Opinion

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

Boycott America?

MELBOURNE – The catastrophic outcome of last November’s United States presidential election is now clear. President Donald Trump’s indifference to the risk of climate change, and the actions he is taking because of that indifference, are likely to have consequences that dwarf the significance of his executive order on immigration, his nomination of an archconservative to the Supreme Court, and, should he manage to achieve it, his repeal of the Affordable Care Act (“Obamacare”).


With the exception of launching a nuclear war, it is hard to think of anything a US president could do that is liable to harm more people than last month’s order canceling rules issued under former President Barack Obama to freeze the construction of new coal-fired power plants and shut down many old ones. Trump’s order followed his pledge to rescind stricter fuel-efficiency standards for cars and trucks, and his announcement that he wants to slash spending on climate science.

Although Trump did not announce the withdrawal of the US from the Paris climate agreement, his actions are likely to prove incompatible with the US government’s pledge to reduce greenhouse-gas emissions to 26% below 2005 levels by 2025. The Paris agreement, signed by 195 countries, is our last real chance of keeping global warming to less than 2ºC above pre-industrial levels. Even 2ºC is too much for the inhabitants of low-lying island states. Many of these states were pleading for a 1.5ºC limit – without which some will disappear beneath the ocean.

Any increase in global temperature greater than 2ºC, scientists agree, risks triggering feedback loops that cause much greater warming and could render large parts of the planet uninhabitable. For example, further warming would release large quantities of methane – a more potent greenhouse gas than carbon dioxide – from thawing Siberian permafrost, leading to more warming, more thawing, and more methane in the atmosphere. Similarly, warming causes the loss of arctic ice, which means that less of the sun’s heat is reflected back rather than being absorbed by the ocean.

During the election campaign, Trump described climate change as a “hoax” perpetrated by the Chinese to destroy American industry. Last month, Scott Pruitt, Trump’s appointee to head the Environmental Protection Agency, said that he did not believe that CO2 is the primary contributor to climate change. He added that “we do not know that yet,” and “we need to continue the review and analysis.”

The American Meteorological Society promptly wrote to Pruitt saying that it is “indisputable” that CO2 and other greenhouse gases are the primary cause of global warming, and that it is “not familiar with any scientific institution with relevant subject matter expertise that has reached a different conclusion.”

That is true. What many commentators failed to notice, however, is that even if, contrary to all the evidence, we were to accept Pruitt’s statement that “we do not know” whether CO2is the primary contributor to climate change, the Trump administration’s actions would still be reckless. Unless the probability that CO2is the primary contributor to climate change is vanishingly small, it is wrong to take chances with the future of our planet and the lives of hundreds of millions of people in order to reduce energy costs for Americans and preserve a few thousand jobs in the coal industry. (In fact, coal jobs are disappearing because of automation and competition from cheaper natural gas, not because of regulations to reduce CO2emissions.)

Perhaps, though, Trump does not see his policy as reckless because, as he has repeatedly proclaimed, he puts “America first.” And it is indeed America between now and the next election that he puts first, at the expense of Americans’ longer-term interests and the interests of everyone who is not American. In the short term, those who will suffer most from climate change are not Americans, but people living in tropical latitudes, and especially the poor, who will have nowhere to go when rains fail or the heat parches their crops. When sea levels rise, those island-state inhabitants, living just a meter or two above sea level, will be the first to be driven off their land, followed by tens of millions of people farming small plots in fertile delta regions in Bangladesh, Southeast Asia, and Egypt.

The Paris climate agreement has no mechanism for sanctioning countries that fail to fulfill their pledges. The idea is that such countries will be “named and shamed.” Well before Trump was elected president, however, when the notorious video in which he boasted of groping women became public, it was obvious that he is immune to shame. What, then, can other countries, and individuals, whether in the US or beyond its borders, do about the fact that Trump is jeopardizing the future of us all, for many generations to come?

If the US uses the cheapest available fuels to produce energy, irrespective of the harm that burning those fuels does to others, it is giving its companies an unfair advantage over those elsewhere that are making a good-faith effort to reduce their greenhouse-gas emissions and meet their Paris pledges. That should be enough for the World Trade Organization to allow other countries to erect trade barriers against US goods. If, however, the WTO is not brave enough to take that step, the remedy is in the hands of foreign consumers, who should show the Trump administration what they think of its policies by choosing not to buy American.

A boycott is a blunt instrument that would, regrettably, harm many US workers who did not vote for Trump and are in no way responsible for his policies. But with so much at stake, and such limited means of changing Trump’s policies, what else is there to do?

Peter Singer is Professor of Bioethics at Princeton University and Laureate Professor at the University of Melbourne. His books include Animal Liberation,The Life You Can Save,The Most Good You Can Do, and Ethics in the Real World.

By Peter Singer

Confronting a New Era of Anti-Semitism

LONDON – Ambassador Ronald Lauder, the President of the World Jewish Congress, had much on his mind when we met in London on a rainy day in early March. The tall, distinguished 73-year-old art collector, hommed’affaires, and philanthropist was clear-minded about a number of issues, even on five hours of sleep.


At the top of his list of concerns is a worrying upsurge of anti-Semitic incidents, not least in his native United States. These include threats to, or actual attacks on, synagogues and other Jewish institutions, and the desecration of graves in St. Louis, Missouri, and other cities. “Even in the US, the country with the strongest Jewish community in the diaspora,” Lauder laments, “anti-Semitism is alive and kicking.”

Anti-Semitism comes in waves, and each historical epoch provides its motives. Christian anti-Semitism blamed Jews for the crucifixion of Jesus. This anti-Semitism, which systematically marginalized Jews in the medieval and early modern periods, was supplanted by a pseudo-scientific race-based discourse that culminated in Auschwitz. When the sheer enormity of the Jewish Holocaust was revealed, these ideas slithered back into the shadowy world of the extreme right. But the anti-Semitism rearing its head again in Europe now sometimes comes from the far left as well.

Lauder, for his part, is particularly concerned about developments in Hungary, France, and the United Kingdom. In Hungary, dubious historical figures such as the Regent Admiral MiklósHorthy have been rehabilitated – and even commemorated – in domestic political discourse. Horthy persecuted Jews for decades before Nazi Germany invaded Hungary. Today’s far-right Jobbik party is his direct political heir.

In France, the National Front’s Marine Le Pen has distanced herself from the morbid anti-Semitic obsessions of her father, Jean-Marie Le Pen, in favor of opportunistically attacking French Muslims. But she has still called for a ban on yarmulkes and kosher slaughter as part of a promise to crack down on public displays of religion. Should Le Pen win the presidency and make such discrimination a reality, Lauder hopes that all French men will take to wearing small skullcaps in a show of solidarity.

Last but not least, in Britain, the Labour Party under Jeremy Corbyn has become a catchall protest party, and is now the political home for Palestinian Solidarity Campaign (PSC) activists, even though there are only 20,000 Palestinians in Britain. The PSC is the driving force behind the Boycott, Divestment, and Sanctions (BDS) movement, which often conflates opposition to Israel with hatred of Jews.

BDS activists have picketed Jewish-owned businesses – from single shops in Glasgow to the retail giant Marks & Spencer – while making many university campuses increasingly uncomfortable for Jewish students. The movement’s frequent likening of Israel to apartheid South Africa is especially nasty, given that many South African Jews fought against apartheid, sometimes from within the ranks of the African National Congress.

Lauder may be a worldly diplomat, but he is also ready to fight. He reports that, in the United Kingdom, there are ongoing efforts to contest local councils’ right to introduce “gestural” BDS motions aimed at banning procurement from Israeli businesses. And at the “street level,” the advocacy group Jewish Human Rights Watch maintains an excellent website that monitors PSC and BDS acts of intimidation.

Lauder, during his time at the WJC, has personally enlisted world leaders of all stripes, from the late Venezuelan president, Hugo Chávez, to Russian President Vladimir Putin, to join the battle against anti-Semitism. Among Putin’s few redeeming qualities is a revulsion to anti-Semitism. And, as it happens, Russia’s Jewish community is thriving. Jewish kindergartens and other schools are full, and five new Jewish universities have opened. Moreover, according to a survey conducted by the Russian Jewish Congress, anti-Semitic attitudes in Russia are among the lowest in the world, at 8% of those polled.

The WJC was founded in Geneva in 1936, beneath the dark clouds of an earlier period of anti-Semitism. But it would be wrong to assume that fighting anti-Semitism is the organization’s sole focus. It played a leading role in helping Jews escape from the former Soviet Union, and in defending the religious freedoms of those who remained there.

The WJC is also a major player in Holocaust-remembrance efforts. And it works to return Jewish families’ stolen assets, by confronting museums that do not closely trace the provenance of art works.
In addition, the WJC is active in fostering Jewish communities around the world. Ironically, Germany is the only European country with a growing Jewish community, now 125,000-strong. A renaissance of Jewish culture is now occurring: many new synagogues have opened; and a majority of the faculty and students in Judaic studies courses are Gentiles.

Still, this cultural rejuvenation has not been trouble-free. Leaders of the far-right Alternative for Germany (AfD) party routinely question the need for Holocaust monuments, including the particularly moving “Memorial to the Murdered Jews of Europe” near Berlin’s Brandenburg Gate.

In Lithuania, the WJC sponsors a center that is working to revive Yiddish, the language that Eastern European Jews spoke for 800 years. And it is helping to promote broader inter-religious dialogue, notably with the Roman Catholic Church, by encouraging more student-exchange programs. These efforts are geared toward removing one of the primary sources of anti-Semitism: mutual ignorance and incomprehension.

When talking to Lauder, one quickly gets the impression that his combination of urbanity and insight makes him exactly the right person to speak for the world Jewish community in these troubled times. With headstones being smashed in Philadelphia, of all places, my encounter with Lauder could have left me filled with gloom; instead, it left me feeling optimistic.

Michael Burleigh’s books includeSmall Wars, Faraway Places: The Genesis of the Modern World,Blood and Rage: A Cultural History of Terrorism, The Third Reich: A New History, and The Best and the Worst of Times: The World As It Is (forthcoming).He is CEO of the global political risk consultancy Sea Change Partners.

A Dramatic Comeback for Europe

LONDON – The Dutch are famous for building dykes that hold back the tides and storms sweeping across the Atlantic. Have the Dutch now done it again, holding back the wave of populist politics that seemed to be threatening Europe after last year’s Brexit referendum and Donald Trump’s victory in the United States?


The unexpectedly weak performance of Geert Wilders’ Freedom Party (PVV) in the Dutch election on March 15 seems to suggest this. Despite predictions running as high as 25% of the popular vote for Wilders, the PVV gained only 13%. If voters in France’s upcoming presidential election prove closer to the Dutch than to Americans and Britons in their susceptibility to xenophobia and protectionism, their decision will have global implications for politics, economics, and the ideology of global capitalism.

A swing back to the center in continental Europe would strongly suggest that the unexpected victories for populist and anti-globalization movements in the US and Britain were not primarily a response to unemployment and disappointing economic performance since the financial crisis, mass migration, or the threat of Islamist terrorism. This conclusion follows from the fact that France has suffered from much higher unemployment and a longer post-crisis recession than either the US or Britain, as well as experiencing more problems with terrorism and Islamic militancy.

If German voters in the autumn follow the French and Dutch in moving back toward the political center, immigration will also be discredited as the root cause of populism. After all, Germany has experienced a much larger influx of foreigners than Britain or the US. Instead, populism will look more like an Anglo-Saxon phenomenon, motivated less by immigration and economic policy than by conservative cultural attitudes among Trump and Brexit voters and the unusual demographic alliances pitting old against young, rural against urban, and university graduates against less educated voters in the US and Britain.

The economic implications will also be far-reaching if the center holds in Europe. The European Union is a bigger trading partner than the US for most emerging economies. And the euro is the only real alternative to the dollar as an international currency.So the EU’s continuing commitment to a philosophy of open trade, globalization, and carbon reduction could be sufficient to prevent a paradigm shift toward protectionism and climate-change denial that seemed almost inevitable with Trump’s election.

Such a change in global leadership would require a dramatic improvement in Europe’s economic performance. Fortunately, that outcome can be expected if voters reject populist politics in France and Germany. The EU has suffered a prolonged economic slump since the 2008 financial crisis, largely because the German government vetoed the kind of monetary and fiscal stimulus that helped to pull the US out of recession in 2010. Germany’s veto on US-style quantitative easing was also the main reason for the near-collapse of the single currency in 2012.

But a dramatic change to European policy and economic conditions occurred in March 2015, when the European Central Bank belatedly launched a bond-buying program similar to America’s, but on a far larger scale. By purchasing almost three times the total net issuance of eurozone bonds, the ECB effectively circumvented eurozone rules and began to monetize Europe’s government deficits, as well as creating a mutual support system between strong economies such as Germany and weaker ones like Italy and Spain.

The ECB’s actions quickly reversed the fragmentation of the European banking system and eliminated fears of a euro breakup. The immediate result was an upsurge in confidence among both businesses and consumers.

By last summer, most of Europe was already enjoying a decent recovery, when renewed fears of disintegration, this time caused by politics, not finance, suddenly overwhelmed the improvement in economic conditions. Brexit and Trump created an expectation that Europe would be the next domino to fall to populism in the looming Dutch, French, and German elections.

Of course, this possibility still cannot be dismissed, which is why international investors remain cautious about Europe. But if the populist victories that worry investors do not in fact happen, a surge of business and consumer confidence will send waves of investment flowing into the eurozone.

The key event will be the final round of the French election on May 7. If this results in a victory for Emmanuel Macron, the centrist front-runner, France will embark on a path leading to at least a modicum of economic reforms.

That, in turn, will create a much more cooperative relationship between France and Germany. Both main candidates for German Chancellor are eager to rebuild post-Brexit Europe by strengthening the Franco-German axis – and the start of a French reform process would reassure German voters that their government, by easing EU austerity, would not merely be pouring money into a bottomless pit.

This brings us to the ideological implications if centrist forces win and economic recovery accelerates in Europe this year. In the immediate aftermath of the global financial crisis, the European “social market” model of capitalism seemed like a logical alternative to the Thatcher-Reagan market fundamentalism that had broken down after 30 years of global dominance. Indeed, President Barack Obama moved the US toward greater government activism in macroeconomic management, financial regulation, environmental policy, and health care.

Paradoxically, however, Europe moved in the opposite direction. Under German pressure, the EU became the last bastion of monetarism, fiscal austerity, and the “disciplining” role of financial markets. The result was the near-fatal euro crisis of 2010-2012.

If this year’s elections result in a centrist French president and a revival of Franco-German cooperation, the EU’s unexpected infatuation with market fundamentalism will probably end. Europe will enjoy a better, more sustainable, and socially inclusive economic recovery than the US under Trump. If this happens, the rest of the world may again start to see the EU as a source of inspiration and a model. Anatole Kaletsky is Chief Economist and Co-Chairman of GavekalDragonomics and the author of Capitalism 4.0, The Birth of a New Economy.

By Aynatole Kaletsk

The End of Poverty in China?

BEIJING – One of the most cited statistics about China may well be the number ofChinese whohave been lifted out of poverty over the last 35 years. Atover 800 million, itis a huge number – and an extraordinary feat. Indeed, no other country has achieved such a level of poverty reduction insuch a short period.But what about the millions of Chinese who have remained behind?


China’s government is committed tofinishing the task, with the aim of reducing rural poverty essentially to zero by 2020. The authorities first made the pledge at the United Nations in 2015, and have reiterated it in subsequent official settings. But fulfilling that promise – which would now entail improving the wellbeing of about 45 million people, roughly equivalent to Sudan’s entire population – will carry significant costs.

Poverty reduction, like so many important endeavors, is subject to the law of diminishing returns:the more you do something, the less productive your efforts become. Think ofwinding a watch: the more you wind, the more resistance builds up in the mainspring, and the more energy it takes to move the stem the same distance.

When it comes to poverty reduction, the people whobenefit first are most likely those who were best equipped to do so, owing to, say, their background or geography. By the time there are only a few – or even a few million – left, one can expect reaching them to be much harder.

China’s experience illustrates this phenomenon perfectly. During the first seven years of China’s official “reform and opening up,” whichbegan in 1978, it is estimated that around 110 million people annually rose out of poverty. For the next 15 years – from 1985 to 2000 – the pace of progressslowed considerably, with around 26 million people moving above the poverty line each year. From 2000 to 2015, the figure stood at just over 22 million per year. The government’s target now is to lift ten million people out of poverty annually.

As the pace of poverty-reduction has slowed, its costs have risen – a trend illustrated ina new UN report, togetherwith World Bank data. In 2000, lifting a person out of poverty in China cost the central government approximately $48 per year (in nominal terms). By 2010, this figure had increased more than three-fold, to $150 per year. Now that the government is working to reach the most remote people – those without access to roads, electricity, or clean water – the cost exceeds $200 per year.

This is not to say that China will not be able to meet its 2020 target.On the contrary,the government’s plans and implementation appear as strong as ever. In fact, last year, thegovernment exceeded its target, with 12.4 million people escaping rural poverty. And the budget for this year is 30% larger, meaning that at least $1,000 has been allocated for each of the ten million people China’s government plans to lift out of poverty in 2017.

But, as the government attempts to “get to zero” on rural poverty – by moving all people above the national rural poverty line of CN¥2,230 ($324) per year – it should not lose sight of broader poverty-related challenges. China continues to experience rapid urbanization – a phenomenon that contributed substantially to past poverty reduction, but that also places a growing number of urban dwellers at risk of destitution.

According to official figures, the average income of the poorest 5% of households in Chinese cities amounts to about $1,128 (CN¥7,521). That isabout 3.5 times China’s rural poverty line. But, overall, the average income in cities is at least four times higher than that in the countryside, suggesting that living on such a budget may be even tougher than living at the rural poverty line. And that does not even account for the many migrant workers who live under the radar in cities andare likely to earn even less than the poorest 5%.

These forms of povertymay be even harder to address, not least because China has less experience doing so. Given this, just as China’s successful efforts to reduce ruralpoverty can serve as a model for others, other countries’ successes in managing urban poverty can – and should – help to guide China’s efforts.

China is far from alone in focusing on the fight to end poverty; indeed, the very first Sustainable Development Goal calls for an end to poverty in all of its manifestations by 2030. With the process becoming increasingly challenging and costly, looking across borders could prove vital to enabling all Chinese to live decent, dignified lives. Hannah Ryder is a former head of policy and partnerships for the United Nations Development Programme in China.

By Hannah Ryder

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