Brookings: Series - Global Working Papers

Germany: A Global Miracle and a European Challenge

Carlo Bastasin — Thu, 09 May 2013 14:00:00 -0400

INTRODUCTION

In 1994, five years after the fall of the Berlin Wall, the Germans feared that the unification of the two Germanys had failed. In 1997 the term "Reformstau" (the reform deadlock) had been elected as the "word of the year". In 1999 and 2000 the weekly magazine The Economist called Germany "the sick man of Europe". In 2003 the German economy was back in recession.

Until 2004, Germany was struggling in a spiral of a seemingly unstoppable decline, without precedent for its length. Since 2004, Germany has emerged from its economic sluggishness with a performance that, considering the preceding fifteen years, appears to be exceptional. Today, people commonly interpret the rebirth of the German economy as a new Wirtschaftswunder, an economic miracle comparable to that of the postwar period and able to provide such a political prestige and diplomatic assertiveness to determine the fate of the political and institutional framework of the rest of Europe.

Over the past seven years, other European countries have had comparable growth rates, Sweden and Switzerland in particular. France has been growing at higher rates if one takes into account a longer period, but probably as a result of the fiscal stimulus induced by a structural budget deficit which regularly exceeded the average of other euro area countries. But the German exception lies in having permanently transformed its economic model in line with the global challenge, showing that the opening of national economic systems can be an opportunity for prosperity. The transformation occurred by introducing more market elements in the economy. This has allowed the achievement of the traditional shared goals of German society - starting with full employment - which have always characterized the Sozialmarktwirtschaft, the social market economy.

Income divergence has increased. The labor market has become dual. Seven million workers, many of them foreigners or migrants, have become dependent on extremely low salaries.

However this has been possible only at the cost of giving up the traditional goal of egalitarianism, both within the German society and in the economic relations with the European partners. Income divergence has increased. The labor market has become dual. Seven million workers, many of them foreigners or migrants, have become dependent on extremely low salaries. Balance of payments disequilibria, and their re-distributional effects within the euro area have been regarded as irrelevant.

In order to defend at least some parts of the social market model, German governments since the early 1990s have accompanied the economy’s internationalization process initiated by companies and major financial institutions. The common political analysis behind this is that a population of 1.15 percent of the world, which currently produces more than 5 percent of global GDP4, can maintain its standard of living only by tying its growth to that of countries bringing 6 billion people out of relative poverty.

For this reason, the entire German production system had to and was able to strengthen its export orientation, while facing the major geopolitical changes that have directly involved the country: the German reunification, the European monetary unification, Eastern Europe opening to international trade and, finally, the entrance into the markets of large areas of the world up to the full development phase of globalization.

The German experience has been proposed by Chancellor Angela Merkel as a reference model for the entire euro area: "To be competitive in the world is not a requirement for Germany, but for the entire euro area, a group of countries which accounts for 7 percent of the world population but produces more than 20 percent of global GDP". Inevitably, it becomes important to understand whether the features of the German economic miracle are identifiable and replicable as a historical process of reform. The indications of this analysis are that the process of transformation of the German economy was born long before becoming a political project, under the impulse of a group of industrial and financial actors subject to the pressure of global competition. Only later, an intensive set of government-led economic reform programs accompanied the transformation of production, allowing the entire economy to benefit from their acquired competitive success. Therefore, the possibility of replicating the German success must lie not only in the process of political reform, but in a double and parallel evolution of the production structure and regulatory framework consistent with a long-term project. More importantly, Germany has deliberately forged its fiscal and labor policies as to ensure a very high net savings surplus. This strategy has drained resources from the rest of the euro area in two ways: The first via lower imports and the second through a huge amount of capital incomes flowing back from the countries of the euro area that had received huge German financial investments. I estimate this effect at a yearly 0.75 percent of German GDP and at an equivalent yearly amount subtracted from the euro area periphery for ten years. Given the incapability of the countries receiving the flows of capitals to put them to good use, the German strategy has aggravated the imbalances within Europe and — among other causes — seems to have contributed dramatically to the origins of the euro crisis.

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Carlo Bastasin

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Can the Poor Be Organized? Evidence from Rural India

Raj M. Desai and Shareen Joshi — Tue, 26 Mar 2013 14:32:00 -0400

INTRODUCTION

There is significant evidence of the role collective action plays in reducing poverty. Effective coordination by the poor has been shown to strengthen property rights (Baland and Platteau 2003; von Braun and Meinzen-Dick 2009), increase bargaining power in labor markets (Bardhan 2005), improve access to fi nancial markets (Karlan 2007) and increase public investments in poor communities (Alesina et al. 1999; Banerjee and Somanathan 2007).

In light of this evidence, governments, aid donors and international NGOs have sought to expand their support to collectives in poorer communities. At the World Bank alone, more than $50 billion has been spent in the past two decades on “community-driven development” projects that expand participation of the poor in the design, implementation and evaluation of development (Mansuri and Rao 2012).

The question of where social capital originates remains poorly understood. Most analyses of how poor communities resolve coordination problems focus on simple, group-devised solutions that restrict access to common resources (Bowles 1998; Ostrom 1998; Henrich et al. 2001; Fehr and Gächter 2000; Ostrom 2000; Ostrom and Ahn 2009). Others examine “socialization” effects for group members in fostering collective action (Miguel and Gugerty 2005). Overall, this research suggests that, in the absence of common preferences, collective action is likely to emerge when individuals have low costs of information, the opportunity to coordinate their actions, the opportunity to engage in repeated interaction and the power to reward contributors and punish free-riders. Given that these constraints are often binding for the poor, it follows that almost everywhere, the poor demonstrate lower levels of organization and collective action (Narayan et al. 2000; Gugerty and Kremer 2008).

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Raj M. Desai
Shareen Joshi

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The United States After the Great Recession: The Challenge of Sustainable Growth

Joshua Meltzer, David Steven and Claire Langley — Fri, 15 Feb 2013 11:58:00 -0500

“Never before has our nation enjoyed, at once, so much prosperity and social progress with so little internal crisis and so few external threats,” President Clinton argued in January 2000 in his final State of the Union address.

Despite this optimistic prognostication, the millennial decade was one of profound crisis, with serious consequences for the United States’ economy and society, and for the environmental sustainability of the American dream.

This paper starts from the following assumptions:

First, though the United States’ economic model has many strengths, its resilience has been weakened. Acute economic, social and environmental challenges will need to be addressed in either the short or long term.
Second, the United States’ response to this era of crisis will be an important factor influencing how other countries react, given the size of its economy, its position as a “necessary but not sufficient” actor on most global issues and its potential for innovation.
Third, it is necessary to gain an understanding of the drivers of and obstacles to change in American society to draw conclusions about its response to crisis.

We identify four trajectories (scenarios) the U.S. could take over the coming decades:

The United States could continue to try and muddle through, reacting to the external environment, rather than trying to shape it.
It might aggressively focus on going for growth in order to meet the aspirations of its growing population, with only limited regard for environmental consequences.
Alternatively, intelligent design would lead the U.S. to place greater value on sustainability at national and global levels, adopting reforms that begin to push its economy onto a new trajectory.
Finally, shocks could drive an emergency response, as renewed breakdown in global financial systems, serious conflict or state failure, or a series of extreme weather events dominate the government’s agenda.

All trajectories are plausible, but the intelligent design scenario is most desirable. This paper makes recommendations that, although challenging to implement, are politically feasible and if implemented would place the U.S. growth model on a new sustainable trajectory at an acceptable cost.

To reach this goal this paper focuses on four areas for action:

Increasing employment, which is the most urgent priority to accelerate recovery from the Great Recession, while addressing underlying structural issues that have led to a decade of poor economic outcomes for most citizens.
Investing in the future, as the key marker of whether the United States is prepared to make farsighted decisions to improve education, build new infrastructure and increase innovation.
Maximizing an increased energy endowment in a way that grows the economy, while reinforcing the trend towards reducing resource demand and reducing greenhouse gas emissions.
Fiscal rebalancing, where the United States must insulate economic recovery from the process of fiscal reform while reducing and stabilizing debt over the long term.

Finally, we argue that President Obama can re-energize America’s global leadership if he builds on a platform of domestic actions that enhance the sustainability of America’s society and economy.

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Improving the Quality of Basic Education for the Future Youth of Yemen Post Arab Spring

Takako Yuki and Yuriko Kameyama — Thu, 31 Jan 2013 09:19:00 -0500

This paper looks at the issue of the quality of education in Yemen. It uses micro-data from TIMSS and from surveys conducted in underserved rural areas, as well as macro-level policy information from the System Assessment for Better Education Results (SABER) database. The analysis indicates that the availability of teachers and resources at schools, the monitoring and supervision of schools and parental involvement in schooling are important factors for better learning outcomes and avoiding trade-offs between expansion of enrollment and quality of learning. The paper suggests three types of reforms that can be carried out in the short run. First, it is necessary to systematically monitor teachers’ actual deployment and attendance in order to link the information with salary management and incentives. Second, there is a need to refine and scale up the existing implementation and monitoring mechanism for school grants to reward schools and communities that improve access for disadvantaged students and girls, and enhance the quality of learning. Third, there is a need to enhance transparency and accountability of school resources and results by disseminating a simple database that would include trends of basic indicators to monitor and compare progress at the school, district and governorate level.

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Takako Yuki
Yuriko Kameyama

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Efforts to Introduce Inclusive Planning in Egypt

Kei Sakamoto — Wed, 30 Jan 2013 11:53:00 -0500

Arab countries lag behind the rest of the world on nearly all governance indicators, particularly those related to voice and participation. Together with a lack of transparency and low accountability, this has led to greater corruption and the emergence of the soft state. A sense of alienation and exclusion, especially among youth, contributed to popular dissatisfaction, which remains unsolved after the revolution. This paper focuses on ways to improve participation in policymaking and economic planning, and to provide a guiding vision to recover from the crisis after the revolution, using Egypt as an example. The paper reviews the experiences of Japan, Malaysia and Indonesia, which indicate the importance of achieving a national consensus on an economic vision for the future, and the policies and programs needed to achieve it. Successful East Asian countries have put in place consultative processes (including different government departments, the private sector and civil society) to agree on national development plans and monitor their execution. The situation has been very different in Egypt where an institutional coordination mechanism among the various stakeholders to build a national vision was missing. The research paper adapts the experiences of East Asia to Egypt’s situation, and presents a proposal for introducing the concept of “inclusive planning” in economic planning and policymaking.

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Kei Sakamoto

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The Role of Micro and Small Enterprises in Egypt's Economic Transition

Hafez Ghanem — Tue, 29 Jan 2013 14:36:00 -0500

The success of Egypt’s transition to democracy will depend crucially on the ability of the democratically elected leadership to develop and implement a new economic vision that responds to the aspirations of the millions of youth who have so far been marginalized. Future growth needs to be much more inclusive than in the past. Therefore, encouraging youth entrepreneurship and the development of small businesses have to be central to any new growth strategy.

This paper focuses on the economic aspects of Egypt’s transition. It argues that while past economic policies (especially starting in 2004) achieved high growth and poverty reduction, they failed to be inclusive as they left millions of Egyptians trapped in lower middle-class status living on $2 to $4 a day and provided few opportunities for youth who felt economically and socially excluded. There was an increasing sense that the system was "unfair," which explains the strong demands for social justice. Inclusive growth could be achieved by shifting away from a system of crony capitalism that favored large and established enterprises to one that focuses on developing small businesses and on creating more opportunities for young men and women. The paper uses enterprise surveys from 2003, 2008, 2010 and 2011 to describe the Egyptian micro and small enterprise (MSE) sector and identify key obstacles to its development. It concludes by proposing a two-pronged strategy for the expansion and modernization of the MSE sector: a macroeconomic and regulatory environment that is conducive to the development of MSEs, and specific interventions to support the sector and encourage young entrepreneurs.

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Hafez Ghanem

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Establishing Good Governance in Fragile States Through Reconstruction Projects: Lessons from Iraq

Seiki Tanaka and Masanori Yoshikawa — Tue, 29 Jan 2013 15:49:00 -0500

Countries in transition often go through periods of upheaval and weak governance and Iraq is a prime example. Usually donor agencies hesitate to increase their support as they face two key problems in post-conflict or post-revolution situations: (1) high security risk for transparent implementation; and (2) poor government effectiveness, marred by corruption, ethnic tensions and economic stagnation. But this is precisely the time when donor engagement is needed most. By using the experience of JICA projects in Iraq, we argue that donors should not withdraw their support in difficult post-conflict situations. The paper proposes three mechanisms – information; social recognition; and mediation mechanisms – to solve such difficulties in a post-conflict society. The empirical analysis shows that more intensive communication between donor and government officials especially leads to a positive impact even in war-torn Iraq.

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Seiki Tanaka
Masanori Yoshikawa

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Youth Employment and Economic Transition in Tunisia

Mongi Boughzala — Tue, 29 Jan 2013 16:36:00 -0500

This paper analyzes trends in youth employment and unemployment in private sector development, with special attention to education and female employment. It uses data from a 2007 enterprise survey to study the evolution of the MSE sector and that Tunisian MSEs are suffering from similar problems faced by the private sector generally. The business environment has been plagued with corruption and many other imperfections and uncertainties, and was not conducive for substantial investment and enterprise creation. Small entrepreneurs, who are not well-connected to the old political elite, have been particularly hurt by the lack of clear rules and by rampant corruption. The paper argues for reforms of labor laws and of the financial sector in order to encourage MSEs to become formal and gain better access to credit. It also points out to huge inequalities between different regions in Tunisia (the poverty rate in the center west region is three times that in Tunis) and to a strong gender bias in the labor market (female labor market participation rate is 27 percent compared to 70 percent for males), and argues for special policies and programs to deal with them.

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Mongi Boughzala

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Scaling Up Programs for the Rural Poor: IFAD's Experience, Lessons and Prospects (Phase 2)

Fri, 18 Jan 2013 11:55:00 -0500

The challenge of rural poverty and food insecurity in the developing world remains daunting. Recent estimates show that “there are still about 1.2 billion extremely poor people in the world. In addition, about 870 million people are undernourished, and about 2 billion people suffer from micronutrient deficiency. About 70 percent of the world’s poor live in rural areas, and many have some dependency on agriculture,” (Cleaver 2012). Addressing this challenge by assisting rural small-holder farmers in developing countries is the mandate of the International Fund for Agricultural Development (IFAD), an international financial institution based in Rome.

The International Fund for Agricultural Development is a relatively small donor in the global aid architecture, accounting for approximately one-half of 1 percent of all aid paid directly to developing countries in 2010. Although more significant in its core area of agricultural and rural development, IFAD still accounts for less than 5 percent of total official development assistance in that sector.1 Confronted with the gap between its small size and the large scale of the problem it has been mandated to address, IFAD seeks ways to increase its impact for every dollar it invests in agriculture and rural development on behalf of its member states. One indicator of this intention to scale up is that it has set a goal to reach 90 million rural poor between 2012 and 2015 and lift 80 million out of poverty during that time. These numbers are roughly three times the number of poor IFAD has reached previously during a similar time span. More generally, IFAD has declared that scaling up is “mission critical,” and this scaling-up objective is now firmly embedded in its corporate strategy and planning statements. Also, increasingly, IFAD’s operational practices are geared towards helping its clients achieve scaling up on the ground with the support of its loans and grants.

This was not always the case. For many years, IFAD stressed innovation as the key to success, giving little attention to systematically replicating and building on successful innovations. In this regard, IFAD was not alone. In fact, few aid agencies have systematically pursued the scaling up of successful projects. However, in 2009, IFAD management decided to explore how it could increase its focus on scaling up. It gave a grant to the Brookings Institution to review IFAD’s experience with scaling up and to assess its operational strategies, policies and processes with a view to strengthening its approach to scaling up. Based on an extensive review of IFAD documentation, two country case studies and intensive interactions with IFAD staff and managers, the Brookings team prepared a report that it submitted to IFAD management in June 2010 and published as a Brookings Global Working Paper in early 2011 (Linn et al. 2011).

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Arntraud Hartmann
Homi Kharas
Richard Kohl
Johannes F. Linn
Barbara Massler
Cheikh Sourang

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Does Access to Information Technology Make People Happier?

Carol Graham and Milena Nikolova — Thu, 13 Dec 2012 10:55:00 -0500

Access to information and communication technology through cell phones, the internet, and electronic media has increased exponentially around the world. While a few decades ago cell phones were a luxury good in wealthy countries, our data show that today over half of respondents in Sub-Saharan Africa and about 80 percent of those in Latin America and Southeast Asia have access to cell phones. In addition to making phone calls and text messaging, cell phones are used for activities such as accessing the internet and social network sites. Meanwhile, the launch of mobile banking gives access to these technologies an entirely new dimension, providing access to financial services in addition to information and communication technology. It is estimated that in Kenya, where the mobile banking “revolution” originated, there are some 18 million mobile money users (roughly 75 percent of all adults). Given the expanding role of information technology in today’s global economy, in this paper we explore whether this new access also enhances well-being.

Neither of the authors is an expert on information technology. The real and potential effect of information technology on productivity, development, and other economic outcomes has been studied extensively by those who are. Building on past research on the economics of well-being and on the application of the well-being metrics to this particular question, we hope to contribute an understanding of how the changes brought about by information and communication technology affect well-being in general, including its non-income dimensions.

Our study has two related objectives. The first is to understand the effects of the worldwide increase in communications capacity and access to information technology on human well-being. The second is to contribute to our more general understanding of the relationship between well-being and capabilities and agency. Cell phones and information technology are giving people around the world – and particularly the poor – new capabilities for making financial transactions and accessing other services which were previously unavailable to them. We explore the extent to which the agency effect of having access to these capabilities manifests itself through both hedonic and evaluative aspects of well-being.

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Carol Graham
Milena Nikolova

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Key Issues on European Banking Union: Trade-Offs and Some Recommendations

Douglas J. Elliott — Wed, 14 Nov 2012 14:51:00 -0500

OVERVIEW

European leaders have committed to moving toward a banking union, in which bank regulation and supervision, deposit guarantees, and the handling of troubled banks will be integrated across at least the euro area and possibly across the wider European Union. This is quite positive for two reasons. Most immediately, it will help solve the euro crisis by weakening the link between debt-burdened governments and troubled banks, where each side has added to the woes of the other. In the longer run, it will make the “single market” in European banking substantially more effective.

Unfortunately, it is much easier to endorse the concept of a banking union than it is to design and implement one. Banks are central to the European financial system, supplying about three quarters of all credit, and are therefore critical to the functioning of the wider economy in Europe. Their supervision is not just a technical issue; it requires many subjective judgments that have serious implications for credit provision, economic growth and jobs. Choices about how much credit banks provide, and to whom, strongly affect the relative performance of national economies and individual businesses and families. Not surprisingly, national governments have been extremely reluctant to give up control over more than €30 trillion of bank assets and are doing so now only because of the severity of the euro crisis. Designing integrated bank supervision will require fighting out how power will be divided among various European institutions and national authorities.

Nor is it the case that we know the right answers and have merely to summon the political will to push them through. Financial regulation is a balancing act, requiring judgments about the relative importance of many things, including:

Dealing with the short-term euro crisis versus long-term improvement of the “single market” in financial services in the EU.
The trade-off of economic growth and financial safety. It is well established that many safety margins in banking carry with them an economic cost2.
The efficiency of supervisory centralization versus the benefits of local knowledge.
The efficiency of a single regulator versus the benefits of multiple specialized regulators, such as for consumer protection or specialized financial institutions like savings banks.
Supervisory independence from political interference versus accountability.

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Douglas J. Elliott

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The Myanmar Economy: Tough Choices

Lex Rieffel — Thu, 06 Sep 2012 13:40:00 -0400

OVERVIEW

In its first 63 years as an independent nation, Myanmar (Burma) went from being Southeast Asia’s brightest hope (in 1948) to its biggest embarrassment, through three distinct periods of uninspired or misguided governance.

From 1948 to 1958, the country was a parliamentary democracy based on a U.K.-inspired constitution. From 1962 to 1988, the country was ruled by General Ne Win, who followed a socialist path featuring nationalization, isolation and repression.

From 1992 to 2011, the country was ruled by General Than Shwe, who restored a market-based economy, strengthened the balance of payments by exporting natural gas to Thailand and moved the country along a seven-step roadmap to a “discipline-flourishing democracy.” At the same time, he kept Aung San Suu Kyi under house arrest, drew global condemnation and sanctions from Western nations for gross human rights abuses and continued to wage war against the country’s ethnic minorities.

Pursuant to the 2008 constitution, approved in a national referendum that fell far short of global standards, the country’s first multiparty election in more than two generations was held in November 2010. Although this election was neither free nor fair, it produced a new government on March 30, 2011. Led by President Thein Sein, this government has ended many of the repressive policies of the past and has started to pursue broad-based and sustainable economic growth.

On the political front, the Thein Sein government initiated a dialogue with Aung San Suu Kyi that enabled her party, the National League for Democracy (NLD), to win 43 of the 45 seats filled in the by-elections held on April 1, 2012, including a seat for Aung San Suu Kyi in the lower chamber of the national legislature. The government has released hundreds of political prisoners, granted a high degree of press freedom, taken steps to find a peaceful resolution to the conflict with ethnic minorities and improved relations with other countries to the point where most sanctions have been dropped or suspended.

On the economic front, the Thein Sein government has abandoned the official exchange rate of the kyat fixed at 8.5057 to the SDR since 1977 in favor of a floating market rate. It is taking steps to build a sound banking system, has reduced some of the heavy transaction costs impeding international trade and has suspended construction of the Myitsone Dam in Kachin State because of its potentially adverse environmental and social impacts.

The pace of the ongoing transition to a democratic political system and market-based economy in the first year of President Thein Sein’s five-year term has been breathtaking. The current level of engagement with Myanmar by the diplomatic community, official aid agencies, international NGOs and private investors is already phenomenal and seems far from peaking.

Based on the country’s economic trends of the past year, Myanmar may achieve Vietnam’s current level of development in less than 10 years. My judgment, however, is that Thein Sein’s administration will not be able to maintain this pace. Until now, the administration has been harvesting low-hanging fruit.

Based on the country’s economic trends of the past year, Myanmar may achieve Vietnam’s current level of development in less than 10 years. My judgment, however, is that Thein Sein’s administration will not be able to maintain this pace. Until now, the administration has been harvesting low-hanging fruit. Rapid political, social and economic progress in the years ahead will depend on successfully resolving a large number of challenging policy issues. The aim in this paper is to highlight the main economic issues facing the administration.

Readers should not look for policy recommendations. Thein Sein’s government is being swamped with recommendations from outsiders, and I prefer not to add to the deluge. Instead, I aim to encourage a public debate within Myanmar that will lead to better policy choices and economic outcomes and to help observers outside Myanmar get a better understanding of the issues and options.

Another caveat is that many economists treat policy options in black and white terms: They are only right or wrong. In contrast, the approach taken here assumes that better outcomes can be achieved when policymakers and policytakers understand that every economic policy option has pros and cons, produces winners and losers, and yields unintended consequences. Instead of examining two or three issues in great detail, this paper examines 21 policy issues more broadly. But policy options are inherently complex: Alongside and within each of the 21 issues are a myriad of other fateful choices that are not addressed.

In addition, only a host of good policy measures working in tandem can create 5-6 percent sustainable economic growth for the Myanmar economy. Thus, if 50 good measures are required, as many as 35 or 40 may have to be implemented successfully before a “tipping point” is reached and impacts become mutually reinforcing.

While this paper focuses on policy issues, it is important not to overlook the huge impact the policymaking process has on the choices that are made. Throughout the first year of President Thein Sein’s administration, process has both enabled and hindered progress. On the positive side, the process has helped the government understand the central importance of the exchange rate and to move with impressive speed on this front. Also, a labor law has been passed that could help avoid labor problems as the economy becomes more industrialized. And no really bad decisions stand out in other economic policy areas. On the negative side, weaknesses in the policymaking process have delayed the adoption of measures in the agriculture sector to raise farmer incomes, an essential step in a country where 70 percent of the population is rural. Furthermore, natural resource extraction continues at an unsustainable and even counterproductive rate. For the most part, policy decisions are being made largely in a non-transparent, top-down, discretionary manner as was the practice in previous governments.

To its credit, the Thein Sein government has sponsored and supported a series of workshops and conferences on a wide range of economic issues. These events, which are strongly favored by the donor community, have been helpful in raising public awareness of the issues and moving toward a social consensus on how to approach them. There is some risk, however, that key decision makers are spending too much time in these public discussions. Recent “needs assessments” and “scoping missions” being undertaken by most donors individually are another distraction from the crucial functions of policy analysis, policy presentation and policy implementation.

Another positive step in identifying strong economic policy options was the Thein Sein administration’s creation of the Myanmar Development Resource Institute (MDRI) and its three separate centers: the Center for Economic and Social Development, the Center for Strategic and International Studies and the Center for Legal Affairs. The MDRI serves as an independent source of policy analysis for the government. The Institute is also expected to play an important role in informing the public about policy issues and in training policymakers and policy analysts.

In May 2012, President Thein also announced the formation of a National Economic and Social Advisory Council, which includes union-level and region-level ministers and prominent personalities from the private sector. Indicative of much of the confusion in Myanmar today, however, as of mid-August, no clear description of the mandate of the council or its membership was available in the English language. There is anecdotal evidence that this council will play an important role in reaching a broad social consensus on contentious issues, especially those related to foreign aid and foreign investment.

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Lex Rieffel

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Scaling Up Development Interventions: A Review of UNDP's Country Program in Tajikistan

Johannes F. Linn — Tue, 21 Feb 2012 12:12:00 -0500

A key objective of the United Nations Development Programme (UNDP) is to assist its member countries in meeting the Millennium Development Goals (MDGs). UNDP pursues this objective in various ways, including through analysis and advice to governments on the progress towards the MDGs (such as support for the preparation and monitoring Poverty Reduction Strategies, or PRSs, in poor countries), assistance for capacity building, and financial and technical support for the preparation and implementation of development programs.

The challenge of achieving the MDGs remains daunting in many countries, including Tajikistan. To do so will require that all development partners, i.e., the government, civil society, private business and donors, make every effort to scale up successful development interventions. Scaling up refers to “expanding, adapting and sustaining successful policies, programs and projects on different places and over time to reach a greater number of people.” Interventions that are successful as pilots but are not scaled up will create localized benefits for a small number of beneficiaries, but they will fail to contribute significantly to close the MDG gap.

This paper aims to assess whether and how well UNDP is supporting scaling up in its development programs in Tajikistan. While the principal purpose of this assessment was to assist the UNDP country program director and his team in Tajikistan in their scaling up efforts, it also contributes to the overall growing body of evidence on the scaling up of development interventions worldwide.

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Johannes F. Linn

Global Governance Audit

Hakan Altinay — Mon, 06 Feb 2012 14:35:00 -0500

Why a Global Governance Audit?

We frequently treat the changing constellation that has come to be referred to as global governance as a lackluster fait accompli. Nobody has masterminded it. Nobody is really in charge. Almost everybody has reasons to be unhappy about what they view as its current suboptimal state. As such, global governance is not an easy phenomenon to assess or audit. The benchmarks and scales to be used are not obvious. Yet an audit attempt is nevertheless necessary, if for no other reason than to start to form a deliberated assessment, to develop some benchmarks, and to refine our questions for the future.

With this goal in mind, I, along with David Held of the London School of Economics, Miguel Maduro of European University Institute, Eva-Maria Nag of the Global Policy journal, and Kalypso Nicolaidis of Oxford, set out to organize such an audit and formulated three questions designed to assess the achievements of, impediments to, and imminent challenges for global governance. Throughout 2011, these questions were channeled to students and the younger generation of academics at universities and think tanks around the world. Many of the submissions we received were by single authors. Australian National University (ANU), Fundacao Getulio Vargas in Rio de Janeiro, Global Relations Forum in Istanbul, Hong Kong University, New Economic School (NES) in Moscow, Sabanci University in Istanbul, and Yale University ran workshops and submitted reports on their discussions and conclusions. Accepted submissions are available at the Global Policy website, and a subset is included in this working paper.

Several points emerge from both the content and the geographical origin of the responses to our audit. For starters, interest in global governance is not uniform across the world. Europeans seem most comfortable with, and fluent in, the global governance debates, which is not surprising. Europe, with the European Union (EU), has been functioning with pooled competencies and sovereignties for decades and is used to thinking about solutions to global problems and changing power architectures through the prism of international law and organizations. Zang reports a rapidly growing interest and debate concerning global governance in China. For much of the rest of the world, issues of global governance seem alien and have high entry barriers. Many in the South have been excluded for too long from the real deliberations. Both interest and familiarity seem to have suffered as a result.

A bigger challenge is the fact that global governance is too sui generis. It is neither a world government nor is it a global version of the nation-state competencies. The EU cannot be looked to as an example of its most advanced form. It is, in actuality, the total sum of the things we do to manage the transnational externalities and challenges in the absence of a world government, within the confines of a given consciousness of global situatedness and a finite appetite for cross-border solidarity and coordination. A world government is not only unfeasible but it is not even desirable. Insisting on comparing global governance to nation-state competencies and finding it failing blinds us to the advances achieved by this messy phenomenon: In the 19th century, it took several decades to develop a system to send telegrams across national borders. And yet, today owners of 4 billion mobile phones have a reasonable expectation that their phones will work seamlessly when they travel to another country. World GSM operators have agreed to sensible standard practices, such as every operator dedicating the number 112 to emergency services. No coercion was needed to achieve this coordination and harmonization. With SWIFT, the Society for Worldwide Interbank Financial Telecommunication, money can be wired across countries with tremendous speed and little inconvenience; we expect our credit cards to work wherever we travel. We cooperate around the internet actively and every day. Vast amounts of data, information, and knowledge are available to all 7 billion of us. Encylopédistes of the 18th century would be awestruck by what is available through Wikipedia, JSTOR, Google Scholar, and the like. Popular VoIP facilities such as Skype have rendered international telephony, a facility not available to Napoleon or Genghis Khan, practically cost free for billions. The Creative Commons is becoming a popular alternative to conventional trademark practices. We all have access to transborder broadcasting through satellite TVs, which makes diverse ideas and varied lives and suffering accessible to a great many, nurturing awareness and a feeling of common humanity along the way. Furthermore, we have a way to allocate satellite orbits, and the system is working with relatively little discontent. Another area with a significant potential for discord, underground water supplies, now enjoys the norms and rules being established through the new Law of Transboundary Aquifers. We have, to take another example, managed to cooperate to protect the genetic diversity of our main crops, have established the Global Crop Diversity Trust, and have a global seed vault in Svalbard. Small pox has been eradicated through global cooperation, and malaria and polio may be next. It is often assumed that traditional sovereign competencies of national states, such as law and order, have been more resistant to international cooperation schemes. However, countries have the facility to seek cooperation through Interpol, which has coordinated in excess of 31,000 arrests in a decade.

Sensible methods to assess global governance would need to start with its sui generis nature and not succumb to implicit or explicit comparisons to how nation states manage their affairs with their monopolies on legal coercion. Actual motives for cooperation or sanctions for lack of cooperation turn out very rarely to be related to coercion, in any event.

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Hakan Altinay

Dynamics of Inflation "Herding": Decoding India's Inflationary Process

Gangadhar Darbha and Urjit R. Patel — Tue, 24 Jan 2012 14:22:00 -0500

Compared to immediately preceding years, that is, its own recent history, India’s inflation became unhinged (thereby reversing creditable performance) from as far back as 2006. In the last two years, among its major comparators India has the highest rate of consumer inflation; it is also volatile in relation to its peers in Asia and the BRICs. This paper puts forward an empirical framework to analyze the time series and cross-sectional dynamics of inflation in India using a large panel of disaggregated sector prices for the time period 1994-95 to 2010-11. It has been motivated in no small part to official pronouncements seemingly unencumbered by methodological rigor. There are several grounds for distrust by citizens regarding policy makers in this context. Firstly, officials have attributed the upswing in prices (measured by all indices) to food supply constraints, and therefore claim they are powerless to do anything about it. Secondly, they resort to hand wringing and public communication that essentially amounts to “we are staring the problem down” as the common refrain for an inordinately long time; in tandem, rolling “(mental) spreadsheet forecasts”—that have been optimistic by some distance—were, and still are, put out at regular intervals to give succor and hope to the public. Thirdly, a spate of recent statements seems to suggest that the medium-term objective of around three percent inflation articulated by inter alia the Reserve Bank of India (RBI)3 is being given a quite burial.

The operational methodology introduced in the paper facilitates a rigorous exploration of issues that have been, at best, loosely posed in policy debates such as diffusion or comovement of inflation across sectors, role of common and idiosyncratic factors in explaining variation, persistence, importance of food and energy price changes to the overall inflation process, and contrast the recent experience with the past. It is found that the current period of high inflation is more cross-sectionally diffused, and driven by increasingly persistent common factors in non-food and non-energy sectors compared to that in the 1990s; this is likely to make it more difficult for anti-inflationary policy to gain traction this time round compared to the past.

The paper has also introduced a novel measure of inflation, viz., Pure Inflation Gauges (PIGs) in the Indian context by decomposing price movements into those on account of: (i) aggregate shocks that have equiproportional effects on all sector prices; (ii) aggregated relative price effects; and (iii) sector-specific and idiosyncratic shocks. While aggregate Wholesale Price Index (WPI) inflation by the end of 2008-09 had declined to about 1 percent (from about 8 percent in 2007-08), PIGs were running at around 3 percent; in contrast to the headline inflation, the most recent trough for PIGs was 2005-06 and not 2008-09. The decline in (and the level of) headline inflation in 2008-09 may have conveyed to the authorities that they had less need of (or more time for) tightening than was the case looking at inflation measures corrected for sectoral and idiosyncratic shocks. If PIGs, in conjunction with our other findings, for example, on persistence had been used as a measure of underlying (pure) inflationary pressures, the monetary authorities may not have been sanguine regarding the timeliness of initiating anti-inflationary policies.

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Gangadhar Darbha
Urjit R. Patel

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Can Producer Associations Make Agriculture Sustainable? Evidence from Farmer Development Centers in India

Raj M. Desai and Shareen Joshi — Wed, 11 Jan 2012 12:58:00 -0500

INTRODUCTION

The problems in farming in developing countries are numerous and well-known: drought vulnerability, soil degeneration, a lack of financial instruments (credit and insurance), high transaction costs imposed by intermediaries, the inaccessibility of reliable inputs, and a lack of market opportunities. Over the past decade, agriculture in India has undergone what one state-level commission terms a period of “generalized rural distress,” producing high levels of rural unemployment, forced migration, and declines in per capita calorie consumption among the poor. Indian agriculture— characterized historically by much greater volatility than the general economy—has also been adversely affected in recent years by declining productivity, greater import competition, and rising prices for fertilizer, seed, and pesticides. Although the percent of agricultural employment in the labor force has been declining, most of that decline has been due to the loss of cultivators.

Adjustment costs in the Indian rural economy have fallen disproportionately on tenant farmers and rural day or “casual” laborers, and in particular, on female farmers. Women constitute only one-third of the Indian workforce, but three-quarters of these economically active women are engaged in agriculture (compared to 53 percent of men), as either workers in household farms owned or tenanted by their families, or as wage earners, and almost all of these agricultural workers are the informal sector. Moreover, Indian women face a range of disadvantages that are exacerbated by the pressures of rising input costs, cuts in agricultural subsidies and risks of weather shocks. First, they encounter steeper entry barriers than men in agriculture. Patriarchal inheritance codes restrict women’s property rights over agricultural land, particularly in North India (Agarwal 1994b; Dyson and Moore 1983). Barriers to access in land translate into barriers to accessing credit, since most formal sector loans require land titles. Female farmers also face other impediments such as cultural indifference, regulatory barriers, as well as higher bribe taxes from officials than their male counterparts (World Bank 2001). As a result, most women’s agricultural work is informal, done under conditions of high insecurity in relation to a lack of contract and benefits, and the availability of a large supply of surplus labor (Unni and Rani 2003).

Second, most government investments in agricultural- support programs—such as agricultural extension— have typically excluded women and have almost exclusively been targeted at men (Danida 2002; Raabe 2008). Third, the lack of collective-action mechanisms available to women in rural areas relative to men has limited female access and representation in local decision-making, and has contributed to the self-exclusion of women from a variety of participatory schemes and other community-based development programs that might mitigate the results of rural gender bias.

In recent years, several non-governmental organizations have attempted to address these issues and provide support to female farmers. “Membership-based organizations” have emerged to provide women with organizational resources that increase coordination, improve their capacity for management of collective goods (e.g., property, irrigation schemes), and support their participation in village affairs and local politics. In rural communities, producer associations have mobilized and organized female farmers, provided them with diverse services that include access to information and training, assistance in organizing inputs, marketing support, provision of credits, as well as in enhancing the bargaining power of farmers for securing better contracts and prices. The general basis for the proliferation of producer associations is the view that local farmers’ possess informational advantages regarding their own farming needs and placing them at the center of decision-making leads to greater efficiency, greater equity and lower transactions costs (Bank 2008; Chen et al. 2007).

Governments and multilateral development institutions have increasingly promoted producer associations. It is expected that collective action by farmers increases participation, improves agricultural productivity, establishes better connectivity with markets, and increases their bargaining power in securing inputs and selling outputs. In the long run, this contributes to both growth and poverty alleviation. Recent research however, demonstrates that this approach has its challenges. Evidence from Sub-Saharan Africa and South Asia suggests that local producer associations’ informational advantages may be nullified by problems ranging from local elite capture, exclusion of the poorest groups from decision-making, and the lack of information about the external environment and market conditions. These issues can prevent producer associations from translating their informational advantages into either agricultural productivity growth or poverty alleviation (Bernard and Spielman 2009).

Empirical assessments of the impact of producer associations are thus quite important. This evaluation focuses on a program in the Indian state of Gujarat that combines social empowerment with agricultural extension. The program, known as the “Women Farmers with Global Potential” (WFGP) initiative, focuses exclusively on rural women and draws on producer associations as the primary channel for delivering the intervention. The effort was coordinated by the Self-Employed Women’s Association (SEWA), a non-governmental organization that has acquired significant experience in the development of producer associations and other membership-based organizations for the rural poor in India.

We aim to evaluate the impact of the WFGP program at the individual level, considering both economic and non-economic outcomes. We examine results of SEWA membership on income, employment, empowerment, consumption, income, and assets of women in these communities. We draw on a survey of approximately 1,500 women in 42 villages in five rural districts in Gujarat conducted in 2010 over several months following the monsoon, divided between members of SEWA and non-members. Although villages were selected randomly for SEWA treatment, individual women were not. To control for problems of individual selection, then, we rely on propensity score matching on observables to ensure balance between SEWA members and non-members.

Our results illustrate that SEWA membership had some important effects: it raised awareness of available opportunities among its participants, and linked women to the financial sector, and to diversified employment opportunities, including non-farm work. SEWA members are less likely to work as unpaid workers, are more likely to have better knowledge of loan products available, more likely to have obtained those loans, and more likely to have superior information about market prices than non-members. SEWA women were also more likely to sell outside the established state-procurement system than non-members.

We also find considerable evidence of the heterogeneity of impact. SEWA membership benefitted the poorest women (as measured by residence in temporary or “kutcha” housing) as well as those who had faced previous income shocks. Relative to other women, these women experience higher farm and non-farm income, greater food consumption, improved household and farm productivity, more self-employment opportunities, a greater likelihood of opening a bank account, higher crop harvests, having access to adequate food for the family.

The remainder of this paper is organized as follows. The next section reviews agricultural extension programs in India, and describes SEWA’s intervention in detail. The section after that examines household impacts of the WFGP initiative. The final section discusses the prospects of scaling up the program in India as well as in other developing countries. The final section concludes and offers some implications for agricultural policy in India and globally.

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Raj M. Desai
Shareen Joshi

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Benchmarking Against Progress: An Assessment of Australia's Aid Effectiveness

Laurence Chandy — Tue, 20 Dec 2011 14:21:00 -0500

INTRODUCTION

Is Australia’s aid program effective? Measuring the effectiveness of aid is no easy feat. For a start, there is uncertainty about what aid is trying to achieve. Even seemingly straightforward objectives, like poverty reduction, throw up a range of questions as to what precisely ought to be measured. For instance, how should one balance the provision of temporary relief to those in need with catalyzing permanent transformation in people’s lives (Barder, 2009)? Second, it is notoriously difficult to isolate the effect of a single aid program from other factors. Aid is delivered in an environment of enormous complexity where all manner of other events shape outcomes, including actions by recipient governments, aid from other countries, non-aid flows, and the performance of the global economy. To accurately attribute impact to aid therefore requires a thorough understanding of the setting in which aid is given. Third, the effects of aid are not always immediate or straightforward. For instance, improvements in people’s skills or the performance of institutions may manifest gradually. Measurements of what aid achieves must be sensitive to the different ways change is brought about (Woolcock et al., 2009).

A solution is to focus on Australia’s approach to giving aid and see how it stacks up against international best practice. International best practice is defined here by what is known to work well in aid, either because it has been demonstrated through research, identified by aid recipients, or agreed through consensus within the aid community. The latter is captured in the Paris Declaration on Aid Effectiveness and the Accra Agenda for Action—two statements of intent by ministers of developed and developing countries and heads of donor agencies, pledging improvements in the way aid is managed and delivered. As a member of the Organization for Economic Cooperation and Development’s Development Assistance Committee (OECD DAC), Australia is a signatory to both agreements.

While adherence with best practice principles cannot guarantee that Australia’s aid will always deliver its intended results, it increases the likelihood that those results will be achieved. And unlike the results of aid, adherence to best practice is fully within Australia’s control. Australia’s performance against best practice standards therefore serves as a touchstone of its commitment to greater aid effectiveness.

Introducing QuODA

A useful tool to assess Australia’s aid program is the Quality of Official Development Assistance (QuODA) assessment, developed jointly by the Brookings Institution and the Center for Global Development (Birdsall and Kharas, 2010; Birdsall et al., 2011). QuODA appraises donor performance along four separate dimensions, each representing distinct components of best aid practice: maximizing efficiency, fostering institutions, reducing the burden on recipients, and promoting transparency and learning. Each dimension is comprised of a collection of indicators against which donor countries are scored. Examining performance against the four different dimensions provides a basis for identifying donors’ strengths, weaknesses and areas for reform. The recent release of the 2011 QuoDA update provides an opportunity to assess Australia’s aid effectiveness based on the latest available evidence.

QuODA is used to assess Australia’s aid program in three ways. First, the aid program is appraised on its own based on Australia’s performance on the different dimensions and indicators. These results are then corroborated using other performance indexes. Second, Australia is judged against a “benchmark” donor of equivalent size, which is involved in similar development work. Third, other donor countries and multilateral agencies active in Australia’s region are assessed. These are donors with whom Australia has the option to partner or to delegate the delivery of its aid, and whose performance is therefore also relevant to assessing how effectively Australia’s aid budget is spent.

A Fragile States Lens

To help shape the analysis, particular attention is paid to the role Australia plays in providing assistance to fragile states. The term “fragility” captures a range of different country conditions, but in each case there is a failure of the state to perform some of its most basic functions, due either to a lack of political will, capacity, or a combination of the two, creating significant challenges for development. These failures are typically observed in terms of one or more persistent deficiencies of the state: its authority, its legitimacy as perceived by the country’s citizens, or its provision of services (Stewart and Brown, 2010).

Australia’s focus on fragile states is a defining feature of its aid program: 50 percent of its aid goes to countries that are considered fragile. This focus on fragile states is a reflection of Australia’s region where fragility is commonplace. Among the countries that are not fragile, many still face related challenges associated with weak governance.

Why is fragility important to this analysis? It is broadly recognized that promoting development is much harder in fragile states than in other countries. The reason for this is straightforward: governments cannot be relied upon to support the development process in fragile states, and in some instances may serve to undermine economic and social progress. This has important implications for aid. Aid delivery tends to be both a more costly and more complex task in fragile settings. Part of the complexity lies in understanding how to apply good practice aid principles. While the principles of effective aid remain just as relevant in fragile states, they cannot always be implemented in the same way as they can in other countries (Chandy, 2011).

While delivering aid in fragile states—and doing so effectively—undoubtedly presents a challenge, many donor countries are tasked to do exactly that. Australia’s region obliges it to take on this type of work. Furthermore, there is a growing consensus within the development community that helping fragile states represents one of the core challenges of global development both now and in the future. Helping fragile states has become inseparable from a commitment to fighting poverty reduction, achieving the Millennium Development Goals (MDGs), and assisting low-income countries:

Fragile states account for a growing share of the world’s poor. As global poverty levels fall, driven by progress in more stable developing countries, the share of the world’s poor living in fragile states has doubled from 20 percent in 2005 to 40 percent today. More than half the world’s poor are expected to live in fragile states by 2015 (Chandy and Gertz, 2011).

No fragile country has yet achieved a single MDG. Fragile states are home to half of all children not in primary school and half of all children who die before reaching their fifth birthday (DFID, 2009). The remarkable success of many stable developing countries in achieving the MDGs has drawn attention to the lagging performance of fragile states.

Two-thirds of low-income countries are fragile. The past decade has seen a wave of 30 (mostly stable) countries graduate out of low-income status. Of the 35 countries still classified as low-income, less than a dozen are stable.

Understanding how to deliver aid effectively in fragile states is, therefore, a vital question for the aid community over the coming years and one Australia can help to answer.

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Laurence Chandy

Taking Development Activities to Scale in Fragile and Low Capacity Environments

Laurence Chandy and Johannes F. Linn — Thu, 01 Sep 2011 10:17:00 -0400

EXECUTIVE SUMMARY

Fragile states present one of the greatest challenges to global development and poverty reduction. Despite much new learning that has emerged from within the development community in recent years, understanding of how to address fragility remains modest. There is growing recognition that donor engagement in fragile states must look beyond the confines of the traditional aid effectiveness agenda if it is to achieve its intended objectives, which include statebuilding, meeting the needs of citizens, and managing risk more effectively. Current approaches are constrained by relying heavily on small-scale interventions, are weakened by poor coordination and volatility, and struggle to promote an appropriate role for the recipient state.

Scaling up (i.e., the expansion, replication, adaption and sustaining of successful policies and programs in space and over time to reach a greater number of people) is highly relevant to fragile settings, both as an objective and as a strategic approach to development. As an objective, it reinforces the logic that the scale of the challenges in fragile states demands interventions that are commensurate in purpose and equal to the task. As a strategy, it encourages donors to identify and leverage successes, and to integrate institutional development more explicitly into projects and programs. In addition, scaling up can assist donors in addressing the priority areas of improved project design and implementation, sustainability and effective risk management.

Successful scaling up in fragile states almost certainly occurs less often than is possible and does not always involve a systematic approach. Donors should therefore look to more systematically pursue scaling up in fragile states and evaluate their performance with specific reference to this objective. This can be done by incorporating relevant elements of a scaling up framework into operational policies, from strategy development through to program design and monitoring.

Contrary to expectations, there are compelling examples of successful scaling up in fragile states. While the conditions prevailing in fragile states create serious obstacles in terms of “drivers” (the forces that push the scaling up process forward) and “spaces” (the opportunities that need to be created, or potential obstacles that need to be removed for interventions to grow), and in terms of the operational modalities of donors, these can be overcome through the careful design and delivery of programs with a clear focus on creating scaling up pathways, and through close partnership and sustained engagement of governments, communities and foreign partners.

Case study evidence suggests that the pathways taken to reach scale in fragile states demand different approaches by donors. Donors need to adopt greater selectivity in determining which areas or sectors for scaling up are justified—a strategy that has also assisted some donors in managing risk. More investment and time are required in upfront analysis and building the evidence for successful scaling up pathways. In some cases, donors require longer time horizons to achieve scale, although demand from government or beneficiaries has sometimes forced donors to move immediately to scale, allowing little or no time for piloting. Regardless of the pace of scaling up, donors that were most successful were engaged early and then remained engaged, often far beyond the replication phase of scaling up, to increase the likelihood of interventions being sustained. Other common characteristics of successful scaling up were simple project design and a focus on the institutional aspects of the scaling up pathway.

Case studies also point to the crucial role of drivers in moving the scaling up process forward in fragile states. Proven ideas and practical models have often been picked up in fragile states, contrary to the expectation that actors may be less responsive to recognizing and acting on the utility of promising results. Leaders undoubtedly have a role to play in supporting scaling up, although there are clear dangers that must be avoided, including avoiding the perception that donors are picking (political) winners by nominating leaders, and tying the survival of projects too closely to the fortunes of a leader’s political career. Incentives were found to be one of the most important drivers in fragile states, and there is a good case to be made for donors introducing new inducements, greater transparency or similar reforms to strengthen the role incentives play. Finally, and in contrast to the standard scaling up framework, community demand was found to be an important driver in many fragile states, both in demanding the expansion of small-scale projects and by facilitating the community’s own resources to support the scaling up process.

The greatest challenge to scaling up in fragile states is the limited spaces these environments provide. This is especially the case in respect to those spaces which concern aspects of governance: political, institutional and policy spaces. When working in fragile states, donors must recognize that spaces for scaling up are almost always more constrained, but look for ways to expand upon them. Some of the most successful examples of scaling up used creative approaches to build space quickly or used existing capacity to the fullest possible extent. Also relevant are the lessons of robust analysis, greater realism and cost control. The case studies confirm the importance of two additional spaces in fragile states. For example, security space often imposed horizontal obstacles to scaling up which could not realistically be overcome while ownership space served as a good indication of the perceived legitimacy of the scaling up process and the likelihood that interventions would be sustained longer term.

Case studies also affirm the importance of emphasizing robust project design and implementation, and the close linkages between the scaling up agenda and the role of risk management and sustainability in fragile states. While sustainability presented a significant problem for many of the projects and programs reviewed, a more focused approach around scaling up may assist donors in addressing sustainability concerns. This would entail adopting a longer-term perspective beyond the immediate confines of any individual project, looking for available drivers and supportive spaces, and focusing on effective implementation and consistent monitoring and evaluation (M&E). Any intervention introduced on a small scale that scores well in sustainability serves as a possible candidate for scaling up.

Similarly, many of the methods used by donors for managing risk—an emphasis on analysis, scenario planning, realism and making use of specialized aid instruments—are equally relevant for supporting scaling up in fragile countries. A persuasive argument can be made that the adoption of a more explicit scaling up approach by donors can form part of a risk management strategy in fragile states. Scaling up can enable donors to more ambitiously tackle development risks without allowing institutional and project risks to grow unchecked. Ultimately, a donor approach that combines good risk management and scaling up requires strong leadership and well-aligned incentives.

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Does Fairness Matter in Global Governance?

Hakan Altinay — Fri, 29 Oct 2010 00:00:00 -0400

INTRODUCTION

Worldwide, there has been a recent increase in expressions of cynicism. We are reminded that all power is hard power, and that being loved or respected is no substitute for being feared. The great power game of nations always continues, we are forewarned, even when a higher goal or rhetoric is evoked. Superpowers are selfish, arbitrary, and dangerous nations, and they should not be embarrassed to be so and not feel constrained by international legitimacy and laws. We are cautioned against assuming that the rise of the world’s emerging powers is doing anything to the status of the United States as the sole superpower. Naturally, it would be a folly to think that global public opinion is, in effect, a “second superpower,” or is even a crucial factor. Such concerns are akin to the Lilliputians binding an unsuspecting Gulliver. Anyone harboring naïve views needs to be told that good intentions are, at best, a distraction and a nuisance and, at worst, a recipe for disaster, given their imprudence. Cynics prefer to be unconcerned about the achievements of transnational normative actions, such as abolishing the slave trade or establishing the International Criminal Court.

The advocates of these views would readily conclude that fairness does not matter in managing our global challenges—only power does. And these cynical views are not advanced only in the hard center of the international system. In a fascinating twist, many on the various peripheries of the international system also agree with this depiction. They argue that might makes right, and this absolves those without formidable power of any responsibility for solving global problems or even articulating their potential contributions if something other than the law of the jungle were to prevail. Thus, the hubris of the powerful triggers irresponsibility among the not so powerful, which in turn is used by the cynics to argue the need for unadulterated power, given the rampant irresponsibility in the world at large.

This working paper, however, is based on a hypothesis that the cynics may be wrong. Its central conjecture is that fairness in global governance does matter today and will matter more in the future. Long-term projections are notoriously and predictably difficult. The forecast that the BRICs (Brazil, Russia, India and China) and the Next 11 group of emerging nations will overtake the Group of 7 may not materialize for a very long time. Yet it is evident that power disparities are less severe today and are likely to be even less so in the near future. At the same time, the current level of global interdependence and the very nature of the imminent global problems we face have clear repercussions for the minimum constellation of alliances that is necessary to overcome these problems. Climate change is the most obvious case in point; unless all the major players and their citizens willingly and proactively cooperate, it is unlikely that human civilization as we know it will survive. It is clear that Commodore Matthew Perry’s body language will not secure the proactive and willing cooperation of citizens around the world. Hubris and cynicism will also not embolden those who witness emergent threats and plots, as diverse as those by Osama bin Laden and Abdul Qadeer Khan, to speak out. And, thus, both notions and perceptions of fairness will be central to developing the master narrative about our epic interdependence and our responsibilities toward each other. Without a sense of fairness that appeals to many and a corresponding framework of global civics, we cannot navigate the treacherous waters of global interdependence

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Hakan Altinay

Scaling Up the Fight Against Rural Poverty

Tue, 26 Oct 2010 13:30:00 -0400

ABSTRACT—

The International Fund for Agricultural Development (IFAD) has for many years stressed innovation, knowledge and scaling up as essential ingredients of its strategy to combat rural poverty in developing countries. This institutional review of IFAD’s approach to scaling up is the fi rst of its kind: A team of development experts were funded by a small grant from IFAD to assess IFAD’s track record in scaling up successful interventions, its operational policies and processes, instruments, resources and incentives, and to provide recommendations to management for how to turn IFAD into a scaling-up institution. Beyond IFAD, this institutional scaling up review is a pilot exercise that can serve as an example for other development institutions.

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Arntraud Hartmann
Homi Kharas
Richard Kohl
Johannes F. Linn
Barbara Massler