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Independent research & practical ideas for global prosperity
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Independent research & practical ideas for global prosperity
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 Posts:April 24, 2009The IMF’s New FaceBy Nora LustigAfter listening to Dominique Strauss-Kahn’s speech at the CGD-SAIS conference on April 23, I almost had to pinch myself: new lending instruments without conditionality and without pre-established limits? Stand-by agreements with social conditionality—that is, requirements designed to protect the poorest? These are very important steps for an institution, which until recently, developing countries saw as the “bad cop” for decades. Read More… 1 Comment »April 10, 2009The Economist Got It Wrong on U.S. Income InequalityBy Nora LustigIn its special report on the rise and fall of the wealthy, referring to the trends in income inequality in the United States The Economist (April 4-10th 2009, p. 3) states “… Another international study found that only Mexico and Russia had more unequal income distributions than America.” That is plain wrong. In Latin America alone all the eighteen countries for which there are comparable data show more inequality than the United States, and that is the case for dozens and dozens more around the world. Undoubtedly, in the last two decades inequality in the U.S. has risen sharply and shamefully. But disposable income (after transfers and taxes) inequality in the U.S. is still far from the levels found in most of the developing world. 1 Comment »April 7, 2009G-20 And IMF Rhythms: The Problem Is Not the Direction but the SpeedBy Nora LustigIf the commitments made last week by the heads of state at the G-20 meeting materialize quickly, this is good news indeed. The increase in available IMF and MDB resources for middle- and low-income countries, along with IMF’s announcement of a Flexible Credit Line which will allow countries to borrow amounts without pre-determined limits or conditionality, are crucial for helping these countries cope with the impact of the financial crisis. Increased resources and the right instruments to deliver them can prevent lots of pain for millions of poor people. The mere existence of these options will give many developing country governments more leeway to make counter-cyclical policy responses and reduce the impact of the crisis on economic growth. Read More… 1 Comment »March 27, 2009Will the Financial Crisis Undermine Support for Market Capitalism in Russia?By Nora LustigAs part of CGD’s efforts to track the impact of the financial crisis, I have been leading a series of conference calls to discuss how recent policy responses—or the lack thereof—may affect poor people in the developing world. Our latest call on the prospects for Russia suggests that the government could—and should—do more. Read More… Comment »March 25, 2009A Cautionary Note on AIG Bonus Clawback: Is the United States Turning into Argentina?By Nora LustigA friend who works in Wall Street was livid upon learning about the U.S. House of Representatives’ move to tax the controversial AIG bonuses at 90 percent. My friend—who is from Latin America and does not work at AIG—said that it looks like the United States is turning into Argentina. He was referring to last year when, in the midst of the commodity boom, the Argentine government attempted to raise the tax rate on the additional profits to around 90 percent and to increase its access to resources it nationalized the private pension plans. Read More… 2 Comments »October 31, 2008Bravo for U.S. Temporary Liquidity Swaps with Emerging MarketsBy Nora LustigLast Wednesday the U.S. Federal Reserve Board announced that it had provided temporary liquidity swaps of $30 billion each with Brazil, Korea, Mexico, and Singapore, thereby significantly expanding the circle of countries that the Fed works with in this manner. This is a very welcome move. Since the beginning of the financial crisis, the Fed has made such currency swaps available to central banks in high-income economies, to help them shore up the value of their currencies as depositors and investors flee to dollar-denominated accounts. Comment »October 14, 2008Inter-American Development Bank and other IFIs Offer Emergency Credit for Latin AmericaBy Nora LustigMuch sooner than we expected a week ago, the multilaterals (or International Financial Institutions — IFIs) must be ready to step in with emergency lending. The Inter-American Development Bank (IDB) in collaboration with Andean Development Corporation (CAF) and the Fund for Latin American Reserves (FLAR) announced yesterday a new $9.3 billion facility to help Latin American countries withstand the turmoil in financial markets. The global crisis that began in the United States has already taken its toll in the region in the form of sharp unexpected depreciations, tumbling equity markets and bankrupticies. Comment »September 22, 2008In the Long Run We Are All Dead, But in the Meantime, Financial Crises Take a Heavy Toll (Development Impacts of Financial Crisis)By Nora Lustig
Michael is correct when he notes that there are crises whose effect is short- lived. But there are also plenty of crises whose negative impact lasts for years before they are reversed (if they ever are). The so-called Tequila crisis in Mexico in the mid-nineties was, as Michael notes, short-lived. But the Latin America debt crisis of the 1980s has had lasting effects on living standards and human capital. Comment »April 24, 2008The Economist got it wrong!! on safety nets and food pricesBy Nora LustigYou probably saw that this week’s Economist devoted his leader to soaring food prices. They made two mistakes: 1. In the editorial they say that it is better to distribute cash rather than food to protect local growers. At a time in which one of the problems is hoarding, cash may push prices even further. There cannot be a blanket recommendation of this kind. 2. In the lead article they have a box on safety nets and mention Mexico’s PROCAMPO program as an example of conditional cash transfers that could be applied elsewhere. First, PROCAMPO is NOT a conditional cash transfer program. The transfer program is called PROGRESA/OPORTUNIDADES (see Millions Saved, Case 9). Second, and more importantly, PROCAMPO is a program that subsidizes those who have land (it is similar to US farm subsidies), the overwhelming majority are net sellers of agricultural goods, so it would do no good at all to have such a program if what you want to do is help net buyers. On the other hand, the Mexican government could use PROGRESA/OPORTUNIDADES to transfer a higher amount of money to the beneficiaries so they can cope with the increases in food prices. The same could be done with similar programs elsewhere. 1 Comment » |
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I am afraid I disagree rather strongly with Michael Clemens 
