Latest Developments, January 19

In the latest news and analysis…

Politics of inequality
Oxfam’s Caroline Pearce writes about the NGO’s new report that suggests inequality is on the rise in the majority of G20 countries.
“Crucially, what the report does not find is any link between particular stages of development and levels of or changes in inequality, casting doubt on those who argue that inequality is an inevitable stage along the way to development. Rather, inequality is a matter of political choices, and now the onus is on the G20 to make the right ones. According to new data from the new Standardized World Income Inequality Database, just four G20 countries (Korea, Brazil, Mexico and Argentina) have reduced income inequality in the last 20 years (see chart), and some with only modest levels of growth. Even these are not unambiguous success stories: in three, initial inequality was so high that decades’ more progress would still be necessary to bring them to levels seen in, for example, Pakistan, let alone in a country like Sweden. The exception is Korea, which grew to high-income status while reducing already comparatively low levels of income inequality. The others, along with the rest of the G20 club, face serious challenges in living up to G20 promises about ‘inclusive growth’.”

Millennium Consumption Goals
The UK Youth Climate Coalition’s Casper ter Kuile wonders how the world’s power brokers, who are about to hold their annual get-together in Davos, will respond to the new inequality data.
“The data also reveals that unlike the G20, in most low-income countries, inequality is falling, and levels of inequality are converging towards those of the G20. Perhaps time to revisit that idea of Millennium Consumption Goals? Or set up The Spirit Level reading groups in the Swiss mountains?”

Hedge fund human rights
The Independent reports hedge funds holding large amounts of Greek debt are going to try to protect their finances via the European Court of Human Rights.
“The funds have baulked at the idea of negotiating a settlement with the indebted country. Now, in a move likely to anger millions of Greeks facing austerity measures, fund managers are considering a fight against what they believe would be a violation of human rights law, arguing that their rights to property would be infringed by a write-down of Greek debt.”

Aboriginal rights
The Globe and Mail reports a prominent First Nations leader is calling for constitutional clarification on the rights of Canada’s indigenous people in the wake of the recent Attawapiskat crisis that drew attention to water and housing issues in Aboriginal communities.
“Many first nations leaders say the key to resolving all of these matters is an equitable sharing of resource rights, not just on reserves, but across all of their traditional lands. And, for the most part, the provinces and territories have control over those resources, whether it is diamonds in Ontario, oil in Alberta or minerals in Manitoba.”

Economics of place
On the heels of the US government’s announcement that Haitians will now be eligible to apply for temporary H-2 work visas, the Center for Global Development’s Michael Clemens writes about his first encounter with the economic significance of one’s place of birth.
“My interest in labor mobility as a poverty reduction tool dates to my boyhood, when I spent a summer in Mexico. I was astonished to discover that the man who fixed our toilet in Mexico City earned just a small fraction of what a man doing an identical job in the United States would earn. How could that be? How could location matter so much more than talent, effort, or character?”

Credit inequality
PIMCO’s Mohamed El-Erian argues the world economy has “a nasty plumbing problem” which is leading to dangerous inequality in access to credit.
“From every angle, the extremity of this state of affairs – in which those with access to credit do not need it, and those who do cannot get it – is highly problematic. If left unattended, it leads to a gradual, and then accelerated, renewed deleveraging of the economic system, with the highest first-round costs – a longer unemployment and growth crisis – borne disproportionately by those least able to suffer them. In the next round, as the system slowly implodes, even those with healthy balance sheets would be impacted, accelerating their disengagement from a deleveraging world economy.
All of this slows social mobility, tears already-stretched safety nets, worsens inequality, and accentuates genuine concerns about the functioning and sustainability of today’s global economic system.”

Responsible capitalism
Ekklesia’s Jonathan Bartley argues the changes to the economic system being advocated by political leaders fall well short of the “fundamental” reforms that are needed.
“Responsible capitalism is an oxymoron akin to ‘well-mannered war’ or ‘friendly famine’. But to begin to acknowledge that, the values of the system itself must be questioned not just the ethical or regulatory framework in which it operates.”

Horizontal accountability
¥OURWORLD’s Reinier van Hoffen offers his thoughts on how to improve democracy, using as his starting point a recent Beyond Aid article that argued finding serious solutions to global problems such as climate change and world hunger will require a system of democratic governance that transcends states.
“However, he also acknowledges that such a centralization of power will have some repercussions and challenges that he does not dwell on in his article. I want to take it from there and while agreeing with his analysis about the state in its current shape, I have a sense that the solutions are to be found in the opposite direction and not necessarily require a replacement of the political representation model that underpins the state. It rather requires a transformation of it, renewing the social contract it requires to function properly. Firstly the focus should not be on the power structure but rather on the power base. Secondly, the means by which a new form of governance has to come into existence is by a transformation of the current governance structure.”

Latest Developments, October 19

In the latest news and analysis…

The truth about tax agreements
The Tax Justice Network writes that the Cayman News Service “has blown the lid on one of the biggest lies of recent years about tax havens/secrecy jurisdiction” that tax information exchange agreements (TIEAs) bring transparency to tax havens.
“On the face of them TIEAs appeared “fearsome” with one tax authority forcing another to disclose information on foreign nationals, [Mourant Ozannes’s Robert] Shepherd noted, but actually there was a good deal that trust professionals could do to protect beneficiaries and honour obligations of confidentiality, citing a number of hoops that tax authorities needed to go through to extract information. For example, the onshore authority must initially identify the tax payer in question about whom they require the information and equally they must have exhausted all local powers to gain information first.

Ziva Robertson from Withers said that there was a big difference between the political will to be seen to be creating TIEAs and the actual economic effect of their implementation.”

Inclusive growth and inequality
The International Monetary Fund’s new economic outlook for Sub-Saharan Africa predicts continued high growth for the region and disputes the apparent disconnect between growth and poverty reduction, while conceding that inequality is rising.
“First, for the region as a whole, the link between poverty and growth is generally weak. But this relationship is considerably stronger for the region’s high-growth countries.
Second, there is evidence of growth having been fairly inclusive in the region’s high-growth countries. We find, for example, that the lowest quartile in three out of the four case studies (Ghana, Tanzania, Uganda) has enjoyed fairly high increases in consumption. But there are signs that in many of these countries higher-income households have enjoyed still higher growth in consumption. This implies some increase in inequality, broadly in line with patterns observed in a number of high-growth Asian countries.”

Malaria vaccine agnosticism
New York University’s Karen Grépin urges caution over the news of a possible malaria vaccine that set off so much excitement earlier this week.
“But as a public health professional, I just don’t think that enough new evidence has been presented for us to think that we found a “game changer” when it comes to malaria prevention and control. The real question, at least in my mind, that is relevant in this discussion is: does this vaccine provide any real lasting immunological protection in the target populations? The interim study was not set up to address this question. The actual full study was but, and I am not entirely sure why, the interim results were published anyway years before the real results of this study are going to be known. I am not the only one who questions the merits of this approach, in the accompanying editorial in the [New England Journal of Medicine] by Nicolas Witte, a true expert in this area, said “there does not seem to be a clear scientific reason why this trial has been reported with less than half the efficacy results available”. But of course we all know it is not always just science that drives most scientific discussions.”

GM food politics
IRIN reports on the ongoing debate over genetically modified food in Africa which finds itself in the middle of an ideological and commercial rivalry between the US and EU.
“A deep mistrust also prevails in Africa, given the fact that two power blocs – the EU and the USA remain divided over GM.
Only one strain of GM maize, Monsanto 810, and one modified potato, have been approved in the EU, and most countries grow neither commercially. Spain accounts for about 80 percent of GMO grown in the EU in terms of land under cultivation, but Austria, France, Greece, Hungary, Germany and Luxembourg have banned all GMO cultivation.
On the other hand, in the USA, where 70 percent of maize is GM, GM food need not be labelled. Some food experts say both the EU and the USA have vested interests in promoting their respective views in Africa, which is seen as a potential market and supplier of either GM or non-GM products.”

The Overseas Development Institute’s Jonathan Glennie questions the common claim that poor countries will suffer too unless Europe recovers quickly from its current economic crisis.
“But growth in some parts of the world and not others is just as plausible as growth all over the place. Plenty of economists view the rapid growth of Europe and the US in the past two centuries as a cause of impoverishment in other countries, rather than an unrelated consequence of sound economic management and hard work.
While income per capita has grown rapidly in the rich world for the past three decades, from about $14,000 (constant 2000) to about $26,000, it declined in sub-Saharan Africa (from $571 to $507) and stagnated in all low-income countries (at around $240) until things started to get marginally better in the first decade of this century. It is simply not the case that western prosperity is necessarily associated with prosperity elsewhere.”

Commodity bonds
Harvard University’s Jeffrey Frankel argues poor countries that depend heavily on resource exports are vulnerable to market volatility and could benefit from issuing commodity bonds rather than borrowing in dollars.
“The advantage of such bonds is that in the event of a decline in the world price of the underlying commodity, the debt-to-export ratio need not rise. The cost of debt service adjusts automatically, without the severe disruption that results from loss of confidence, crisis, debt restructuring, and so forth.”

Millennium Villages Project transparency
The Center for Global Development’s Michael Clemens and the World Bank’s Gabriel Demombynes argue that the Millennium Villages Project uses evaluation methods that make it impossible to judge whether or not it is having the desired (and claimed) results.
“A critical element of persuasive impact evaluation is that it is independent and transparent. An independent and transparent analysis of its data could make the MVP evaluation more persuasive. The MVP has told us, however, that it will only consider making data available to outside researchers after it has completed publishing all of its work on data collected through 2016. This suggests the MVP will not share any of the data it has collected until roughly 2020, 15 years after the project began.”

Apples to apples
Oxfam’s Duncan Green has posted a World Bank list of the world’s 100 largest economies, which includes countries, companies and cities, thereby prompting a number of apples-to-oranges comments and a subsequent update to the original post.
“Fascinating comment from [the Bretton Woods Project’s] Peter Chowla, pointing out that a better comparison is between government tax revenue and corporate revenue, and when he crunched the numbers (he didn’t include cities), he got only 29 countries in the top 100 – the rest were corporates.”