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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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March 15, 2010Game Change: A Sudden Shift in the Global Climate DebatePosted by David Wheeler in Climate Change Tags: Copenhagen, World BankLast week, Saurabh Shome and I reported that India’s proposed massive investments in clean power will cost about $50 billion more than generating the same power with coal. As we note in our paper, Less Smoke, More Mirrors, India is considering such investments “despite the absence of any meaningful international pressure to cut emissions, no guarantees of compensatory financing, and a continuing American failure to adopt stringent emissions limits.” With this initiative, India joins China, South Africa, and other industrializing countries that have begun large clean technology programs at their own expense. In the process they have knocked the conventional climate-development debate into a cocked hat. Consider the following contrasts between Old Think and the New Reality. Read More… 1 Comment »February 16, 2010Postcard from Dubai—Infrastructure Investments May Eventually Prove Wise After AllPosted by Vijaya Ramachandran in Global Development Tags: World BankDubai must be seen to be believed. Even its skyline is unreal–rising straight out of the desert and now dominated by the 2625 ft tall, 160-story, silver and glass structure, the Burj Khalifa, built by Samsung to be twice as tall as the Empire State Building in New York. But two months after its grand opening, the Burj remains mostly empty with its observation deck closed to visitors–perhaps symbolic of the fate of this Emirate, which has recently become dependent on huge amounts of short-term debt to keep its economy going. Read More… 1 Comment »January 29, 2010For Haitians’ Sake, Drop the “Drop the Debt”Posted by David Roodman in Aid Effectiveness, Debt Relief Tags: Foreign Aid Reform, Haiti, IMF, World BankAs I blogged Monday, the Haiti government owes the rest of the world about $1.25 billion. Seems like a lot of money. Inevitably, groups such as the One Campaign, Oxfam International, and the Jubilee Debt Campaign have seized the moment to call on Haiti’s creditors to cancel the debt. And they have a point: can you imagine a metaphorical debt collector from the IMF knocking on the door of the Haitian finance ministry (if it still has one) asking for a few million dollars please? That’s why I called debt relief, meaning at least a suspension of debt collection, a no-brainer. The question is whether to go further than debt service suspension, to drop Haiti’s debt outright, as non-governmental organizations, members of Congress, and others have demanded. Actually, the practical question for citizens, officials, politicians, campaigners, and other players is whether to push for that. On a few days’ reflection, I say no. I would go so far as to describe such pressure as harmful. 8 Comments »January 25, 2010Suspend Haiti’s Debt—And Take Official Lenders beyond LendingPosted by David Roodman in Debt Relief, Global Development Tags: Haiti, IMF, World BankMore Fresh Ideas for Haiti
See also[Update: For a more opinionated take on debt cancellation, see For Haitians' Sake, Drop the "Drop the Debt".] Haiti and international debt go way back, and it is a sad history. The circumstances of Haiti’s birth seem auspicious in retrospect: it was the second republic in the Western Hemisphere, founded in 1804 by slaves of African descent who had wrested freedom from their masters, then defeated Napoleon’s navy. But after France gave up on enslaving Haiti’s people, it enslaved the whole nation. In 1825, it exploited its superiority on the high seas to ransom the country’s ability to export sugar and coffee. The price: 150 million francs in gold, some $22 billion in today’s dollars. Not until 1947 did Paris declare Haiti’s debt cleared. A century of intense pressure to export commodities and extract profit by pressing plantation workers into conditions tantamount to slavery goes far to explain Haiti’s human and ecological poverty today. The latter is symbolized by satellite photos of the border between Haiti and the Dominican Republic, its twin-separated-at-birth on the Hispaniola island. The DR has trees. Haiti has none. Today, Haiti owes foreigners $1.25 billion. Inevitably, many are calling for the cancellation of that debt. The question of whether to give Haiti debt relief is at once easily distorted and misunderstood—and a no-brainer. When the world is struggling to channel resources through damaged air and water ports to a nation that has suffered such a blow, sending bills for debt service due would be practically and morally absurd. Since rebuilding Haiti will take time, a sensible formulation is that at a minimum, Haiti’s creditors should cancel all principal and interest payments for the next five years. This debt relief could be accomplished by, but would not require, debt cancellation. Why not go for complete cancellation? For some creditors, the political and financial costs would be high. And the benefits for Haiti would be lower than you might guess. Notably, persuading the Inter-American Development Bank (IDB) to swallow a $411 million loss in Haiti would be hard. Persuading it to forbear for a time on Haiti’s $8.6 million/year in debt service, or even arranging for the U.S. and other donors to reimburse that loss, would be a more realistic and expedient response to the emergency. 2 Comments »December 4, 2009Will There Ever Be Any Serious Reform of World Bank Governance?Posted by Nancy Birdsall in Global Development, International Financial Institutions, World Bank Tags: Ernesto Zedillo, International Financial Institutions, World BankAt our recent event with former President of Mexico Ernesto Zedillo, who chaired the High Level Commission on Modernization of World Bank Group Governance on World Bank governance reform (report is here), panelists Moises Naim and Arvind Subramanian worried that there is no reason to expect the powers-that-be to take up any of the recommendations for reform. Read More… Comment »November 24, 2009Senator Kerry Nudges World Bank on Governance, Gender, and Climate IssuesPosted by Kaci Farrell in Global Development Tags: Cliamte, Gender, Governance, Senator Kerry, World BankU.S. Sen. John Kerry’s recent speech at the World Bank hit all the right notes—and may have set World Bank management back on its heels a bit. Sen. Kerry expressed frank views, especially on increasing the voice of developing countries in Bank governance and on the Bank’s role in addressing climate change. On the question of when and how to give developing countries greater say in Bank management and operation, Sen. Kerry’s views were broadly in line with those of the Zedillo Commission, namely that it is long overdue for European countries to relinquish some board seats to make space for emerging economies:
Comment »November 24, 2009Cash for Poor Countries, or Another Round of Subprime Lending?Posted by Todd Moss in Capitol Flows/Financial Crisis, Debt Relief, International Financial Institutions, International Monetary Fund Tags: African Development Bank, IMF, Subprime Lending, World BankThis is a joint post with Benjamin Leo. A special new lending facility was announced in July 2009 with the objective of providing up to $17 billion in new loans through 2014 and, to entice cash-strapped borrowers, the lender is waiving interest payments for the first two years. This may sound like dangerous new short-term teaser offers for sub-prime borrowers. But this isn’t coming from Countrywide Financial. It actually is a new IMF facility for low-income countries, including some of heavily indebted poor countries (HIPCs) who are just barely coming out of the last debt crisis. The stated objectives of the new IMF facility are laudable: to offset the effects of the global economic crisis by boosting international reserves and supporting adjustment policies. And yes, the overall terms are more concessional than past IMF loans. Nonetheless, the net impact on national debt levels may be significant. And it was just four years ago that the IMF committed to cancel roughly $6 billion in bad loans to many of these very same countries. Comment »November 10, 2009World Bank Governance: Let’s Get Real on Reform and Global Public Goods!Posted by Nancy Birdsall in Global Development, The Future of the World Bank, World Bank, World Bank Clean Technology Fund Tags: World Bank, Zedillo, Zedillo CommissionThe central message in last week’s CGD forum featuring former Mexican President Ernesto Zedillo on World Bank governance reform was “let’s get real.” From whom and from where will come any impetus to take up the Zedillo Commission’s good ideas? Answer: G-20, with the United States in the lead. As I said at the forum, one reform should be relatively easy politically. The G-20 should agree to split voting power at the International Bank for Reconstruction and Development (the wing of the bank that lends to middle-income countries) evenly between developed and developing countries. This shouldn’t be a big deal: it’s already the case at the Inter-American Development Bank and in the World Bank’s own Climate Investment Funds—the multibillion dollar Clean Technology Fund included. The G-20 members should put this on the agenda of the spring 2010 World Bank meeting. Other simple steps I urged include agreeing to scrap the unwritten rule that the World Bank president is necessarily an American; and establishing separate boards for the IBRD and the International Development Association (IDA), the bank wing that lends on highly concessional terms to the world’s poorest countries. 5 Comments »October 29, 2009Zedillo Commission Offers G-20 a Blueprint for Fixing the World Bank (But will Zoellick be Gorbachev or Brezhnev?)Posted by Lawrence MacDonald in Global Development, International Financial Institutions, World Bank Tags: Climate Change, Ernesto Zedillo, Governance, World Bank
Zoellick, a U.S. appointee, welcomed the report and said it would be “especially relevant as we undertake important institutional changes.” But he expressed doubts about recommendations for changes in the size and structure of the board, while side-stepping a recommendation that the next bank president be chosen without regard to nationality. Read More… 11 Comments »September 28, 2009Mismatch between Newly Inclusive G-20 and Limited Changes at the IMF and World BankPosted by Nancy Birdsall in Global Development, International Financial Institutions Tags: G20, G8, IMF, World BankThe big headline from Pittsburgh was the G-20 officially becoming the recognized grouping on “global economic issues”, eclipsing forever the nearly four-decade role of the G-7/8. Presumably that was the quid pro quo for three steps by China: (1) its signing on to the promise in the communique to support for increasing domestic consumption at home to deal with the global imbalance problem; (2) keeping alive that China will find a way to help fill the unfilled gap in the $750 billion to be made available by the G-20 countries to the IMF’s short-term resources; and most important (3) the 5 percent shift in voting power at the IMF to underrepresented countries, which means mostly China. Read More… 3 Comments »September 10, 2009Birdsall Urges Pittsburgh G-20 Summit to Prepare for Next Global CrisisPosted by Lawrence MacDonald in Capitol Flows/Financial Crisis, Climate Change, Environment, Global Development, International Financial Institutions, World Bank Tags: G20, IMF, Poverty, UN, World Bank
1 Comment »August 19, 2009On Current Path, IFC Is Set to Become Bigger than the World Bank in Five YearsPosted by Vijaya Ramachandran in International Financial Institutions Tags: World BankThis blog entry also appeared on the Huffington Post. Private capital flows to emerging markets have been badly hit by the recession. But the International Finance Corporation — the private sector arm of the World Bank Group — has managed to provide financing for private sector projects in the amount of $14.5 billion, including $4.0 billion mobilized through syndications and other initiatives. According to its annual results released a couple of weeks ago, IFC invested in 447 projects, of which half were in IDA countries. IFC reported income of $299 million for the fiscal year ended June 30, 2009. This is less than the $16.2 billion of financing provided in FY08 but is still a very large amount. And despite the recession, IFC’s net income for the fourth quarter of FY09 was $384 million versus $271 million for the same period last year. Read More… Comment »August 7, 2009Zoellick Goes to AfricaPosted by Vijaya Ramachandran in Climate Change, Global Development Tags: World BankThis blog entry was also published on the Huffington Post. The World Bank has announced that its president, Robert B. Zoellick, will travel to three African countries next week. President Zoellick is urging investors to take advantage of investment opportunities in the region with regard to energy and transport, among other things. His message cannot come at a better time. Across Africa, a majority of businesses surveyed cite inadequate power supply as a major or severe constraint. Outages are not just frequent but unpredictable and long, sometimes stretching through the entire work day. Businesses in many countries suffer outages on more than half the working days in the year. Comparable data for China show that the burden of power outages for businesses there is far smaller. Read More… Comment »July 27, 2009Development is Key to Climate Change Resilience, Wheeler says in Congressional TestimonyPosted by Kaci Farrell in Climate Change, Global Development Tags: Clean Technology Fund, Climate Change, On the Hill, World Bank Congress should focus U.S. foreign assistance on human and economic development to buttress vulnerable societies against the inevitable impacts of climate change, CGD senior fellow David Wheeler told members of the House Foreign Affairs Subcommittee on Asia, the Pacific and the Global Environment at a congressional hearing last week. 2 Comments »July 6, 2009Bob McNamara Should Also Be Remembered as Transformative President of the World BankPosted by Nancy Birdsall in Global Development Tags: Bob McNamara, Center for Global Development, World BankPredictably and perhaps appropriately, the flood of remembrances of Robert McNamara is focusing on his role as the architect of the Vietnam War. Yet McNamara was also a transformative president of the World Bank, shaping both that institution and the larger development enterprise in ways that are still felt today. McNamara served for 13 years as World Bank president, almost twice the seven years he previously spent as the U.S. defense secretary (both terms set records for length that have yet to be exceeded). Read More… 1 Comment »June 15, 2009Birdsall Tells Worried House Subcommittee Why U.S. Support to IMF Makes SensePosted by Sarah Jane Staats in Capitol Flows/Financial Crisis, Global Development Tags: IMF Gold, Nancy Birdsall, On the Hill, Security and Development, World BankIn testimony before the House Foreign Affairs Subcommittee on Terrorism, Nonproliferation and Trade last week, CGD president Nancy Birdsall argued that support for the G-20 commitments to increase lending resources at the IMF is a critical part of ensuring U.S. recovery from the economic crisis and global prosperity and security. She was, however, confronted with a host of concerns about whether multilateral lending would go to governments like Iran, Sudan, and Syria, and with one member of Congress’s view that he “is a citizen of the United States, not the world.” The hearing cast a broad net: “Foreign Policy Implications of U.S. Efforts to Address the International Financial Crisis: TARP, TALF and the G20 Plan.” Other witnesses included Kevin Kearns, president of the U.S. Business and Industry Council; Roger Robinson Jr., president and CEO of Conflict Securities Advisory Group; Damon Silvers, associate general counsel at the American Federation of Labor and Congress of Industrial Organizations; and Terry Miller, director of the Center for International Trade and Economics at the Heritage Foundation. Birdsall’s testimony focused on the G-20 plan and its implications for emerging and developing economies, as well as for the United States. As in previous testimony, Birdsall said that today’s global challenges—disease, human and food insecurity, climate change, and financial crises—do not respect borders; they threaten security globally and at home.
Birdsall also referred to a statement that Tim Adams, former Under Secretary of Treasury for International Affairs, made when they testified before the House Financial Services Subcommittee on International Monetary Policy and Trade last month. Adams said,
Birdsall reminded the subcommittee that many of the recent recipients of International Monetary Fund (IMF) support (e.g. Mexico, Colombia, Poland, and Pakistan) are crucial players in the success or failure of our foreign policy and national security objectives. Birdsall also argued that in addition to the national security and foreign policy implications of the G-20 plan, U.S. recovery from the economic crisis depends not only on the U.S. stimulus, but on sustaining demand abroad, including in emerging and developing-country markets. She explained to the subcommittee that in economic terms, emerging-market and developing economies have driven much of recent world growth:
Birdsall urged members of the subcommittee to support the G-20 commitments currently moving through Congress, and in particular the proposed increase in lending resources for the IMF that have been attached to the war supplemental, but not yet voted on. Congress, however, remains strongly divided over the IMF proposals. The witnesses at this particular hearing, including Birdsall, encountered the type of disdain normally reserved for administration officials defending their own policies, not private guests invited to provide expert opinion on the matters at hand. The range of issues—TARP, TALF, and G-20—gave the members a virtual grab-bag for political grandstanding. My sense is that several members of this particular subcommittee were grumpier than usual because they feel that President Obama’s G-20 commitments bypass Congress’s policymaking and oversight role. It is true that the House really hasn’t had a chance for substantive floor or committee debate on the issues and that this subcommittee lacks direct jurisdiction (or control) over the IMF or World Bank issues. And in the absence of strong outreach and education on the complexities of the IMF and G-20 proposals, the administration’s gamble of attaching the IMF funding to the war supplemental may be backfiring (see this article in the Financial Times). The unfortunate result, however, is that many members of Congress are taking aim at the G-20, and multilateral engagement more broadly, rather than criticizing a flawed process. Bruised egos and flawed processes aside, there are several misconceptions expressed at the hearing that merit response.
More troubling is the refrain of Rep. Donald Manzullo (R-IL) who told the witnesses that he is “a citizen of the United States and not of the world” (apparently a phrase used by Newt Gingrich) and criticized the G-20 communiqué for saying that prosperity is indivisible. Manzullo said “the United States wants to be profitable” and “apparently everything we have to do in this world is to make sure that every third world country and every country has the same prosperity that we do.” Absent from his statements was a recognition, as many of the witnesses tried to convey, that what happens in the rest of the world matters for our own economy and our safety (not to mention the subcommittee’s issues on trade, nonproliferation and terrorism, or some of the largest employers in Manzullo’s district like Hamilton Sundstrand and Ingersoll Machine Tools that happen to be export-dependent manufacturers).
There are strong and compelling cases to be made on these issues, and it’s unfortunate that they are suffering under the weight of bailout fatigue, a panoply of other political hot-button issues, and a risky (but understandable) gamble from the administration on process with Congress. Here’s hoping the Obama administration and others can continue to work with members of Congress on explaining not only the IMF financing mechanisms to dispel concerns over an “IMF bailout,” but also continue to make the case that a more effective, legitimate, and better-resourced IMF is important for the United States’ own recovery from the economic crisis as well as national (and global) security, and that it is not the only mechanism that the United States can and should be using to help emerging and developing countries cope with the current crisis. 1 Comment »June 8, 2009President Lula to Head the World Bank? Process Matters, TooPosted by Nancy Birdsall in Global Development, International Financial Institutions Tags: Brazil, BRIC, Lula da Silva, World BankLast week the Guardian reported that the Obama Administration has approached President Luiz Inácio Lula da Silva of Brazil about becoming the next President of the World Bank. Seems unlikely to me – for one thing it’s early, since Robert Zoellick’s term lasts another three years, and the Administration has many other fish it is frying right now. Still it’s a welcome rumor, since it signals a willingness to imagine the World Bank having as its president a non-American – and one whose primary experience is in fighting poverty rather than primarily in finance. The Guardian cited a report in the respected Brazilian business weekly magazine Exame, and also noted that our friends at Foreign Policy magazine recently reported that the Obama administration was considering either Lula or Manmohan Singh, the prime minister of India, to head the World Bank. Read More… Comment »April 21, 2009Nathalie’s Story: Saving the Mountain Gorillas, and the PlanetPosted by David Wheeler in Climate Change, Global Development Tags: Forest Monitoring for Action (FORMA), World Bank
Comment »April 16, 2009Liberia Cuts its Debt with $1.2 Billion Buy-Back at 97 Percent DiscountPosted by Steve Radelet in Debt Relief, Economic Growth, Global Development, International Financial Institutions, Regions Tags: Ellen Johnson Sirleaf, Liberia, World Bank
6 Comments »April 3, 2009G-20 to World Bank: Start Carbon Accounting. G-20 to Rich Countries: Pay the BillPosted by David Wheeler in Climate Change, Global Development Tags: Carbon Accounting, Clean Technology Fund, G20, World BankYesterday, the G20 leaders released a statement that commits the World Bank and the other MDB’s to financing low-carbon growth:
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Last week, the World Bank released the long-awaited 
CGD president Nancy Birdsall urged the United States to exercise leadership at the upcoming G20 Summit in Pittsburgh in a 
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