Monthly Archives: September 2010

Barack Obama’s United Nations Day

President Barack Obama Addresses the United Nations

President Barack Obama Addresses the United Nations

President Barack Obama was in New York yesterday for United Nations week, the annual gathering of the world’s heads of government to discuss issues of global importance. Discussion of the Millennium Development Goals had dominated the discussion leading up to Obama’s speech (and will likely be the focus of ongoing discussion, as Texas in Africa notes).

President Obama’s speech was—as many of the speeches to the United Nations by heads of state tend to be—long on rosy rhetoric and short on details. Obama did hint at a couple of (potentially) interesting shifts. He announced a new “U.S. Global Development Policy” and outlined his “new approach and new thinking” in which America’s “national security strategy recognizes development as not only a moral imperative, but a strategic and economic imperative.” Collectively, according to him, means that “the United States is changing the way we do [development] business.” Much of the rhetoric offered nothing new. His speech emphasized the same need for transparency, good governance, and commitment to free markets that have defined U.S. development policy since the early 1990s (at least).

More concretely, Obama recommitted the United States to achieving the Millennium Development Goals. He also suggested the need to rethink how we define development. According to Obama,

“For too long, we’ve measured our efforts by the dollars we spent and the food and medicines we delivered. But aid alone is not development. Development is helping nations to actually develop—moving from poverty to prosperity. And we need more than just aid to unleash that change. We need to harness all the tools at our disposal-from our diplomacy to our trade and investment policies.…

[W]e’re changing how we view the ultimate goal of development. Our focus on assistance has saved lives in the short term, but it hasn’t always improved those societies over the long term. Consider the millions of people who have relied on food assistance for decades. That’s not development, that’s dependence, and it’s a cycle we need to break. Instead of just managing poverty, we have to offer nations and peoples a path out of poverty.

This could suggest a more dramatic shift in U.S. foreign policy. For example, the United States may move away from providing in-kind food aid to a greater emphasis on cash for emergency aid and an increase in non-emergency food development. But this kind of shift involves more than a simple speech at the United Nations. The proof, as they say, is in the pudding.

Measuring Development

ChildrenAttend a Rural School.

ChildrenAttend a Rural School.

I’ve blogged before on the limits of gross domestic product [glossary] as a measure of development, commenting on the absurdity of the BP oil spill being good for America’s GDP.

As a measure of development, GDP per capita offers at best a rough proxy. A country like Oman or Saudi Arabia may have a relatively high GDP per capita, but may be less able to translate that wealth into improvements in quality of life (measured in terms of life expectancy, literacy, infant mortality, or other similar measures). By contrast, a country like Costa Rica may be able to make good progress in addressing social development, reducing infant mortality, increasing life expectancy, and reducing levels of malnutrition, despite having a comparatively lower GDP per capita.

As a proxy for development, then, GDP may tell us little about human development in a particular country. Indeed, GDP per capita suffers from several shortcomings:

First, it tells us nothing about the distribution of income within a particular country. Take, for example, Kuwait. While the country as a whole has a relatively high GDP per capita, that income is unevenly distributed, with some Kuwaitis having significant wealth while others (mostly migrant laborers) having very little indeed. GDP per capita does not address inequality, hiding such disparities.

Second, GDP hides externalities—those costs associated with an economic transaction that are not incorporated into the price of a good. See my post on the BP oil spill for more information on externalities.

Third, GDP generally does not include activities taking place n the informal sector, including unrecorded economic activities, illegal activities, or unpaid work contributing to the social welfare. This exclusion has a particular gendered dynamic as well, with much of the work associated with social reproduction excluded from the formal sector. 

There are alternatives. The Human Development Index has been around for nearly twenty years. and the differences in country rankings between the HDI and GDP per capita makes for an interesting comparison. France has proposed using something like the genuine progress indicator to measure development.  Chad Jones and Pete Klenow  (ht to Chris Blattman)  offer an alternative measure based on consumption, leisure, inequality, and mortality. Feminist economist Marilyn Waring has long campaigned for a more radical measure based on time use. And as James Hammock blogged at Triple Crisis, the Oxford Poverty and Human Development Initiative (OPHDI) has proposed to use an new index that incorporates income, access to health care, education, and nutrition.

What differences does the measurement make? Plenty. While the Jones/Klenow index correlates highly with GDP per capita, there are important variations, most significantly, 

Western Europe looks considerably closer to U.S. living standards, emerging Asia has not caught up as much, and many African and Latin American countries are farther behind due to lower levels of life expectancy and higher levels of inequality. In recent decades, rising life expectancy boosts annual growth in welfare by more than a full percentage point throughout much of the world. The notable exception is sub-Saharan Africa, where life expectancy actually declines.

In defining and measuring development, we need to remember what the purpose of development actually is. Growing GDP is best seen as a means to an end. The goal is not necessarily to expand the economy, but to expand the economy in order to achieve the ultimate goal of improving the human condition. The problem is that using GDP per capita as a proxy for development obscures the means for the ends.

Food Crises and Financial Speculation

Food Riots in Mozambique

Food Riots in Mozambique

There’s been much ado in the press recently about the emerging global food crisis. As global food commodity prices have increased over the past several months, governments have taken steps to address the price increasing, fueling greater response. The decision of the Russian government to limit wheat exports and the food riots in Mozambique garnered the greatest attention, leading the Financial Times last week to lead its online edition with an article entitled “Fears grow over global food supply.” 

Several of my favorite bloggers, including Chris BlattmanDuncan Green,  the Global Dashboard, and Raj Patel, have already chimed in on the topic. Perhaps the most interesting discussion was between Chris Blattman and Duncan Green, who offer competing perspectives on the two most important questions, namely: 1) Is there a food crisis today? and (2) What caused it?
 According to Blattman,

Globalization and growth should reduce price spikes in future. More countries are producing crops. Climate shocks in Argentina are not that tied to climate shocks in Russia or China, and so price volatility from supply shocks should be going down. Falling transport costs also mean that more substitutes are available, further reducing price volatility. So things should be getting better over time, not worse, especially if trade allows countries to diversify their diet. Envision a future of diminishing instability…

Are bread prices the proximate cause of the riots? Probably. Are they the root cause? Unlikely. Are global grain markets to blame? Unclear. How about bad domestic policy? Almost certainly. How about shallow and alarmist journalism about those poor, violent, unwashed nations? There are some things you can bet your life on.

Green counters, “This reminds me of the apocryphal French diplomat arguing in a Brussels punch-up ‘I can see it works in practice, but does it work in theory?’ Here’s the practice – you can clearly see food prices pretty smooth up til 2007, then going haywire.” Green offers the FAO Food Price Indices to support his position (see below).  

FAO Food Price Indices (2002-2004=100)

FAO Food Price Indices

But the real take away is that instability in global food prices is increasing. There’s also good reason to believe that speculative investment rather than real changes in demand is fueling the instability. Indeed, the dramatic price increases seen during the 2007 food crisis had very little to do with declining supply or increasing real demand.  Here, I think Blattman is fundamentally mistaken, price volatility will continue to increase not fall over time. Not a rosy picture.

The Continuing Challenge of Coalition Politics

Julia Gillard

Australian Prime Minisiter Julia Gillard

Australia has a new government, two weeks after elections left the future of Australian politics in uncertainty. Two independent members of parliament (MPs) announced they would back Julia Gillard’s minority government, permitting the Labour Party to continue to try to govern the country. But Gillard’s government is fragile. She’s promised the Greens a renewed effort to address climate change in exchange for their support and three rural MPs a high-speed fiber optic cable to connect their rural constituencies with the national broadband network. The deals give Gillaard’s center-left Labour Party coalition a narrow two-seat advantage over the rival Liberal/National coalition. But Gillard’s ability to manage her narrow majority will be tested at nearly every turn, as a single defection from the coalition could trigger a confidence motion in the government.

But the news is less positive in Belgium, where three-month old talks collapsed over the weekend, leaving the country without a national government. Belgium, like its neighbor the Netherlands, has been without a government since elections in June. The defeated pre-election government continues to operate as a caretaker government. But Belgium has, since July 1, also held the rotating presidency of the European Council.

In both the Netherlands and Belgium, the inability of the various political factions to form a new coalition government stems largely from the rise of political parties which lack any real interest in establishing a national government. In Belgium, the longstanding linguistic division and the rise of parties like the Vlaams Belang make it difficult to form alliances between traditional allies across the Flemish-French linguistic divide. Strong anti-immigration platforms in the Netherlands have also undermined coalition possibilities.

But the challenges facing Belgium and the Netherlands (and the crisis narrowly avoided in Australia) demonstrate the challenge of coalition politics. While the proportional representation electoral system [glossary] used in Belgium and the Netherlands affords voters a greater choice of political parties, it also fractures the political spectrum. Twelve separate political parties are represented in the lower house of the Belgian parliament, the largest of which controls just 18 percent of the seats. In such a fragmented political system, it is hardly surprising that a coalition would be difficult to form. Indeed, any realistic coalition would have to (1) transcend the linguistic divide, arguably the most difficult and controversial division in Belgium today; and (2) involve more than five coalition partners.  A tall task indeed!

Reforming the International Monetary Fund

Dominique Strauss-Kahn, Managing Director of the IMF

Dominique Strauss-Kahn, Managing Director of the IMF

There’s a showdown brewing at the International Monetary Fund (IMF). The organization, which is responsible for overseeing the global financial system, stabilizing exchange rates and balance of payments, is at a standoff over the appropriate size of its executive board. The board is arguably the most powerful body within the fund, as it is responsible for conducting the day-to-day affairs of the IMF. By tradition, the Managing Director of the IMF is a European, while the First Deputy Managing Director is an American (similarly, the World Bank President has traditionally been an American). Constitutionally, there are 20 members of the board, though a series of ad hoc decisions which must be renewed every couple of years, the number of seats was expanded to 24.

There’s the rub. The European Union, which currently holds 9 of the 24 seats on the board, wants to renew the agreement. The United States, arguing in favor of a more streamlined decision-making process, objects. Due to the voting procedures in the IMF, the United States effectively holds a veto over the body’s decisions. All decisions of the IMF must be made by an 85 percent supermajority, and the United States holds 16.74 percent of the votes. (The voting structure and board composition is detailed on the IMF website).

The likely losers in the reform process are the small European states, like Belgium and the Netherlands, which would see their seats merged with a larger European power, most likely Germany. “Musical deck chairs,” as the Global Dashboard describes it. And given the ongoing controversy over Germany’s push for fiscal austerity, this would not likely be well-received.

The United States, however, gains in other ways. According to a report by the Economist’s Free Exchange, the reforms would also give the United States greater clout with developing countries, which have been pushing to reform the voting structure of the IMF for years.

America also gains subtly by taking the side of emerging economies. They might be less likely, for example, to make a big fuss about America’s effective veto at the fund. This is something some have been highlighting as a rule that needs to change—but perhaps now that America is using its veto to make emerging countries’ case, they might prefer to pipe down about what a terrible thing it is. Which would probably suit America just fine.

The current voting structure of the IMF gives Belgium (2.08% and the Netherlands (2.34%) greater input than Mexico (1.43%), Brazil (1.38%), and South Korea (1.38%). Not to mention the fact that many IMF members have less than 1/10 of a percent of a vote. Zambia, for example, has 0.23 votes, Vietnam 0.16 votes, Uganda 0.09 votes, and so on. Even South Africa—the largest economy on the African continent—has just 0.85 votes. (For a complete list of the IMF weighted votes by country, see the IMF website).

And that is, of course, the tragic irony: the countries most affected by IMF policy have the least input in its decision-making processes. The countries most likely to need IMF assistance, and therefore most likely to be subject to the austerity measures imposed as a condition of receiving that assistance, have virtually no input in crafting the nature of those conditions, let alone influencing broader IMF policy.

Some redistribution of seats is certainly necessary. As David Bosco notes, Europe is over-represented and the developing world, particularly East Asia, is under-represented in the current IMF voting system. But does reducing the size of the board address this inequality? Not really. Even with the changes, the developing world continues to lack real input into the decisions of the IMF. The United States continues to have its de facto veto. The position of the other major powers in the IMF (Japan, Germany, France, the United Kingdom) remains unchanged. European control of the Managing Director position remains intact. And the developing world continues to be affected by the decisions of the IMF without having any real input into making those decisions. Under these conditions, the “failure” of developing countries to take “ownership” of the economic reform process—a criticism widely cited as the reason for the failure of structural adjustment in IMF reports—is hardly surprising. Why take ownership of a process and policy you had little input in crafting?

Today’s IR Students; Tomorrow’s IR Practitioners

US Soldiers on Patrol in Iraq

US Soldiers on Patrol in Iraq

Daniel Drezner has an interesting analysis of the foreign policy views of Millennials

. Citing Peter Beinart’s The Icarus Syndrome, Drezner observes that policy makers viewpoints are often shaped by the formative experiences (primarily wars), particularly during their formative years. Based on this observation, Drezner concludes that the worldview of today’s Millennials were shaped primarily by: (1) an early childhood of peace and property (the nineties); (2) the September 11 attacks; (3) the ongoing wars in Iraq and Afghanistan; (4) the global economic crisis and recession; and (5) the rise of China and the decline of U.S. hegemony.

These formative events, Drezner concludes, will likely lead Millennials to be “anti-interventionist to the point of isolationism.” Joshua Keating echoes Drezner’s analysis, noting that the Millennials would seem to be strong supporters of Ron Paul’s brand of (less militaristic) Republican foreign policy.

This is certainly a thought-provoking discussion, but I wonder to what degree we can draw conclusions regarding the impact of such dramatic events on large groups. The September 11 attacks, for example, briefly mobilized the general public to support the war in Afghanistan, but this support soon faded. Opinion was soon sharply divided, even among those most affected by the attacks themselves. Some victims’ families wanted revenge for the attacks, strongly supporting a more aggressive foreign policy position. Others, however, turned their grief into calls for understanding and peace, opposing the war. Events, in other words, may help to solidify ideologies, but individual ideology may develop in sharply divergent ways in response to the same event.