lives in the developing world. Big Bond resources, managed by the African Development Bank, could be used to help guarantee financing for major regional infrastructure projects that have long been stuck on the back burner, such as the East Africa Railwayconnecting Tanzania,Rwanda, and Burundi, and a highway stretching fromNigeria to Côte d’Ivoire. Such projects could also be co-financed by private investors.

Moreover, the Big Bond could help to reinvigorate the relationship between donors and African countries.And, as it supports investments with importantcountry-level benefits, itcouldserve as an incentive for African countries to pursue reforms that increase their absorptive capacity, in terms of choosing and executing public infrastructure investments.

The Big Bond approach represents a much-needed update to the ODA framework – one thatsupports higher and more sustainable growth in recipient countries,while lowering the burden on donor countries.At a time when aid is under political pressure, perhaps such a bold approach tomaximizing the efficiency of donor resources is exactly what the world needs.

Nancy Birdsall is President Emeritus and a senior fellow at the Center for Global Development. Ngozi Okonjo-Iweala, a former finance minister of Nigeria and managing director of the World Bank, is a distinguished visiting fellow at the Center for Global Development.

By Nancy Birdsalland NgoziOkonjo-Iweala

Federalism and Progressive Resistance in America

BERKELEY – The year 2016 was one of ascendant populism in the United States, the United Kingdom, and many other developed countries. With income stagnation, faltering economic opportunities, and a loss of faith in progress fueling widespread discontent, voters backed candidates who promised to return power to the “people” and to shake up systems that mainstream political leaders had “rigged” in favor of a corrupt “elite.” In the US, growing ethnic diversity, smoldering racial tensions, and changing social mores added fuel to the electoral fire.


In the US, long-term erosion of trust in the federal government culminated in Donald Trump’s victory in November’s presidential election: even though President Barack Obama enjoyed high public approval, only 19% of Americans trusted the federal government to do what is right. Given traditional Republican priorities, reflected in President-elect Trump’s cabinet choices, federal government programs (with the notable exception of the military) are likely to be slashed.Ironically, spending cuts for health, education and training, and the environment, along with large regressive personal and business tax reductions, will further enrich the “elite” while undermining programs that benefit the majority of households.

But the major social and economic challenges addressed by federal programs will not disappear. The responsibility to deal with them will merely fall more heavily on state and local governments, which will have to tackle them in innovative ways. Indeed, the answer to Trumpism is “progressive federalism”: the pursuit of progressive policy goals using the substantial authority delegated to subnational governments in the US federal system.

Annual Gallup polls continue to show that a majority of Americans trust their state governments (62%) and their local governments (71%) to handle problems. A 2014 Pew study found that while only 25% of respondents were satisfied with the direction of national policy, 60% were satisfied with governance in their own communities. And the US Constitution allows individual states to function as what Judge Brandeis called laboratories of democracy by experimenting with innovative policies without putting the rest of the country at risk.

There is a long and rich history of successful experiments. State and local governments were leaders in establishing public primary and secondary education systems, as well as state colleges and universities. California, Wyoming, and other states allowed women to vote – an example that encouraged passage of the Nineteenth Amendment (enfranchising all adult women). Welfare-to-work programs in Michigan and Wisconsin served as the model for federal welfare reform under President Bill Clinton, and Obamacare is based on Massachusetts’ health-care system, introduced under Republican Governor Mitt Romney.

Likewise, from 2000 to 2014, by enacting a variety of energy policies – from broad climate action plans to mandated renewable-energy standards – 33 states cut carbon dioxide emissions while expanding their economies. More recently, some states have introduced cap-and-trade systems to put a price on carbon, and many are already on track to meet Obama’s Clean Power Plan targets. Half of all US states have now legalized marijuana in some form, with eight embracing full legalization. Three states have implemented laws offering paid family leave, with a fourth on the way. Nineteen states rang in 2017 with increases in their minimum wage.

The list goes on. Successful examples of progressive federalism can be seen in a wide variety of areas, including health care, prison reform, higher education and job training, entrepreneurship, worker protection and benefits in the “gig economy”, and pay-for-success government contracts.Cooperation, collaboration, and compromise – between private and public actors, for-profit and non-profit organizations, and Republicans and Democrats – are essential features in all of them. They also underpin the myriad examples of policy innovation and civic engagement at the local level described by James Fallowsin a recent article and upcoming book.

To promote state and local policy innovation, the federal government often assumes the role of venture capitalist, providing measurable goals and incentives, rather than dictating solutions. Obama championed this approach through statewide competitions like the Department of Education’s Race to the Topprogram, through federal “social innovation grants” to support state and local governments, and through the Medicaid expansion program. Vice President-elect Mike Pence is proud of the Medicaid expansion he led as Governor of Indiana – though, as of October 2016, 19 states, mainly in the South and Midwest, had opted not to participate, thereby denying health insurance to more than 2.5 million low-income people.

With the world’s sixth-largest economy, a population of nearly 40 million that looks like the future of America, and a united and responsible Democratic government, California is a model of what progressive federalism can accomplish. It has led the way in expanding rights for women, farmworkers, immigrants, and sexual minorities, among others. Similarly, it has been at the vanguard of environmental protection and efforts to combat climate change – from setting tough standards for energy consumption and auto emissions (adopted as federal law in 2016), to pioneering a carbon-pricing system. Governor Jerry Brown recently promised that if the Trump administration cuts federal funding for satellites needed to collect climate data, California would “launch its own damn satellite.”

California can also be a leader of progressive resistance or “uncooperative federalism,” by refusing to carry out federal policies that it opposes. Many cities in California and the state itself already act as “sanctuary jurisdictions,” which protect undocumented immigrants from deportation by limiting cooperation with federal authorities. By law, immigration enforcement is the federal government’s responsibility; in practice, it lacks adequate resources. The massive spending and personnel cuts promised by Trump will exacerbate the shortfall, forcing the federal government to rely even more on state and local authorities to do much of the work. Signaling its opposition, the California legislature recently introduced for consideration new bills to finance legal services for immigrants fighting deportation and to ban the use of state and local resources for immigration enforcement on constitutional grounds.

Trump has already threatened to cut federal funding to sanctuary jurisdictions. But such pressure tactics have been rendered more difficult by a recent Supreme Court decision limiting the use of conditional spending by the federal government to “coerce” state officials into implementing federal policies.

We may remember 2016 as the year populism returned to power in the US. But it may also be remembered as the start of a new era of progressive federalism and resistance, championed by state and local governments trusted by their citizens to help improve their lives and communities.

Laura Tyson, a former chair of the US President's Council of Economic Advisers, is a professor at the Haas School of Business at the University of California, Berkeley, and a senior adviser at the Rock Creek Group. Lenny Mendonca, Senior Fellow at the Presidio Institute, is a former director of McKinsey & Company.

By Laura Tyson and Lenny Mendonca

The Second Year of Europe

NEW YORK – More than four decades ago, US National Security Adviser Henry Kissinger declared 1973 to be “The Year of Europe.” His aim was to highlight the need to modernize the Atlantic relationship and, more specifically, the need for America’s European allies to do more with the United States in the Middle East and against the Soviet Union in Europe.


Kissinger would be the first to admit that the Europeans did not take up his challenge. Nevertheless, we again face a year of Europe. This time, though, the impetus is coming less from a frustrated US government than from within Europe itself.

The stakes are as high as they were in 1973, if not higher. Russia shows no sign of withdrawing from Crimea or stopping its efforts to destabilize eastern Ukraine. There is genuine concern Russia might employ similar tactics against one or more of the small NATO countries on its border.

Refugees have added to Europe’s strain, as has terrorism inspired by events in the Middle East or carried out by attackers from the region. Brexit, the United Kingdom’s exit from the European Union, has now formally begun; what remains to be resolved are its timing and terms, which will determine its impact on the UK’s economic and political future and on others contemplating withdrawal from the EU. Greece and a number of other countries in southern Europe continue to be burdened by high unemployment, growing debt, and a persistent gap between what governments are being asked to do and what they can afford.

But of all the challenges confronting the EU, France’s upcoming presidential election holds the most significance for Europe’s future, and perhaps for that of the world. Polls indicate that any of the four candidates could emerge as the eventual winner. What makes this uncertainty different and truly consequential is that two of the four, National Front leader Marine Le Pen and far-left leader Jean-Luc Mélenchon, support policies far outside the French and European mainstream. If either wins the second-round run-off on May 7, it could mean the end of French membership in both the EU and NATO, raising existential questions for both organizations – and for all of Europe.

Such scenarios were unimaginable until only recently. For decades, Europe has constituted the world’s most successful, stable, and predictable region, a place where history seemed to have all but ended. The goal of making the continent peaceful, whole, and free had largely been realized.

But dramatic change has come to Europe. One factor is the willingness and ability shown by Vladimir Putin’s Russia to use military force, economic coercion, and cyber manipulation to advance its agenda. But an even greater challenge to modern Europe comes from its own politicians, who increasingly question the value of the EU, the heir to the European Economic Community established in 1957 by the Treaty of Rome.

The rationale behind Europe’s six-decade-long integration process – often called the “European project” – was always clear. Western Europe, and above all Germany and France, had to be unified to such a point that war, which had so often characterized the continent’s past, would become unthinkable.

This has been achieved, as has considerable economic progress. But, along the way, the European project lost its hold on Europe’s citizens. The EU’s institutions became too distant, too elitist, and too strong, not taking into account the national identities to which Europeans remained attached. The ill-advised creation of a monetary union without a fiscal counterpart made matters worse. The bureaucrats had overreached.

The rise of populist, nationalist candidates on both the left and the right in France and elsewhere in Europe is the result. And even if one of the two establishment candidates prevails in France, much will remain uncertain. The immediate crisis will have passed, but the long-term challenge will remain.

It is apparent that the EU needs to be rethought. It needs to move away from “one size fits all” to something more flexible. There also needs to be a rebalancing of power away from Brussels, the seat of most EU institutions, toward the national capitals.

Governments need to do more to create the prerequisites of faster economic growth while enhancing workers’ ability to contend with the inevitable elimination of many existing jobs as a result of technological innovation. Germany, whether led by its current chancellor or her principal opponent after its general election in September, will need to take the lead here.

Europeans, appropriately enough, will mostly determine Europe’s future. But the Trump administration also has a role to play. Trump’s shortsighted support for Brexit and other exits from the EU must end; a divided, weaker, and distracted Europe will not be a good partner in NATO. It may be true that Asia is more likely than Europe to shape the history of the twenty-first century. But the lesson of the last century should not be lost: what happens in Europe can and will affect global stability and prosperity.

Richard N. Haass is president of the Council on Foreign Relations and the authorof A World in Disarray: American Foreign Policy and the Crisis of the Old Order.

By Richard N. Haass

 Africa’s Unique Vulnerability to Violent Extremism

 

ADDIS ABABA – Africa bears the brunt of lives lost, economies ruined, and relationships fractured by terrorism. It is the continent where al-Qaeda launched its war against the United States in 1998, by bombing the US embassies in Nairobi, Kenya, and Dar es Salaam, Tanzania; where Boko Haram kidnapped 276 Nigerian schoolgirls in 2014; and where 147 students were killed in their sleep at Kenya’s Garissa University in 2015.


While these attacks did garner the world’s attention, most people do not realize that, in the past five years alone, 33,000 people have died in terrorism-related violence in Africa. Violent extremism and groups espousing it are threatening to reverse Africa’s development gains not only in the near term, but also for decades to come.

African countries are particularly vulnerable to violent ideologues, owing to the prevalence of weak institutions and ungoverned territory where extremist groups can germinate. Add to this the mismanagement of ethnic and religious diversity, stir in a large and growing cohort of unemployed and digitally connected youth, and the continent offers ideal conditions for mayhem.

Emulating countries elsewhere, African governments have responded to violent extremism primarily by putting “hard” security first. But this strategy has not reduced extremist groups’ potency or limited their reach. In fact, there is evidence that an exclusively military response can be a waste of resources, or even do more harm than good. What is missing is a deeper examination of root causes, particularly underlying development challenges.

Some people claim that the connection between socioeconomic conditions and violent extremism is specious, because most poor and marginalized communities do not join terrorist groups. But this argument fails to address the relevant issue: poverty, social marginalization, and political disenfranchisement are the fertilizers extremist groups need to take root and grow. Around the world, policies and operational responses to violent extremism are largely informed by theory, rather than drawing on thorough empirical evidence of the personal motivations and structural factors that drive people to commit terrorist acts.

I recently visited Galkayo, in North Somalia, to interview captured al-Shabaab fighters as part of an ongoing United Nations Development Programme study of the roots of African extremism. What struck me was that, apart from their being imprisoned, these young men seemed entirely normal, and their individual journeys toward extremism were not particularly informed by religion.

Rather, what united the young al-Shabaab militants I spoke to was a shared experience of deprivation. They had all grown up surrounded by conflict, and none of them had ever been given a good reason to view the government as a positive force in their lives. When I asked whether they went to public school, most could not even fathom the idea of free education or health care. These children and young adults are by-products of a failed state and society; they have spent their entire lives in an environment that is ripe for terrorist recruitment and exploitation.

Just as tuberculosis infects a body already compromised by HIV, extremism thrives under the right conditions, such as those created by the conflict in Somalia, or the political fragility and social neglect in northeastern Nigeria, where many interviewees cited scarce access to both religious and secular education.

The UNDP’s primary research into extremists’ personal motivations – based on more than 350 interviews with formerly active violent extremists in prisons and transitional centers in Cameroon, Kenya, Niger, Nigeria, Somalia, and Uganda – is the most extensive project of its kind in Africa, if not globally.

Our preliminary results suggest that the ideology behind violent extremism is delivered with a flexible marketing strategy, whereby extremist groups tailor their message for potential recruits. For the unemployed or the poor, they offer paid jobs; for marginalized ethnic and religious minorities, they offer recourse through violence; and for the middle class, they offer an adventure, a sense of “purpose,” and an escape from mundanity. The ideology mutates to exploit its intended recruit’s vulnerabilities.

Our research, which will be completed in early 2017, aims to shed light on individual journeys to extremism, through the words and perspectives of people who have been involved in terrorist organizations in Africa. It will also provide communities, other researchers, and policymakers with empirical evidence on which to base their future interventions.

One thing we already know for certain is that poverty and underdevelopment can no longer be ignored if we are ever to combat violent extremism effectively. Addressing these issues, rather than just strengthening military and law-enforcement capacity, must be a high priority for any plausible strategy. Mohamed Yahya is Africa Regional Program Coordinator for the United Nations Development Programme (UNDP).

By Mohamed Yahya

The Insecurity of Inequality

NEW YORK –Global inequality today is at a level last seen in the late nineteenth century – and it is continuing to rise.With it has come a surging sense of disenfranchisement that has fueled alienation and anger, and even bred nationalism and xenophobia. As people struggle to hold on to their shrinkingshare of the pie,their anxiety has created a political opening for opportunistic populists, shaking the world order in the process.


The gap between rich and poor nowadaysis mind-boggling. Oxfam has observed that the world’s eight richest people now own as much wealth as the poorest 3.6 billion. As US Senator Bernie Sanders recently pointed out,the Walton family, whichownsWalmart,now owns more wealth than the bottom 42% of the US population.

I can offer my own jarring comparison. Using Credit Suisse’s wealth database, I found that the total wealth of the world’sthree richest people exceeds thatofall the people in three countries –Angola, Burkina Faso, and the Democratic Republic of Congo– which together have a population of 122 million.

To be sure, great progress on reducingextreme poverty – defined as consumption of less than $1.90 per day –has been achieved in recent decades. In 1981, 42% of the world’s population lived in extreme poverty. By 2013 – the last year for which we have comprehensive data – that share had droppedto below 11%. Piecemeal evidence suggests that extreme poverty now stands just above 9%.

That is certainly something to celebrate. But our work is far from finished. And, contrary to popular belief,that work must not be confined to the developing world.

AsAngus Deatonrecentlypointed out, extreme poverty remains a serious problem in rich countries, too. “Several million Americans – black, white, and Hispanic – now live in households withper capitaincome of less than $2 per day,” he points out. Given the much higher cost of living (including shelter), he notes, such an income can pose an even greater challenge in a country like the US than it does in, say, India.

This constraint is apparent in New York City, where the number of known homeless peoplehas risen from 31,000 in 2002 to 63,000 today. (The true figure, including those who have never used shelters, is about 5% higher.) This trend has coincided with a steep rise in the price of housing: over the last decade, rents have been rising more than three times as fast as wages.

Ironically, the wealthy pay less, per unit, for many goods and services. Astark example is flying. Thanks to frequent flier programs, wealthy travelerspay less for each mile they fly. While this makes sense for airlines, which want to foster loyalty among frequent fliers, it represents yet another way in which wealth is rewarded in the marketplace.

This phenomenonis also apparent in poor economies. A studyof Indian villages showed that the poor face systematic price discrimination, exacerbating inequality. In fact, correcting for differences in prices paid by the rich and the poor improves the Gini coefficient (a common measure of inequality)by 12-23%.

The betteroff also get a whole host of goods for free. To name one seemingly trivial example, I can’t remember when I last bought a pen. Theyoften simply appear on my desk, unintentionally left behind by people who stopped by my office. They vanish just as often, as people inadvertently pick them up. The late Khushwant Singh, a renowned Indian journalist, once said that he attended conferences only to stock up on pens and paper.

A non-trivial example is taxation. Rather than paying the most in taxes, the wealthiest peopleare often able to take advantage of loopholes and deductions that are not available to those earning less. Without having to break any rules, the wealthy receive what amount to subsidies, which would have a far larger positive impact if they were allocated to the poorest people.

Beyond these concrete inequities,there are less obvious – but equally damaging – imbalances. In any situation where, legally, one’s rights are notenforced or even specified, the outcome will probably depend on custom, which is heavily skewed in favor of the rich.Wealthy citizenscan not only vote; they can influence elections through donations and other means. In this sense, excessive wealth inequality can undermine democracy.

Of course, in any well-run economy, a certain amount of inequality is inevitable and even needed, to create incentives and power the economy. But, nowadays, disparities of income and wealth have become so extreme and entrenched that they cross generations, with family wealth and inheritance having a far greater impact on one’s economic prospects than talent and hard work. And it works both ways: just as childrenfrom wealthy families are significantly more likely to be wealthy in adulthood, children of, say, former child laborers are morelikely to work during their childhood.

None of this isany individual’s fault. Many wealthy citizenshave contributed to society and played by the rules. The problem is thatthe rules are often skewed in their favor.In other words, income inequality stems from systemic flaws.

In our globalized world, inequality cannot be left to markets and local communities to solveany more than climate change can. As the consequences of rising domestic inequalityfeed through to geopolitics, eroding stability, the need to devise new rules, re-distribution systems, and even global agreements is no longer a matter of morals; increasingly, it is a matter of survival. KaushikBasu, a former chief economist of the World Bank, is Professor of Economics at Cornell University.

By KaushikBasu

The Pie-in-the-Sky UBI

BERKELEY – According to the conventional wisdom in Silicon Valley, robots will soon eat everyone’s job, and a universal basic income will become necessary. Lately, tech titans are especially eager to extol the results of a UBI pilot project in Kenya that is being funded largely by Silicon Valley philanthropists.


While the idea of UBI often arises during periods of economic and social stress, this is the first true test of it. The Kenya project provides a guaranteed poverty-ending income for those who receive it. In 40 poor, remote villages, 6,000 adults are now receiving 75 cents (yes, cents) per day – or $22 per month for 12 years.

We hope that the experiment in Kenya works. Cash assistance shows much promise for eliminating extreme poverty in developing countries. But, to be effective, it must be delivered directly to those in need over a sustained period of time, and inadequate amounts. In poor developing countries, a UBI can disintermediate expensive aid programs that fail to address the targeted population’s needs, and that are often undermined by corrupt regimes.

Still, Silicon Valley’s titans should curb their enthusiasm. The Kenya UBI relies on M-Pesa, a for-profit mobile banking system that was built with the support offoreign aid, private companies, and a forward-looking government – not well-meaning philanthropists.

And even if a UBI succeeds in Kenya over the next 12 years, it is not a solution to pressing problems in the US economy today. A UBI for the United States is as fanciful as President Donald Trump’s border wall: it would be prohibitively expensive; and it would not solve the problems that it is meant to address.

Worst of all, UBI proposals are disingenuous distractions from such immediate problems as persistent poverty, especially for children and racial and ethnic minorities; stagnant real (inflation-adjusted) wages and incomes for most households; expanding income inequality; declining social mobility; inequalities in educational opportunities; and the income volatility that comes with erratic employment.

Technology has not yet significantly reduced the overall number of jobs in the US, but it has certainly undermined job quality for millions of workers. New technologies are wiping out routine manual and cognitive middle-skill jobs, and exacerbating labor-income inequalities, the most important source of overall income inequalities. But does this litany of problems justify a basic income for every working American, including Silicon Valley “superstars,” whose skills and incomes have been complemented and enhanced by skill-biased, labor-saving technological change?

Even if a UBI for every American adult was a desirable goal, no serious proposal for funding it exists. In Kenya, a $22 monthly payment might very well eradicate poverty; but it would be “chump change” in the US, where the official poverty line for an adult in 2016 was $12,700 per year.

Each year, a $10,000 basic income for every American adult would cost more than $3 trillion, consuming more than three-quarters of the annual federal budget. This would require historically high taxes, and yet we rarely hear wealthy UBI advocates calling for their taxes to be raised. They are more likely to advocate cutting existing social-welfare spending, such as Social Security and other programs that benefit the bottom two-fifths of the population, including children.

While we await the results of the Kenyan UBI pilot and anticipate the future destruction of jobs by intelligent robots, we need to modernize and strengthen existing programs that address the challenges workers face today. Quality education at all levels, including job-relevant training and lifelong learning opportunities, are critical to provide the skills that labor markets demand, but require significant investment.

Transition-assistance programs, to help workers and their families cope with employment and income disruptions, also will be needed. In Silicon Valley, “disruption” connotes positive change; in reality, disruption inflicts substantial pain on those whose livelihoods are upended by new technology.

In the US, current programs – such as Medicaid, unemployment compensation, the Supplemental Nutrition Assistance Program (SNAP), and Temporary Assistance for Needy Families (TANF) – should be made more generous. In addition, the US should develop a national, universal income-insurance program to assist those facing financial insecurity as a result of unemployment, disability, illness, or the death of a family member. Meanwhile, as a larger share of the workforce engages in independent work, the current employment-based benefits system will need to be replaced with a portable benefits system that covers all workers, regardless of employer.

Americans also need a higher federal minimum wage. Had the minimum wage kept pace with rising productivity, it would be nearly $19 per hour today, instead of $7.25. Among workers earning the minimum wage, more than half are women, and many of them depend on tipping for the bulk of their income, as restaurants are permitted to pay a shockingly low minimum wage of $2.13 per hour. A majority of Americans support raising the minimum wage, as do seven Nobel laureates in economics; one hopes that Silicon Valley’s UBI proselytizers do, too.

Finally, America should start to develop a means-testedincome supplementfor workers whose jobs are displaced, or whose wages are undercut, by automation. To that end, the earned-income tax credit should be replaced by a generous negative income tax – an idea that the economist Milton Friedman proposed decades ago, when robots were still the stuff of science fiction.

A negative income tax – which, unlike a UBI, provides a powerful incentive to work – could raise the take-home pay of millions of workers employed in low-wage jobs. Many of these are “care” and other “personal services” jobs, which are projected to be among the fastest-growing occupations in the next decade – and which robots are unlikely to “disrupt.”

As Teddy Roosevelt said, “Far and away the best prize that life offers is the chance to work hard at work worth doing.” The focus of policy today should be on worthwhile work that pays a living wage, not starry-eyed proposals for a post-work future.

Laura Tyson, a former chair of the US President’s Council of Economic Advisers, is a professor at the Haas School of Business at the University of California, Berkeley, and a senior adviser at the Rock Creek Group. Lenny Mendonca, Senior Fellow at the Presidio Institute, is a former director of McKinsey & Company.

By Laura Tyson and Lenny Mendonca

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