Inter Press Service » Financial Crisis http://www.ipsnews.net News and Views from the Global South Sun, 04 Dec 2016 16:08:45 +0000 en-US hourly 1 http://wordpress.org/?v=4.1.13 Ensuring Shared Progress for Sustainable Development and Peacehttp://www.ipsnews.net/2016/11/ensuring-shared-progress-for-sustainable-development-and-peace/?utm_source=rss&utm_medium=rss&utm_campaign=ensuring-shared-progress-for-sustainable-development-and-peace http://www.ipsnews.net/2016/11/ensuring-shared-progress-for-sustainable-development-and-peace/#comments Thu, 24 Nov 2016 23:15:50 +0000 Jomo Kwame Sundaram http://www.ipsnews.net/?p=147948 Jomo Kwame Sundaram was the Assistant Secretary-General for Economic and Social Development in the United Nations system during 2005-2015, and received the 2007 Wassily Leontief Prize for Advancing the Frontiers of Economic Thought. ]]> Concern about equality has grown as every major economic, social and political crisis has been preceded by rising inequality. Credit: IPS

Concern about equality has grown as every major economic, social and political crisis has been preceded by rising inequality. Credit: IPS

By Jomo Kwame Sundaram
KUALA LUMPUR, Malaysia, Nov 24 2016 (IPS)

International inequality has grown over recent centuries, especially the last two. Before the Industrial Revolution, between-country inequalities were small, while within-country inequalities accounted for most of overall global income inequality. Now, inter-country income inequalities account for about two-thirds of world inequality with intra-country inequality accounting for a third.

Concern about inequality has grown as every major economic, social and political crisis has been preceded by rising inequality. World War II was no exception. Thus, on 10th May 1944, the International Labour Congress adopted the historic Philadelphia Declaration which asserted that “lasting peace can be established only if it is based on social justice”.

Similar concerns were on the agenda of the Bretton Woods Conference two months later. The conference sought to create conditions for enduring peace by ensuring post-war reconstruction and post-colonial development through sustained growth, full employment and declining inequality. Bretton Woods created the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD) with this mandate foremost.

The IMF would support countries, not only in overcoming balance of payments difficulties, but also “to direct economic and financial policies toward the objective of fostering orderly economic growth with reasonable price stability, with due regard to its circumstances”. The IBRD, later better known as the World Bank, was set up to support long-term investment and development.

The world then saw almost three decades of shared prosperity as labour’s share of output increased. This Golden Age also saw greater investment in health, education and public services, including social welfare. This post-war consensus endured for over a quarter century before breaking down in the 1970s, only to be replaced in the 1980s by its anti-thesis, the Washington Consensus.

Counter-Revolution
Unfortunately, each era, no matter how successful, sows the seeds of its own demise. Three major new economic ideas helped undermine the post-war consensus underlying the Golden Age:
• the higher propensity to save (and invest) of profit makers, compared to wage earners, became the pretext for the tolerance, if not promotion of inequality in favour of profits, ostensibly to accelerate investment and growth;
• progressive redistribution was deemed bad for growth, as it not only lowers savings and investment rates, but also requires significant fiscal resources, raising tax rates and diverting fiscal resources from investments desired by investors;
• the Kuznets’ hypothesis suggested the inevitability of inequality rising with growth (before eventually declining).

From the early 1980s, the “Washington Consensus” – the policy consensus on economic development shared by the American establishment and the Bretton Woods institutions located in the US capital city – emerged as the banner for the counter-revolutions against development economics, Keynesian economics and progressively redistributive state interventions.

A relentless push for deregulation, privatization and economic globalization followed. Such measures were supposed to boost growth, which would eventually trickle down, thus reducing poverty. Hence, there was no need to worry about inequality.

Macroeconomic policies became narrowly focused on balancing the annual budget and attaining low single digit inflation – instead of the previous emphasis on sustained growth and full employment with reasonable price stability.

But these ‘neo-liberal’ measures largely failed to deliver sustained growth. Instead, financial and banking crises have become more frequent, with more devastating consequences, exacerbated by greater tolerance for inequality and destitution.

The new global priorities at the end of the Second World War remain relevant today. Research has disproved the previously widespread presumption that progressive redistribution retards growth. Even recent IMF and World Bank research acknowledges that inequality and social exclusion are detrimental to growth. After more than three decades of regression, we have to recommit ourselves to the more egalitarian ethos of the Philadelphia Declaration and the Bretton Woods conference.

Marshall Plan
At the beginning of the Cold War against the Soviet bloc, US Secretary of State General George Marshall announced a reconstruction plan for war-torn Europe. Known as the Marshall Plan, the generous infusion of US aid and acceptance of national reconstruction and development policies ensured the rebirth of modern Western Europe. For many Europeans, this is still seen as America’s finest hour.

In the decade that followed, the Marshall Plan became what is probably the most successful economic development assistance project in history. Similarly appropriate economic development policies were introduced in Japan, Taiwan and South Korea following the Korean War and establishment of the People’s Republic of China. Thus, the Marshall Plan created a cordon sanitaire to contain the spread of communism as the Cold War began.

The Marshall Plan experience offers valuable lessons for today. Europe was rebuilt with policies that included economic interventions such as high duties, quotas and other non-tariff barriers. Free trade was delayed until after international competitiveness had been achieved.

Marshall’s lecture offers other relevant lessons. Unlike today’s conventional wisdom, he argued that viable institutions would only emerge from economic progress, not the other way around. Marshall also emphasized that aid should be truly developmental, not piecemeal or palliative. The productive capacities and capabilities of developing nations have to be nurtured. Marshall knew that inclusive and shared economic progress is the only way to create lasting peace.

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Inequality and Its Discontentshttp://www.ipsnews.net/2016/11/inequality-and-its-discontents/?utm_source=rss&utm_medium=rss&utm_campaign=inequality-and-its-discontents http://www.ipsnews.net/2016/11/inequality-and-its-discontents/#comments Thu, 17 Nov 2016 16:08:27 +0000 Jomo Kwame Sundaram http://www.ipsnews.net/?p=147831 Jomo Kwame Sundaram was an Assistant Secretary-General for Economic and Social Development in the United Nations system during 2005-2015, and received the 2007 Wassily Leontief Prize for Advancing the Frontiers of Economic Thought. ]]> Although class has not declined in significance, by shaping the institutional context, political geography has become a key determinant of income. Credit: IPS

Although class has not declined in significance, by shaping the institutional context, political geography has become a key determinant of income. Credit: IPS

By Jomo Kwame Sundaram
KUALA LUMPUR, Malaysia, Nov 17 2016 (IPS)

Global income inequality among different regions began to increase about five centuries ago, before accelerating about two centuries ago, according to the great economic historian Angus Maddison. After the brief reversal during the ‘Golden Age’ quarter century after the Second World War, higher commodity prices in the decade until 2014, despite protracted slowdowns in most rich countries following the 2008 financial crisis, reduced international disparities between North and South.

Before the Industrial Revolution, inequalities among regions were relatively small, while within-‘country’ inequalities accounted for most of overall global income inequality. But inter-country income inequalities now account for about two-thirds of world inequality, with intra-country inequality accounting for a third.

Short 20th century
National income distribution trends do not necessarily follow those for global income inequality. National level inequality in 22 developed economies grew up to the second decade of the 20th century, with inequality declining thereafter until the 1970s. The trend then reversed again with the market fundamentalist counter-revolution and changing role of the state in recent decades.

The general trend for these countries is quite clear, but does not hold for all other countries. For example, many developing countries fared badly in the 1920s and 1930s as primary commodity prices fell, especially during the Great Depression.

The late historian Eric Hobsbawm famously described the period from the Bolshevik Revolution in 1917 to the collapse of the Soviet Union in 1991, as the ‘short twentieth century’. Other pundits identify the end of the First World War, or the creation of the ILO in 1919, as an alternative starting point for Karl Polanyi’s ‘second movement’.

For many, the ascendance of Margaret Thatcher and Ronald Reagan led the ‘neo-liberal’ counter-revolution against the post-World War Two ‘Golden Age’ marked by decolonization, Keynesianism, the welfare state, agrarian reforms and rapid employment expansion.

Washington Consensus
The ‘Washington Consensus’ from the early 1980s – shared by different branches of the US government and the Bretton Woods institutions located in the American capital – brought an end to earlier policy interventions associated with Keynesian and development economics.

The breakdown of the international monetary system and other developments of the 1970s led to ‘stagflation’ – economic stagnation despite high inflation — in much of the West while growth accelerated in other regions, notably East Asia. The US Fed raised interest rates sharply from 1980, inducing an international recession, and eventually, fiscal and sovereign debt crises in some developing countries and ‘communist’ economies. High debt and the Volcker-induced interest rate spike forced many governments to pursue macro-financial stabilization policies to defeat inflation besides microeconomic structural adjustment policies.

But the so-called Washington Consensus was not really about market liberalization, as little was done to check, let alone undermine private oligopolistic and oligopsonistic trends. Instead, despite the market rhetoric, neo-liberalism is really about strengthening property rights and capturing rents.

This involved a shift away from public authority and coordination, redefining the role of the state and enhancing private power. Good governance in the new order means upholding the rule of law, especially strengthening property rights and related privileges and entitlements. To secure political support, it appeals to all as consumers, and to all asset-owners, including petty ones and rentiers seeking to maximize net income flows by minimizing rent-seeking costs. Not surprisingly then, recent trends in the functional distribution of income reflect a declining share for labour despite rising labour productivity.

Labour solidarity?
This disconnect between labour productivity and income is not unfamiliar to developing economies with high unemployment and underemployment. In such labour markets, characterized by ‘unlimited supplies of labour’ associated with economics laureate Arthur Lewis, productivity gains did not translate into higher wages, or a ‘producer surplus’, but instead lowered prices, contributing to the ‘consumer surplus’. This contrasts sharply with strong labour market institutions where wages rise with productivity.

Growing wealth concentration in recent decades reflects enhanced rentier power in most economic sectors and activities as well as the ascendance and globalization of finance in recent decades. Rentier income flows from legally sanctioned monopolies associated with intellectual property rights have grown greatly in recent years, increasingly capturing productivity gains at the expense of labour.

Although class has not declined in significance, by shaping the institutional context, political geography has become a key determinant of income. This not only helps explain the continuing strong economic incentive for international migration, but also the growing barriers to such movement, often supported by those who feel threatened about losing their privileges.

Not surprisingly, international labour solidarity has become much more difficult, while foreign advocacy of labour rights or the environment is treated with suspicion as self-interested, or even as protection by another name.

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A Cuban Economy Facing Grim Forecasts Awaits Impact of Trumphttp://www.ipsnews.net/2016/11/a-cuban-economy-facing-grim-forecasts-awaits-impact-of-trump/?utm_source=rss&utm_medium=rss&utm_campaign=a-cuban-economy-facing-grim-forecasts-awaits-impact-of-trump http://www.ipsnews.net/2016/11/a-cuban-economy-facing-grim-forecasts-awaits-impact-of-trump/#comments Tue, 15 Nov 2016 22:54:26 +0000 Ivet Gonzalez http://www.ipsnews.net/?p=147782 Students in Havana participate in an October protest, part of a campaign to fight the U.S. embargo against Cuba. Credit: Jorge Luis Baños/IPS

Students in Havana participate in an October protest, part of a campaign to fight the U.S. embargo against Cuba. Credit: Jorge Luis Baños/IPS

By Ivet González
HAVANA, Nov 15 2016 (IPS)

Cuba’s economic difficulties will be aggravated by the uncertainty regarding how U.S. president-elect Donald Trump will deal with the thaw inherited from President Barack Obama.

Experts consulted by IPS preferred not to speculate. But they did recommend that the Cuban authorities adopt all measures within their reach to cushion the blow and reinforce what has been achieved on the economic front with the outgoing U.S. administration.

“In any case, Cuba will have to continue moving forward with its economic reforms and try to resolve whatever has clearly not functioned for decades and is within our reach to fix,” said Cuban economist Pável Vidal, a professor at the Javeriana University in Cali, Colombia.“As a businessman, he could be inclined towards pragmatic policies that favour business interests. He doesn’t have a personal history against Cuba, and as a Republican he doesn’t have a complex about appearing weak. Since he doesn’t have prior experience in public office, a large part of his decisions will be reached with the advisers who surround him.” – Ricardo Torres

Vidal is studying the economic reforms implemented since 2008 by the government of Raúl Castro, which has been facing major difficulties this year due to liquidity problems and oil shortages caused by the political and economic crisis in Venezuela, this country’s main trading partner and energy supplier.

In the first six months of this year, GDP grew just one percent, half of what was expected. And forecasts for the rest of 2016 are bleak, projecting a drop of one percent.

Further muddying the picture are the doubts with respect to the recently restored relations with the United States, now that Democratic candidate Hillary Clinton was defeated by her Republican rival in the Nov. 8 elections.

“With regard to Cuba, I don’t think (Trump) will roll back the important steps taken by the Obama administration to normalise relations between the two countries,” John Gronbeck-Tedesco, assistant professor of American Studies at Ramapo College in New Jersey, told IPS by email.

“But with a Republican-controlled Congress, it’s harder to know when the United States will fully commit to lifting the embargo and truly open up trade between the two countries,” said the academic, the author of the book “Cuba, the United States, and Cultures of the Transnational Left, 1930-1975”.

The U.S. embargo against Cuba, in place since 1962, consists of a complex web of laws that can only be fully repealed by Congress.

Cuba sees the embargo as the biggest obstacle it faces to development and a normalisation of ties with its giant neighbour to the north.

Since the start of the move towards reestablishing bilateral ties, in December 2014, Obama has taken measures to undermine the embargo and attempted to protect his efforts by means of Presidential Policy Directive 43 on the normalisation of relations between the United States and Cuba, issued on Oct. 14.

He even took an enormous symbolic step on Oct. 26, when for the first time in 25 years the United States abstained in the United Nations vote on the resolution that Cuba has presented annually since 1992, condemning the U.S. embargo, which it blames for 125.873 billion dollars in losses.

 Tourists enjoy the beach at the western Cuban resort town of Varadero. The number of U.S. tourists arriving jumped 80 percent in the first half of 2016, with respect to the same period in 2015. Credit: Jorge Luis Baños/IPS


Tourists enjoy the beach at the western Cuban resort town of Varadero. The number of U.S. tourists arriving jumped 80 percent in the first half of 2016, with respect to the same period in 2015. Credit: Jorge Luis Baños/IPS

Obama said his aim was to make the opening to Cuba “irreversible”. But just a week before the election, Trump said “We will cancel Obama’s one-sided Cuban deal, made by executive order, if we do not get the deal that we want and the deal that people living in Cuba and here deserve, including protecting religious and political freedom.”

But the business community and Cuban-Americans are largely in favour of the thaw, as analysts in both countries have been pointing out.

In Gronbeck-Tedesco’s view, “The United States will continue treating Cuba and Venezuela as separate political issues. And since Venezuela is still suffering from economic and political uncertainty, Trump’s plans would not appear to include an improvement in relations with Venezuela or help in rebuilding that country.”

In a reaction that observers like Vidal describe as “tardy”, Havana appears to be pushing for more foreign investment, especially in the energy industry, which is heavily dependent on the shrinking deliveries of Venezuelan crude.

“The tendency is for foreign investment in energy to pick up speed,” Juan Manuel Presa, an official at Cuba’s Ministry of Energy and Mines, told IPS. “There are a large number of projects in different stages of progress to use renewable sources, mainly wind and solar power.”

The engineer said the industry “is seeking a diversity of partners in a diversity of formulas: external financing of Cuban projects, companies that are made up 100 percent of foreign capital, and the new legal status of mixed – Cuban and foreign – companies.”

Cuba is still far from its goal of drawing 2. 5 billion dollars a year in foreign investment – the amount needed to put the economy on a steady footing. The 83 projects approved since a new law on foreign investment went into effect in 2014 have attracted just 1.3 billion dollars so far.

But to some extent, the thaw is easing the tense economic situation in this country.

Between 2.0 and 2.5 billion dollars in remittances from abroad flow into Cuba annually, mainly coming from the Cuban-American community, according to estimates by Cuban economist Juan Triana.

Only exports of medical services bring in more hard currency revenues, he said.

Another major source of hard currency is tourism. Cuba’s colonial cities and white sand beaches are experiencing an unprecedented tourism boom, with the number of visitors from the U.S. growing every month, despite the fact that they can only travel here under one of 12 approved categories, such as family visits, academic programs, professional research, journalistic or religious activities.

In the first half of this year, Cuba received 2,147,912 visitors from abroad, including 136,913 from the U.S. This latter number was 80 percent higher than the total for the first half of 2015, according to the national statistics office, ONEI.

In that period, tourism brought in more than 1.2 billion dollars, only counting public installations, not the growing private sector, which rents out rooms and runs taxis and restaurants.

Cuban economist Ricardo Torres showed IPS a novel analysis on the U.S. president-elect, who was widely criticised during the campaign for his racist, xenophobic and misogynistic remarks.

“There are three aspects (of Trump) that could benefit relations with Cuba,” the academic researcher said.

“As a businessman, he could be inclined towards pragmatic policies that favour business interests,” he said. “He doesn’t have a personal history against Cuba, and as a Republican he doesn’t have a complex about appearing weak. Since he doesn’t have prior experience in public office, a large part of his decisions will be reached with the advisers who surround him.”

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Privatization Cure Often Worse Than Maladyhttp://www.ipsnews.net/2016/11/privatization-cure-often-worse-than-malady/?utm_source=rss&utm_medium=rss&utm_campaign=privatization-cure-often-worse-than-malady http://www.ipsnews.net/2016/11/privatization-cure-often-worse-than-malady/#comments Thu, 03 Nov 2016 14:12:44 +0000 Jomo Kwame Sundaram and Anis Chowdhury http://www.ipsnews.net/?p=147610 Jomo Kwame Sundaram was a UN Assistant Secretary General for Economic Development. Anis Chowdhury is Visiting Fellow, Crawford School of Public Policy, Australian National University, and held various senior United Nations positions in New York and Bangkok. ]]> Privatization has not provided the miracle cure for the  problems (especially the inefficiencies) associated with the public sector. Credit: IPS

Privatization has not provided the miracle cure for the problems (especially the inefficiencies) associated with the public sector. Credit: IPS

By Jomo Kwame Sundaram and Anis Chowdhury
KUALA LUMPUR and SYDNEY, Nov 3 2016 (IPS)

Privatization of SOEs has been a cornerstone of the neo-liberal counterrevolution that swept the world from the 1980s following the economic crisis brought about by US Fed’s sharp hike in interest rates. Developing countries, seeking aid from the International Monetary Fund (IMF) and the World Bank, often had to commit to privatization as a condition for credit support.

The World Bank and the IMF then attributed developing countries’ inability to adjust to the external shocks of that time, inter alia, to their import-substituting industrial policy initiatives and the inefficiency of the state-owned enterprises (SOEs). Hence, their support came with conditions to undertake measures for ‘stabilization’ and ‘structural adjustment’.

Privatization was seen and advocated as an easy means to accelerate growth, improve efficiency and productivity, shrink the public sector and associated debt, as well as reduce governments’ financial and administrative responsibilities and activities. However, the privatization experiences of the last three and a half decades, especially for developing countries, have been anything but glorious.

Mixed experiences
Privatization has not provided the miracle cure for the problems (especially the inefficiencies) associated with the public sector. And the public interest has rarely been effectively served by private interests taking over public-sector activities. More recently, growing concern over adverse consequences of privatization has spawned research worldwide.

Privatization was supposed to free market forces and encourage competition in the economy, but the new owners have an interest in retaining the SOE’s ‘competitive advantages’, including monopoly positions. Hence, there has been widespread concern about: (i) formal and informal collusion, e.g. cartel-like agreements; (ii) collusion in bidding for procurement contracts and other such opportunities; and (iii) some interested parties enjoying special influence and privileged information.

Chairman of the Australian Competition and Consumer Commission (ACCC) Rod Sims, a strong supporter of privatization for three decades, recently confessed that “he is on the verge of becoming a privatisation opponent” (Sydney Morning Herald, 27 July 2016). According to him, selling public assets has created unregulated monopolies that hurt productivity and damage the economy.

Adverse consequences
As a matter of fact, both the IMF and World Bank were aware of such likely adverse impacts of privatization. For example, a 1999 IMF research paper acknowledged that privatization “can lead to job losses, wage cuts and higher prices for consumers”. Similarly, World Bank research on the experiences of Argentina, Bangladesh, Chile, Ghana, Malaysia, Mexico, Sri Lanka and Turkey in 1997 found large-scale employment losses when big SOEs were privatized.

Comparative data from the US, UK, Canada, Chile, Sweden, Russia, Poland, Ukraine, Bulgaria, China, Hong Kong, Malaysia, Philippines, South Korea, Sri Lanka and Bangladesh for 1999-2004 found that privatization disproportionately affected female workers. IMF and World Bank safety-net or compensation proposals were either too costly for the public exchequer or too administratively burdensome for many developing countries.

Privatization may postpone a fiscal crisis by temporarily reducing fiscal deficits, but the public-sector would lose income from profitable public-sector activities, and be left to finance and subsidize unprofitable ones. For example, Sydney Airport paid no tax in the first ten years after it was privatized even when it earned almost A$8 billion; instead, it received tax benefits of almost A$400 million!

No solution
Privatization in many developing and transition economies has primarily enriched a few with strong political connections who ‘captured’ profitable opportunities associated with privatization, while the public interest has been sacrificed to such powerful private business interests. This has, in turn, exacerbated problems of corruption, patronage, and other related problems.

In most cases, privatization did not solve the problem of governments’ fiscal deficits. Instead, governments lost vital revenue sources. In most cases, profitable SOEs were sold as prospective private owners were only interested in securing profits. Fiscal crises have often been exacerbated when new private owners used ‘creative accounting’ to avoid tax and secure tax credits. Thus, in most cases, privatization has been the problem, rarely the solution to the government’s fiscal crisis or SOE problems.

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Are Public Enterprises Necessarily Inefficient?http://www.ipsnews.net/2016/10/are-public-enterprises-necessarily-inefficient/?utm_source=rss&utm_medium=rss&utm_campaign=are-public-enterprises-necessarily-inefficient http://www.ipsnews.net/2016/10/are-public-enterprises-necessarily-inefficient/#comments Thu, 27 Oct 2016 14:22:57 +0000 Jomo Kwame Sundaram http://www.ipsnews.net/?p=147537 Jomo Kwame Sundaram was United Nations Assistant Secretary-General for Economic Development and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.]]> Improvements in SOE management must be required by the national political leadership and can be enabled by increased enterprise and administrative autonomy as well as new incentive systems. Credit: Mario Osava/IPS

Improvements in SOE management must be required by the national political leadership and can be enabled by increased enterprise and administrative autonomy as well as new incentive systems. Credit: Mario Osava/IPS

By Jomo Kwame Sundaram
KUALA LUMPUR, Malaysia, Oct 27 2016 (IPS)

From the 1980s, various studies purported to portray the public sector as a cesspool of abuse, inefficiency, incompetence and corruption. Books and articles with pejorative titles such as ‘vampire state’, ‘bureaucrats in business’ and so on thus provided the justification for privatization policies. Despite the caricature and exaggeration, there were always undoubted horror stories which could be cited as supposedly representative examples. But similarly, by way of contrast, other experiences show that SOEs can be run quite efficiently, even on commercial bases, confounding the dire predictions of the prophets of public sector doom.

SOE inefficiency

To be sure, unclear and contradictory objectives – e.g. to simultaneously maximize sales revenue, address disparities, generate employment, etc. – often meant ambiguous performance criteria, many open to abuse. Often, SOE failure on one criterion (e.g., cost efficiency) was justified on the grounds of fulfilling other objectives (e.g., employment generation). However, the ambiguity of objectives is not necessarily due to public or state ownership per se.

Problems of co-ordination among various government agencies and inter-departmental rivalries also played a role. Some consequences included ineffective monitoring, inadequate accountability, or alternatively, over-regulation. ‘Moral hazard’ has also been a problem as SOE management’s expected sustained financial support from the government, come what may attributed to weak fiscal discipline or ‘soft budget constraints’.

Often, SOE managements lacked adequate or relevant skills but were constrained from addressing them expeditiously. But privatization does not automatically solve the problem of lack of managerial skills. Similarly, privatization of SOEs which are natural monopolies (e.g. public utilities) will not solve problems of inefficiency due to the monopolistic or monopsonistic nature of the industry or market.

Can SOE inefficiency be improved?

Improvements in SOE management must be required by the national political leadership and can be enabled by increased enterprise and administrative autonomy as well as new incentive systems. Such changes do not require privatization as a prerequisite, but can be achieved by greater decentralization or devolution of administrative authority.

Many SOEs enjoyed monopoly or monopsony powers de jure or de facto, often providing cover for inefficiencies and other abuses. Hence, competition and enterprise reorganization – rather than mere changes in ownership status – are more likely to induce greater enterprise efficiency. Instead of presuming that privatization is the only solution, reformers should consider the variety of modes of enterprise reform, privatization, marketization and other measures as options for improving the public sector.

With such an approach, privatization becomes one among several options available to the government for dealing with the undoubted malaise of many public sectors. After all, there may well be instances where privatization offers the superior option (e.g., the Hungarian privatization of retail shops), but this should be the policy conclusion after serious consideration of all options available rather than the default option it has become in recent decades.

Options need consideration

Remember that many SOEs were set up precisely because the private sector was believed to be unable or unwilling to provide certain services or goods. Such arguments may still be relevant in some cases, but no longer relevant in other cases, and perhaps, never even true or relevant in yet other cases.

Many SOEs have undoubtedly proven to be problematic, often inefficient. However, privatization has not proved to be the universal panacea for the myriad problems of the public sector it was touted to be.

In many instances, the problem with an SOE is not due to ownership per se, but rather to the absence of explicit, feasible or achievable objectives, or even to the existence of too many, often contradictory goals. In other cases, the absence of managerial and organizational systems (e.g., flexibility, autonomy) and cultures supportive of such goals and objectives may be the key problem.

Privatization may facilitate the achievement of such organizational goals or objectives with the changes it may bring about in train, but this does not necessarily mean that privatization per se is responsible for the improvements. In such cases, managerial and organizational reforms may well achieve the same objectives and goals, or even do better, at a reduced cost, and thus prove to be the superior option.

However, the superior option cannot be presumed a priori, but should instead be the outcome of careful consideration of the roots of an organization’s malaise.

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Privatization the Problem, Rarely the Solutionhttp://www.ipsnews.net/2016/10/privatization-the-problem-rarely-the-solution/?utm_source=rss&utm_medium=rss&utm_campaign=privatization-the-problem-rarely-the-solution http://www.ipsnews.net/2016/10/privatization-the-problem-rarely-the-solution/#comments Thu, 20 Oct 2016 17:02:13 +0000 Jomo Kwame Sundaram http://www.ipsnews.net/?p=147445 Jomo Kwame Sundaram was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.]]>

Jomo Kwame Sundaram was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.

By Jomo Kwame Sundaram
KUALA LUMPUR, Malaysia, Oct 20 2016 (IPS)

Privatization has been one of the pillars of the counter-revolution against development economics and government activism from the 1980s. Many developing countries were forced to accept privatization as a condition for support from the World Bank while many other countries have embraced privatization, often on the pretext of fiscal and debt constraints.

Jomo Kwame Sundaram. Credit: FAO

Jomo Kwame Sundaram. Credit: FAO

Privatization generally refers to changing the status of a business, service or industry from state, government or public ownership to private control. It sometimes also refers to the use of private contractors to provide services previously delivered by the public sector.

Privatization can be strictly defined to include only cases of the sale of 100%, or at least a majority share of a public or state-owned enterprise (SOE), or its assets, to private shareholders. The definition of privatization in some contexts is so broad that it includes cases where private enterprises are awarded licences to participate in activities previously the exclusive preserve of the public sector.

Why the turn to privatization?
The balance of payments problems arising from oil shocks in the 1970s and the US Fed’s increase of the interest rate to well over 20% precipitated sovereign debt crises in Latin America and elsewhere from the early 1980s, forcing many developing countries to seek credit support from the International Monetary Fund (IMF) and the World Bank.

The World Bank and IMF’s ‘neo-liberal’ policy prescriptions involved liberalization, deregulation and privatization. Collectively, they later came to be known as the Washington Consensus to refer to the common position of three Washington DC based institutions – the US Treasury, the IMF and the World Bank.

Main arguments for privatization
Privatization was advocated as an easy means to:
1) reduce the ‘financial and administrative burden of the government’, particularly in undertaking and maintaining services and infrastructure;
2) ‘promote competition, improve efficiency and increase productivity’ in the delivery of public services;
3) ‘stimulate private entrepreneurship and investment’, and thus accelerate economic growth;
4) help reduce ‘the presence and size of the public sector, with its monopolistic tendencies and bureaucratic support’.

Public or consumer welfare
Since a significant portion of state-run activities are public monopolies, privatization will hand over such monopoly powers to private interests likely to use them to maximize profits. The privatization of public services tends to burden the public, especially if charges are raised for privatized services which may not improve with privatization.

Private interests are only interested in profitable or potentially profitable activities and enterprises. Thus, the government will be saddled with unprofitable and less profitable activities, reinforcing the impression of SOE inefficiencies. Consequently, privatization may worsen overall enterprise performance. ‘Value for money’ may go down, despite improvements used to justify higher user charges.

Privatization in many developing and transition economies has primarily enriched a few with strong political connections who ‘captured’ lucrative opportunities associated with privatization, while the public interest has been increasingly sacrificed to such powerful private business interests. This has, in turn, exacerbated problems of corruption, patronage and other related problems.

Adverse consequences
Some other adverse consequences of privatization include:
– The social and political implications of two types of services, i.e. one for those who can afford more costly, private – including privatized – services, and the other for those who cannot, and hence have to continue to rely on subsidized public services, e.g. medical services and education.
– The effects of minimal long-term investments by private owners narrowly focused on maximizing short-term profits.
– Increased living costs as well as poorer services and utilities – especially in remote and rural areas – due to ‘economic costing’ of services, e.g. telecommunications, water supply and electricity.
– Reduced jobs, overtime work and real wages for employees of privatized concerns.

Flawed arguments
Arguments for privatization can be refuted on the following grounds:
• The public sector can be more efficiently run, as demonstrated in Singapore, Taiwan and South Korea.
• Greater public accountability and a more transparent public sector can ensure greater efficiency in achieving the public and national interest while limiting public-sector waste and borrowing.
• Privatization may postpone a fiscal crisis by temporarily reducing fiscal deficits, but the public sector would lose income from profitable public sector activities, and be stuck with financing and subsidizing unprofitable ones. As experience shows, the fiscal crisis may even deepen if the new owners of profitable SOEs avoid paying taxes with creative accounting or due to the typically generous terms of privatization.
• Privatization gives priority to profit maximization, typically at the expense of social welfare, equity and the public interest. It tends to adversely affect the interests of public-sector employees and the public, especially poorer consumers.
• Public pressure to ensure the equitable distribution of share ownership (e.g., ‘voucher privatization’) may inadvertently undermine pressures to improve corporate performance since each shareholder would then only have small equity stakes, and would therefore be unlikely to incur the high costs of monitoring management and corporate performance.
• By diverting private capital from productive new investments to buying over public sector assets, economic growth would be retarded rather than enhanced.

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Wage and Fiscal Policies for Economic Recoveryhttp://www.ipsnews.net/2016/10/wage-and-fiscal-policies-for-economic-recovery/?utm_source=rss&utm_medium=rss&utm_campaign=wage-and-fiscal-policies-for-economic-recovery http://www.ipsnews.net/2016/10/wage-and-fiscal-policies-for-economic-recovery/#comments Wed, 05 Oct 2016 17:31:36 +0000 Anis Chowdhury and Jomo Kwame Sundaram http://www.ipsnews.net/?p=147235 Anis Chowdhury is Visiting Fellow, Crawford School of Public Policy, Australian National University, and held various senior United Nations positions in New York and Bangkok. Jomo Kwame Sundaram was UN Assistant Secretary General for Economic Development.]]> Employers are finally creating more jobs and paying higher wages than seven years after the Great Recession started following the 2008 financial crisis. Credit: IPS

Employers are finally creating more jobs and paying higher wages than seven years after the Great Recession started following the 2008 financial crisis. Credit: IPS

By Anis Chowdhury and Jomo Kwame Sundaram
SYDNEY and KUALA LUMPUR, Oct 5 2016 (IPS)

The new US census data released in late September show that 3.5 million people in the US climbed out of poverty, as the tepid economic recovery continues. Employers are finally creating more jobs and paying higher wages than seven years after the Great Recession started following the 2008 financial crisis.

This progress, while modest, debunks the claims of those who predicted a dire outcome following the increase in the legislated US minimum wage, especially without a robust recovery. The data show large employment and wage gains, particularly for the lower end of the jobs spectrum.

Raising the legal minimum-wage and other government programmes, such as social security, earned-income tax credit, and food stamps, have not only kept tens of millions from sinking into poverty. They also aided economic recovery by supporting household expenditure, and hence, aggregate demand, enabling a 1.2 percentage point decline in the poverty rate, the largest annual drop since 1999.

Every major demographic group benefited from the stronger economy and an expanding job market. Furthermore, wage increases were stronger at the bottom than in the middle. The poverty rate fell in 23 states, and stayed flat in the rest, not getting worse in any.

So, what is the lesson? Addressing poverty, inequality, and economic recession needs progressive counter-cyclical macroeconomic policies, with wage and social protection programmes.

Low growth trap
Meanwhile, the recent OECD Interim Economic Outlook worries that the world economy remains stuck in a low-growth trap, with poor growth expectations depressing trade, investment, productivity, and wages. It estimates that the “potential” growth rate per person for its 35 member countries has halved to one percent a year. It also warns that “exceptionally low and negative interest rates” are distorting financial markets – including share and housing price bubbles – and creating risks of future crises.

Hence, the OECD recommends switching the current policy stance from its sole dependence on expansionary monetary policy to fiscal stimulus. It also recognizes that fiscal stimuli always work better when countries act in concert, rather than in a ‘beggar thy neighbour’ fashion.

This has long been the message from the United Nations since the crisis began, especially after G20 countries prematurely switched to fiscal consolidation following the 2010 Toronto Summit. The UN also consistently argued that fiscal and structural measures are needed to boost demand and raise productive capacity.

Ensuring growth is likely to reduce the debt-to-GDP ratio in the short term, by adding more to nominal GDP than to public debt. Thus, when fiscal measures raise output, a temporary debt-financed expansion need not increase debt ratios in the longer term.

UN tax and spending policy advice favours more growth by improving infrastructure spending, social protection, and progressive tax incidence. Better labour market programmes benefit both short-term demand, longer-term supply and inclusive growth.

Malaysia’s minimum wage policy
Khazanah Research Institute’s recent second State of Malaysian Households report, based on the 2014 Household Expenditure Survey by the Department of Statistics, suggests a significant increase in household income of the ‘bottom 40%’ from RM1761 in 2012 to RM2296 in 2014!

While partly attributable to higher commodity prices before the commodity price slump from late 2014, this impressive increase was probably also due to implementation of the 2012 minimum wage law from 2013.

The minimum wage law had long been sought by the labour movement and opposition political parties. Nevertheless, it continues to be opposed by some employers, especially in the plantation sector, and those of ‘neo-liberal’ economic persuasion as ‘populist’. Some of these critics claim, without supporting evidence, but by citing others of similar ideological persuasion, that such labour market distortions will result in greater unemployment and dissuade productivity growth.

In fact, the continued availability of immigrant workers prepared to work for lower wages has delayed the introduction of labour saving innovations which would increase labour productivity. Malaysia has to come to terms with its immigrant labour policy as it threatens economic progress and worker welfare.

By subjecting foreign workers to poor working conditions, Malaysians depress the welfare of all. By understating their numbers and contribution of 30-40 percent of the labour force, economic performance seems more impressive than is actually the case. This is especially so in the most dangerous, dirtiest and depressed jobs, weakening efforts to ensure ‘decent work’ for all.

Although Malaysia remains a very open economy, better working conditions will go a long way towards boosting aggregate demand. Lower income households are much more likely to spend most, if not all their additional income. In turn, their spending is more likely to be on goods and services produced within the national economy.

Thus, high commodity prices until 2014 and enforcement of the 2012 minimum wage law have helped economic recovery. But with the collapse of commodity prices and fiscal spending since, prospects for the economy are poorer.

An election budget may help improve public sentiment, but is unlikely to help address fundamental underlying problems, not least because so much will be syphoned off by political rentiers, ostensibly for campaign finance.

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Jobs Are Crucial for Peace, Stem Radicalization and Violent Extremism in Kenyahttp://www.ipsnews.net/2016/09/jobs-are-crucial-for-peace-stem-radicalization-and-violent-extremism-in-kenya/?utm_source=rss&utm_medium=rss&utm_campaign=jobs-are-crucial-for-peace-stem-radicalization-and-violent-extremism-in-kenya http://www.ipsnews.net/2016/09/jobs-are-crucial-for-peace-stem-radicalization-and-violent-extremism-in-kenya/#comments Wed, 21 Sep 2016 12:22:30 +0000 Ambassador Amina Mohamed and Siddharth Chatterjee http://www.ipsnews.net/?p=147013 Ambassador Amina Mohamed (@AMB_A_Mohammed) is the Cabinet Secretary in the Ministry of Foreign Affairs and Trade. Siddharth Chatterjee (@sidchat1) is the United Nations Resident Coordinator to Kenya. ]]> Under Vision 2030, the agriculture sector is to be made more innovative, commercially oriented and modern. Photo Credit: WikiMedia

Under Vision 2030, the agriculture sector is to be made more innovative, commercially oriented and modern. Photo Credit: WikiMedia

By Ambassador Amina Mohamed and Siddharth Chatterjee
NAIROBI, Kenya, Sep 21 2016 (IPS)

Today 21 September 2016 is the International Day of Peace.

Kenya has the largest number of jobless youth in East Africa, putting a strain on the economy’s growth and also threatening peace and security when hopeless youth gravitate towards violent extremist groups.

Today, youth form two-thirds of Kenya’s population, many of them unemployed, with the ratio of youth unemployment to overall adult unemployment standing at 46 percent, according to the 2009 Kenya Population and Housing Census. At the same time, there are eight dependents for every ten working Kenyans, meaning that the average worker will very often have little left to save or invest for growth.

While this youth bulge may seem like a disaster in the making, investing in the sectors with highest potential can turn it into a gateway to rapid economic growth and development as we have seen among Asian Tigers like Singapore, South Korea and Malaysia.

By all projections, agriculture presents this opportunity.

While the African Union has recognised agriculture as the driving force of social and economic transformation, the youth often feel that agriculture lacks the glamour, sophistication and allure of the professions they seek.

This is regrettable. Africa not only has the largest percentage of arable land in the globe, and untapped potential for irrigated agro-pastoralism on its vast arid and semi-arid lands, but it also has the highest ratio of young people with the necessary knowledge, innovative skills and physical strength.

Of particular interest are youth in hard to reach areas, such as the arid and semi-arid lands, who are increasingly disgruntled by dim prospects of good jobs and increasingly prone to the temptations of extremist groups. These groups sway them with blandishments and exploit their feelings of exclusion and hopelessness.

In northern Kenya, which has borne the brunt of extremism in the country, traditional livestock farming methods can be targeted for transformation into a quality-driven, export-targeting industry. This calls for investment in education, rural transport and electricity, and smart business and trade policies.

In these areas, formal education should provide young people with basic numeracy and literacy, managerial and business skills, and introduce them to agro-pastoralism. It has been shown that education is key to overcoming development challenges in rural areas, and that improved access to education also improves rural children’s food security.

The power of the internet also offers a great opportunity for attracting youth in far-flung areas to agriculture. Packaging and disseminating information on agri-business to the youth through social media platforms like blogs, websites, Twitter and Facebook has proven effective in Kenya. Much more can be achieved with increased access to the internet especially in the remote parts of the country.

There is a great potential pay-off for the continent: according to the World Bank, African agriculture and agribusiness could be worth $1 trillion by 2030. Clearly, this is the low hanging fruit that Kenya should aim to invest in to solve the myriad problems associated with youth unemployment.

Agro-pastoralism has great potential to improve livelihoods for youth and women and reduce food insecurity, create incomes and generally help youth to feel engaged and involved with the national development agenda. Those promoting entrepreneurship must therefore include agribusiness as a priority area of focus, particularly at the county level.

Acting on this, President Uhuru Kenyatta during this year’s African Green Revolution Forum held in Nairobi, announced that the government would invest US$200 million to enable 150,000 young agricultural entrepreneurs to gain access to markets, finance and insurance.

With their dynamism, enthusiasm and innovativeness, the youth are our greatest asset and a force for improving the productivity and growth of all sectors in Kenya.

To reap the dividends, Kenya’s priority focus needs to be on growth in sectors that can absorb them, particularly agriculture.

Policies must also ensure that women and girls, who do most of the actual work in farms across Africa, can achieve their potential. Lack of collateral and financial literacy often make them ineligible for financial assistance while cultural norms deny them land inheritance rights and, at times, restrict their movement and access to markets for their produce.

Kenya’s Vision 2030 aims to turn the country into an industrialized, middle-income country and provide a high quality life in a safe and secure environment to all its citizens by 2030.

It is only when the current large group of youth has been given education and skills demanded by the sectors of greatest potential that we will turn the youth bulge into a force for good and transform Kenya into a peaceful and prosperous nation.

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In Host Country Lebanon, Refugee and Rural Women Build Entrepreneurship, Cohesion and Futurehttp://www.ipsnews.net/2016/09/in-host-country-lebanon-refugee-and-rural-women-build-entrepreneurship-cohesion-and-future/?utm_source=rss&utm_medium=rss&utm_campaign=in-host-country-lebanon-refugee-and-rural-women-build-entrepreneurship-cohesion-and-future http://www.ipsnews.net/2016/09/in-host-country-lebanon-refugee-and-rural-women-build-entrepreneurship-cohesion-and-future/#comments Fri, 16 Sep 2016 16:44:32 +0000 UN Women http://www.ipsnews.net/?p=146967 Women entrepreneurs from refugee and host communities in Lebanon are using their unique skills and creativity to build their own model of social stability in Lebanon while launching economically viable businesses.]]> Refugee and rural women in host country, Lebanon, learn to create, brand and commercialize high-quality handicrafts, organic and agro-food products as part of the UN Women Fund for Gender Equality project. Photo: UN Women/Joe Saade

Refugee and rural women in host country, Lebanon, learn to create, brand and commercialize high-quality handicrafts, organic and agro-food products as part of the UN Women Fund for Gender Equality project. Photo: UN Women/Joe Saade

By UN Women
Sep 16 2016 (IPS)

“When we were forced to leave our country, I never thought that a community in Lebanon would accept and treat me as an active member, the way I have been at the Kfeir Women’s Working Group,” says Hiba Kamal, an 18-year-old refugee from Syria who travelled to Lebanon with her family five years ago fleeing instability in her own country.

Kamal is among more than 1.5 million refugees from Syria and its neighbouring countries, hosted by Lebanon. The massive influx of refugees accounts for 25 per cent of the total population in Lebanon and puts unprecedented pressure on the Lebanese economy. There is an ever-increasing demand for public services and significantly stronger competition for limited resources and employment.

Hiba Kamal, a Syrian refugee, learns needlework technique from a Lebanese woman at a workshop by Amel Association, supported by UN Women Fund for Gender Equality. Photo courtesy of Amel Association

Hiba Kamal, a Syrian refugee, learns needlework technique from a Lebanese woman at a workshop by Amel Association, supported by UN Women Fund for Gender Equality. Photo courtesy of Amel Association

The protracted refugee and migrant crisis has led to increased tensions between host and refugee populations, especially in the poorest areas, where refugees tend to concentrate. There is a higher risk of insecurity, sexual and gender-based violence [1].

Women, both Lebanese citizens and refugees, often suffer more discrimination due to the prevalence of prejudiced laws and cultural stereotypes. They are frequently either restricted at home, or relegated to finding low and unstable income within the informal sector without social protection.

To improve women’s access to employment and markets, the Amel Association, a grantee of UN Women’s Fund for Gender Equality, implemented a three-year project from 2012 – 2015 in the south of Lebanon and the suburbs of Beirut. The project has impacted over 1,000 rural and refugee women, who have learned how to create, brand and commercialize high-quality handicrafts, such as embroidery and accessories, organic and agro-food products, following the highest quality and sanitation standards.

By mixing traditional techniques, materials and designs, the participants of the MENNA project create unique and marketable products under the MENNA brand. The interactive workshops where refugee and Lebanese women learn and work together has also created spaces for dialogue and coexistence. Photo: UN Women/Joe Saade

By mixing traditional techniques, materials and designs, the participants of the MENNA project create unique and marketable products under the MENNA brand. The interactive workshops where refugee and Lebanese women learn and work together has also created spaces for dialogue and coexistence. Photo: UN Women/Joe Saade

Through interactive sessions, where refugee and Lebanese women learned and worked together, the programme also created spaces for dialogue and coexistence to build social stability. “The [Lebanese] women started teaching me their traditional needle work and I was genuinely happy to share with them all the traditional practices that I had learned from my mother and grandmother in loom work,” shares Kamal. By mixing traditional techniques, materials and designs, participants link their cultural heritage and history with the products, making them unique and highly marketable.

“We started seeing real results of our work when some of the women started creating their own products and started exhibiting them. They grew stronger, more confident and set inspiring examples for other women in the area,” says Safaa Al Ali, Programme Manager at the Amel Association.

The organization facilitated an alliance with 13 other civil society organizations and cooperatives doing similar work to create the first economic network for women in Lebanon, called “MENNA” (meaning “from us” in Arabic language). Today, more than 300 refugee and rural Lebanese women producers sell soaps, candles, accessories and handicrafts directly to the public in a shop in Beirut also named MENNA.

“I came to Lebanon as the crisis began in Syria five years ago…it was hard to find a suitable job as a refugee and I could not access the formal business sector,” shares Mona Hamid, a 51-year-old Syrian refugee living in the suburbs of Beirut. “By joining the MENNA network at Amel, I gained skills to sell and promote my items at local businesses and also showed them at exhibitions.”

The success of the initiative prompted Amel to create a MENNA catering service in February 2016, opening up more income-generating opportunities for women.

Over 1,000 rural and refugee women have learned to create, brand and commercialize their products. Photo: UN Women/Joe Saade

Over 1,000 rural and refugee women have learned to create, brand and commercialize their products. Photo: UN Women/Joe Saade


The MENNA brand has brought together Lebanese and refugee women in a way that has benefited entire communities. “The importance of this project is that it respects the culture and skills of refugee women and assists them in integrating into the host community. It is a model that works, not only to make women agents of their own economic empowerment in a fragile context, but also as a way that brings them together to work for a common goal, thus building social stability and sustainable peace,” notes Rana El-Houjeiri, Programme Specialist for UN Women’s Fund for Gender Equality in Lebanon. The Fund is now building upon the success of this project by supporting similar initiatives in Lebanon and other countries in the Arab States region.

Notes
[1] Amel Association International (2013). Unpublished study on “Gender analysis of Host Communities affected by Syrian Refugee Crisis”

This story was replicated from the UN Women website <http://www.unwomen.org/>. IPS is an official
partner of UN Women’s Step It Up! Media Compact.

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European Security with or Without Russia? Consequences of the Chinese-Russian Alliance on the Relationship Between USA and EUhttp://www.ipsnews.net/2016/09/european-security-with-or-without-russia-consequences-of-the-chinese-russian-alliance-on-the-relationship-between-usa-and-eu/?utm_source=rss&utm_medium=rss&utm_campaign=european-security-with-or-without-russia-consequences-of-the-chinese-russian-alliance-on-the-relationship-between-usa-and-eu http://www.ipsnews.net/2016/09/european-security-with-or-without-russia-consequences-of-the-chinese-russian-alliance-on-the-relationship-between-usa-and-eu/#comments Fri, 16 Sep 2016 14:03:48 +0000 Roberto Savio http://www.ipsnews.net/?p=146957 By Roberto Savio
ROME, Sep 16 2016 (IPS)

The joint military manoeuvres between the Russian and Chinese navies, armies, and air forces has kicked off. It’s a clear message for Washington, which has recently strengthened its action in Asia, indicating that as a country that overlooks the Pacific, it wants to play an important role in the continent, aimed at containing the Chinese expansion.

Roberto Savio

Roberto Savio

Obama, during his visit to Laos, the first by an American President and his last in Asia as President, has explicitly stated that the United States are guarantors of Asian stability. One must also consider that the greatest continent of the world is going through a wave of nationalism (China, Japan, India) and populism (Philippines). Joint military manoeuvres are a clear message: the United States cannot decide the destinies of Asia.

Russia is already considered by NATO an enemy to contain, encircled by the borders of Eastern Europe. The annexation of Crimea, the intervention in eastern Ukraine, and then the military action in Syria, have isolated the Kremlin, object of unprecedented trade sanctions by both Europe and America.

The meeting last week, between Obama and Putin at the G20, ended overtly negative. The fragile agreement to a ceasefire in Syria reached between the respective foreign ministers, does not solve the overall dispute between the two countries, which are still willing to fight each other with an undeclared war, until the very last Syrian. The Western alliance intends to maintain sanctions on Russia.

The logic is that the latter, weakened by the fall in oil prices and witnessing a significant reduction of its revenue, will lead to Putin being obliged to accept the supremacy of the West, hence being forced to reduce his action internationally.

This logic leads to a non-negotiation, as everyone waits for Putin to understand that he cannot have global ambitions. As Obama said, “Russia is a regional power.” And the information system is full of analysis on how the Russian economy is going through a crisis, and how the decline in resources will undermine the relationship between Putin and the Russian people.

Now, a slightly more in-depth analysis gives way to serious doubts on the strength of this strategy. To begin with, the sanctions have a different burden on Europe than on the United States. It is emphasized that Russia’s GDP has fallen by 3.5 percent. But aside from the fact that in this scenario the reduction in oil prices (the main Russian export) plays a much more serious role, from $ 100 a barrel to the current 50 dollars, all is quiet on the cost of penalties for the West, which has suspended Russia’s exports.

According to the European Commission, at the end of 2015, it was $ 100 billion dollars. But here lies a major difference, which has been inexplicably silenced. US exports to Russia fell by 3.5%, while the Europeans fell by 13% ( 43% of the agricultural sector). For its part, European imports from Russia fell by 13.5%.

Also according to the European Commission, the European GDP fell by 0.3% in 2014 and 0.4% in 2015, as a direct result of the sanctions. This doesn’t preoccupy Germany but countries like Italy, whose growth is close to zero (and whose agricultural sector has been hit by the loss of the Russian market), without forgetting that the total growth of the European GDP is close to 1 percent. But, reply the NATO circles, the difference between the decline of Russia’s GDP and that of Europe, shows that sanctions work, and it is only a matter of time before Putin capitulates.

This leads to another reflection largely absent in the media. One cannot ignore that Putin enjoys great esteem amongst the Russian population. The independent surveys confer to him levels of popularity which range from 60% to peaks of 78%, percentages unknown for any Western leader.

This popularity has increased since Putin annexed Crimea, intervened in Ukraine, sticking a knife on NATO’s side, (which he can turn as he pleases), and intervened in Syria. The response of the official circles is that these actions were carried out to hide the internal social and economic crisis.

However, crises arise when they feel as such. Americans are convinced that during the Reagan presidency the United States they were living through a blissful economic era, whereas in reality, the fiscal deficit rose from 800 billion to 2,750 trillion.

It’s now easy to convince the Russians that the West is trying to strangle their economy. Furthermore, the Russians are a population, according to sociologists, are able to squeeze consumer spending much more than the citizens of the western countries, for both historical and cultural reasons.

However, the main reflection should be made on an important dysfunctional element: the simultaneous existence of the European Community and Nato, two institutions which have a different agenda, which often generate schizophrenic actions.

The formal purpose of the European Community is to promote further integration and development of European countries, based on common values and interests.

The formal purpose of Nato is to act for the security of the Western world, which is made up at the same time by the United States (absolute leaders) and from Europe.

As a consequence, Europe entrusts Nato in her security. According to many analysts, Nato echoes the characters of Pirandello’s Play “Six Characters looking for an author”. The end of the cold war and the end of the Soviet threat would have implied Nato’s end. But getting rid of an institution is often more difficult than creating one. So for a long time, Nato has persistently looked for an enemy which would justify its existence.

As a Chinese proverb says: If you put a hammer in the hands of a man, they will look everywhere for nails that protrude. So much so in this case, that the last commander of Nato, the current General, has declared that Russia is a greater threat than ISIS.

Yet, there is also a school of thought that considers the West guilty of doing everything it could to make sure Putin was paranoid when he’d started off as an ally of Bush.

It should not be forgotten that Gorbachev’s agreement to accept the fall of the Berlin wall was a consequence of Nato’s commitment to keeping its borders.

Instead, all European countries of the former Soviet Union have entered Nato. And, representative of this trend, defined as an encirclement of Moscow (while Madrid defines it as a containment) is the recent admission of Montenegro to Nato, who admitted to having an army composed of 3,000 men.

Now, with careful analysis, there it is safe to say that Nato carries more weight in international politics than Europe. Even because, objectively speaking, Europe has reduced military expenses, as it delegates the costs of her defence to the United States. No coincidence that Trump, making a point during his election campaign, promised that if he were to become President, the Europeans would have to pay their bills. This would result in a severe decrease of Nato’s power in Europe.

Joint manoeuvres in the South China Sea are part of a very important and accelerated approach between Russia and China. Despite the slowdown in China’s economy, as Beijing has signed loans for 25 billion dollars to Russian companies: Russia, for its part, has committed itself to a gas supply agreement of 38 billion cubic meters of gas per year, for 30 years, with a fee of 400 billion dollars.

China Development Bank has granted a line of credit at Sberbank of 966 million dollars. Beijing has set up an investment fund for Russian Agriculture worth 2 billion dollars and has granted 19.7 billion dollars credit for a railroad linking Moscow to the city of Kazan. The two countries have also agreed to increase their bilateral trade to 200 billion dollars by 2020. In other words, an unprecedented business alliance is growing between the two countries.

The question that Europe must, therefore, ask, taking off its Nato hat and putting on the hat of the European Union, is whether it should push Russia into the arms of China. Maybe it’s time to open a comprehensive negotiation with Russia, instead of discussing separately each step of the litigation, Siria separately from Ukraine, from Crimea, from the issue of Georgia, from Eastern Europe and so on.

From this analysis, an ever more crucial question arises. Is it a forward-looking strategy for Europe, if the sanctions had an effect, to have a country of great military and economic importance such as Russia, close to the borders, on it knees and with a population who is humiliated and offended, convinced (thanks to evidence) that Europe is obstructing Russia from having a righteous place in the world? Is this the best path for European security? Perhaps a negotiation with Russia would be better, in order to obtain a security policy, as well as trade and commerce for which there are huge needs, as according to world-leading economists we’re headed towards a long period of stagnation.

But the question whether the European schizophrenia of the two hats, that of Nato and the EU, (today in crisis), enables this negotiation. Especially because Putin is creating his own system of European alliances: an Alliance with the populist right, with the Salvini’s and the Le Pen’s, achieving the admiration of Trump, becoming the model for an illiberal democracy, as the Hungarian President Orban puts it. This certainly reduces European security. But where is a leader capable of having a newer, more realistic and long-term vision of security for Europe? Are we sure this is feasible without Russia?

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Poverty Cut by Growth Despite Policy Failurehttp://www.ipsnews.net/2016/09/poverty-cut-by-growth-despite-policy-failure/?utm_source=rss&utm_medium=rss&utm_campaign=poverty-cut-by-growth-despite-policy-failure http://www.ipsnews.net/2016/09/poverty-cut-by-growth-despite-policy-failure/#comments Thu, 08 Sep 2016 14:04:02 +0000 Jomo Kwame Sundaram http://www.ipsnews.net/?p=146842 Jomo Kwame Sundaram was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.]]>

Jomo Kwame Sundaram was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.

By Jomo Kwame Sundaram
KUALA LUMPUR, Malaysia, Sep 8 2016 (IPS)

At the UN Millennium Summit in September 2000, world leaders committed to halve the share of people living on less than a dollar a day by 2015. The World Bank’s poverty line, set at $1/day in 1985, was adjusted to $1.25/day in 2005, an increase of 25% after two decades. This was then re-adjusted to $1.90/day in 2011/2012, an increase by half over 7 years! As these upward adjustments are supposed to reflect changes in the cost of living, but do not seem to parallel inflation or other related measures, they have raised more doubts about poverty line adjustments.

Jomo Kwame Sundaram. Credit: FAO

Jomo Kwame Sundaram. Credit: FAO

The number of people living on less than $1.90 a day in developing countries is estimated to have fallen from close to two billion in 1981 to 1.95 billion in 1990 to just under 1.4 billion in 2005 and 902 million in 2012, projected to 702 million in 2015. The share of poor people has thus declined from 44% in 1981 to 37% in 1990, 24% in 2005 and 12.8% in 2012, projected to 9.6% in 2015.

Uneven progress
Much of the progress has been due to sustained rapid growth in several large developing countries, notably China and India, and higher commodity prices for over a decade until 2014. However, outside of East Asia, progress has been modest, with actual setbacks in some countries and regions. For those earning just above the extreme poverty line ($1.90 a day), progress can be temporary as economic and other shocks threaten hard-won gains, forcing them back into poverty. Progress in reducing poverty has been generally slower using higher poverty lines. Over 2.1 billion people in the developing world lived on less than $3.10 a day in 2012, compared to 2.9 billion in 1990.

Extreme poverty in Sub-Saharan Africa has hardly declined, standing at around 42.6% in 2012. Moreover, many of the poor in this region are estimated to be very far below the poverty line as the average consumption of Africa’s poor is only about 70 cents a day—barely more than twenty years ago. Thus, even 20 more years of progress at recent rates will not end poverty in Africa, with a quarter of Africans expected to still be deemed poor in 2030.

Besides income, wide ranging deficits in the human condition remain widespread, not only in most low income countries, but also in many middle income countries. Access to basic education, healthcare, modern energy, safe water and other critical services — often influenced by socioeconomic status, gender, ethnicity and geography — remain elusive for many.

Claiming credit

There is little evidence that the professed commitments by the global community to the Millennium Development Goals (MDGs) and what was done in the name of the MDGs was critical to poverty reduction. This does not bode well for the Sustainable Development Goals (SDGs), especially with the protracted economic slowdown since 2008, the declining commitment to economic multilateralism and the constrained fiscal and policy space most developing countries have.

In decoupling poverty reduction from economic development, various ‘silver bullets’ – microcredit, ‘bottom of the pyramid’ marketing, land titling, ‘good governance’ – were touted, but failed, as miracle cures. In most developing societies, economic reforms and policies imposed or advised by international financial institutions, did not deliver promised growth, but instead often exacerbated growing inequalities, both within and among nations. And even where economic growth – typically despite, rather than because of the conventional wisdom – lifted most boats, it often did not raise the leaky, fragile ones of the poor.

This nuanced record of poverty reduction challenges the conventional policy prescriptions identified with the Washington Consensus – the norm outside East Asia since the 1980s. Reductions in public investments – in health, education and other social programmes – have adversely affected billions. The poor have also been more vulnerable to economic downturns, as unskilled workers tend to lose their jobs first, while job recovery generally lags behind output recovery.

Ideology, crisis and poverty

The counter-revolution against development economics, and the ascendance of the Washington Consensus since the 1980s, significantly transformed the development discourse. Reforms such as macroeconomic stabilization, defined as low single digit inflation, as well as microeconomic market liberalization, associated with structural adjustment, were all supposed to accelerate economic growth and poverty reduction, presumed to follow from growth. These typically failed on both counts – to spur growth and to eliminate poverty.

Little attention was given to structural causes of poverty, including gross inequalities of resources and opportunities, and the consequences of uneven development. While the Washington Consensus economic reforms were supposed to unleash rapid growth, social protection was reduced to social safety nets targeted at a few supposedly falling between the cracks, often victims of temporary setbacks such as natural catastrophes and economic crises.

The Washington Consensus reforms, often imposed as conditionalities, have significantly constrained policy space for national development strategies. Failure to sustain growth, regressive tax reforms and reduced government revenues have also constrained developing countries’ fiscal space. Developing countries also significantly reduced state capacities and capabilities while under pressure to liberalize and globalize on unequal and debilitating terms. Such reductions of both fiscal and policy space have undermined sustainable and equitable development.

Poor policies

Conventional policy approaches to poverty eradication are clearly insufficient, if not worse. Meanwhile, obstacles to reducing global poverty remain formidable, numerous and complex. Targeting – often demanded by many donors – is not only typically costly, but also inadvertently excludes many who are deserving. Furthermore, many poverty programmes favoured by donors have not been effective in reducing poverty, although some have undoubtedly helped ameliorate poverty.

The 2008-2009 global financial and economic crisis has prompted some reconsideration of appropriate economic policies, even by the international financial institutions. There is now greater recognition of the need for inclusive, pro-growth and counter-cyclical macroeconomic policies as well as prudent capital account management, but institutional prejudices and prescriptions have been slow to change at the country level.

The overall global economic situation and prospects have deteriorated with the ongoing economic slowdown. While the timing and sustainability of economic recovery remain uncertain, job prospects and work conditions continue to deteriorate, with adverse consequences

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Fossil Fuels: At What Price?http://www.ipsnews.net/2016/09/fossil-fuels-at-what-price/?utm_source=rss&utm_medium=rss&utm_campaign=fossil-fuels-at-what-price http://www.ipsnews.net/2016/09/fossil-fuels-at-what-price/#comments Wed, 07 Sep 2016 14:06:16 +0000 John Scales Avery http://www.ipsnews.net/?p=146830 The author was part of a group that shared the 1995 Nobel Peace Prize for their work in organising the Pugwash Conferences on Science and World Affairs. He is Associate Professor Emeritus at the H.C. Ørsted Institute, University of Copenhagen. He was chairman of both the Danish National Pugwash Group and the Danish Peace Academy, and he is the author of numerous books and articles both on scientific topics and on broader social questions. His most recent book is Civilization’s Crisis in the 21st Century.]]>

The author was part of a group that shared the 1995 Nobel Peace Prize for their work in organising the Pugwash Conferences on Science and World Affairs. He is Associate Professor Emeritus at the H.C. Ørsted Institute, University of Copenhagen. He was chairman of both the Danish National Pugwash Group and the Danish Peace Academy, and he is the author of numerous books and articles both on scientific topics and on broader social questions. His most recent book is Civilization’s Crisis in the 21st Century.

By John Scales Avery
OSLO, Sep 7 2016 (IPS)

We often read comparisons between the prices of solar energy or wind energy with the prices of fossil fuels. It is encouraging to see that renewables are rapidly becoming competitive, and are often cheaper than coal or oil. In fact, if coal, oil and natural gas were given their correct prices renewables would be recognized as being incomparably cheaper than fossil fuels.

A petrochemical refinery in Grangemouth, Scotland, UK.| Author: John from wikipedia | Creative Commons Attribution-Share Alike 3.0 Unported license.

A petrochemical refinery in Grangemouth, Scotland, UK.| Author: John from wikipedia | Creative Commons Attribution-Share Alike 3.0 Unported license.

Externalities in pricing

The concept of externalities in pricing was first put forward by two British economists, Henry Sidgwick (1838-1900) and Arthur C. Pigou (1877-1959).

In his book “The Economics of Welfare”, published in 1920, Pigou further developed the concept of externalities in pricing which had earlier been introduced by Sidgwick. He proposed that a tax be introduced to correct pricing for the effect of externalities.

An externality is the cost or benefit of some unintended consequence of an economic action. For example, tobacco companies do not really wish for their customers to die from cancer, but a large percentage of them do, and the social costs of this slaughter ought to be reflected in the price of tobacco.

The true environmental costs of fossil fuel use are much greater than those of smoking. Unless we stop burning fossil fuels within one or two decades, we risk a situation where uncontrollable feedback loops will lead to catastrophic climate change regardless of human efforts to prevent the disaster.

If we do not act very quickly to replace fossil fuels by renewables, we risk initiating a 6th geological extinction event. This might even be comparable to the Permian-Triasic extinction, during which 96 per cent of all marine species and 70 per cent of all vertebrates were lost forever.

Subsidies to fossil fuel companies

Far from being penalized for destroying the global environment and threatening the future of all life on earth, fossil fuel companies currently receive approximately $500,000,000,000 per year in subsidies (as estimated by the IEA).

They use part of this vast sum to conduct advertising campaigns to convince the public that anthropogenic climate change is not real.

Betrayal by the mainstream media

If we turn on our television sets, almost nothing that we see informs us of the true predicament of human society and the biosphere.

John Scales Avery

John Scales Avery

Programs like “Top Gear” promote automobile use. Programs depicting ordinary life show omnipresent motor cars and holiday air travel. There is nothing to remind us that we must rapidly renounce the use of fossil fuels.

A further betrayal by the mainstream media can be seen in their massive free coverage of US presidential candidate Donald Trump, who is an infamous climate change denier.

Despite the misinformation that we receive from the mainstream media, we must remember our urgent duty to leave fossil fuels in the ground. If threats to the future are taken into account, the price of these fuels is prohibitive.

The statements and views mentioned in this article are those of the author and do not necessarily represent those of IPS.

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Rousseff’s Ouster Won’t Clear Up Uncertainty in Brazilhttp://www.ipsnews.net/2016/09/rousseffs-ouster-wont-clear-up-uncertainty-in-brazil/?utm_source=rss&utm_medium=rss&utm_campaign=rousseffs-ouster-wont-clear-up-uncertainty-in-brazil http://www.ipsnews.net/2016/09/rousseffs-ouster-wont-clear-up-uncertainty-in-brazil/#comments Thu, 01 Sep 2016 23:45:37 +0000 Mario Osava http://www.ipsnews.net/?p=146749 Michel Temer (third from the left) in his swearing-in ceremony in the Senate shortly after Dilma Rousseff was impeached. Credit: Beto Barata/PR

Michel Temer (third from the left) in his swearing-in ceremony in the Senate shortly after Dilma Rousseff was impeached. Credit: Beto Barata/PR

By Mario Osava
RIO DE JANEIRO, Sep 1 2016 (IPS)

The dismissal of now ex-president Dilma Rousseff brings to a close a turbulent chapter of Brazil’s crisis, but does nothing to clear up the doubts that threaten the political system and the economy of Latin America’s powerhouse.

The Senate voted 61-20 on Wednesday Aug. 31 to impeach Brazil’s first female president for budget irregularities, putting an end to 13 years of rule by her left-wing Workers’ Party (PT).

She had been in office since 2011, and was suspended in May, less than halfway through her second term.Her predecessor was the PT’s founder Luiz Inácio Lula da Silva (2003-2011).

Michel Temer, who was Rousseff’s vice president and served as interim president since May 12, was sworn in on Wednesday as the country’s new leader. He will face challenges that require unpopular measures.

A large part of the lawmakers belonging to the parties that back him are facing corruption charges or are under investigation by the public prosecutor’s office.

Temer, described as uncharismatic and dour, has been implicated in a corruption probe, accused of soliciting illicit funds for election campaigns of members of his Brazilian Democratic Movement Party (PMDB).

The president and members of the legislature can only be tried by the Supreme Court and it is unlikely to hand down a sentence against Temer before the end of the current four-year term.

Temer is also facing a legal challenge from the TSE electoral court for alleged abuse of economic and political power while in office as Rousseff’s vice president. Reports of corruption aggravated things for both Rousseff and Temer.

The TSE ruling is not expected until 2017, and could annul the results of the 2014 elections. If that happens, Congress will choose a new president, to complete the current term, which ends the last day of 2018.

Operation Car Wash, which is investigating corruption in the state-run oil giant Petrobras and has led to charges against dozens of businesspersons and politicians, threatens to bring down a number of lawmakers when the Supreme Court starts to try the implicated legislators.

Until then, the accusations will throw a shadow over the legitimacy of a weak government subjected to bombardment from the left-wing opposition, which accuses it of being the result of a “parliamentary coup”, as Rousseff repeated over and over again during her impeachment trial.

The new government has announced fiscal adjustments, including a constitutional amendment to limit public spending growth for up to 20 years, which would oblige the government to limit annual spending growth to the prior year’s inflation rate.

Dilma Rousseff smiles during her speech in Brasilia on Aug. 31, after she was ousted as president of Brazil by the Senate, an outcome that came as no surprise, although unexpectedly she was not banned from politics. Credit: Lula Marques/ AGPTl

Dilma Rousseff smiles during her speech in Brasilia on Aug. 31, after she was ousted as president of Brazil by the Senate, an outcome that came as no surprise, although unexpectedly she was not banned from politics. Credit: Lula Marques/ AGPTl

That means economic growth, once Brazil has emerged from the current recession, would be accompanied by a reduction of the deficit.

But analysts doubt that the measure will be approved by a Congress traditionally opposed to austerity measures, especially given the fact that it would require a constitutional amendment, which would need a 60 percent majority to be approved.

Another measure considered indispensable to shore up public accounts, raising the retirement age, will also face heavy resistance in Congress and from trade unions and social movements.

Temer, however, has the support of a parliamentary majority strengthened by their victory in the impeachment trial and the vote of confidence they enjoy, for now at least, from the powerful business community.

On Apr. 17,71.5 percent of the 513 members of the lower house voted in favour of an impeachment trial; 75 percent of the Senate approved her ouster on Aug. 31; and similar majorities were seen in other votes prior to the start of the impeachment process.

Ousted but not banned

The bloc was only divided towards the end of the impeachment trial, when the Senate decided not to ban her from politics for eight years, which would have required a two-thirds majority – 54 senators – but only took 42 votes. The measure would basically have ended the political career of the 68-year-old Rousseff.

It was a conciliatory gesture offered by a portion of the new ruling parties, especially the PMDB, after the escalating attacks during the impeachment process, which began in December when the then speaker of the lower house of Congress Eduardo Cunhagave the go-ahead to the proceedings after accepting one of 37 motions to impeach her.

During the final six-day impeachment trial, Rousseff and her supporters described the process as “a coup against democracy,” “betrayal” and a “farce”, and called advocates of the proceedings “demagogues,” “irresponsible,” “liars,” and “corrupt” generators of “economic chaos”.

Rousseff argued that she did not commit any crime.But the prosecution maintained that using state bank funds to conceal a looming deficit and increasing public spending without authorisation from the legislature amounted to “crimes of responsibility”, one of the grounds for impeachment under the constitution.

Even legal experts expressed views that fed the argument that the impeachment was a “coup”, with some observers going so far as to compare it to the 1964 military coup d’etat that ushered in a 21-year dictatorship.

But the economic crisis, especially the huge public deficit that has built up over the last few years, weakened Rousseff, who was accused of concealing the serious financial situation during her 2014 reelection campaign.

Rousseff blamed the recession that began in 2014 on the crash in international commodity prices and policies adopted by rich countries, aggravated by the legislative boycott of her proposed initiatives in 2015.

Only voters can decide on the legitimacy of a government in a presidentialist regime, argued Rousseff and her allies, ruling out the possibility of impeachment, which was first used in 1992 to remove Fernando Collor (1990-1992) and attempted many times against Fernando Henrique Cardoso (1995-2003).

The fall of Rousseff and the PT “is part of a global decline of the left, which is stronger in Latin America, where governments are facing severe economic recessions,” University of Brasilia Professor Elimar Nascimento told IPS.

In the region, he said, “leftist thinking, which lives on fantasies of the past, and is incapable of comprehending change, is showing a lot of wear and tear” – part of a pendular movement after 15 years of mainly left-wing governments in the region.

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Youth Key to the Success of the SDGs in Kenyahttp://www.ipsnews.net/2016/08/youth-key-to-the-success-of-the-sdgs-in-kenya/?utm_source=rss&utm_medium=rss&utm_campaign=youth-key-to-the-success-of-the-sdgs-in-kenya http://www.ipsnews.net/2016/08/youth-key-to-the-success-of-the-sdgs-in-kenya/#comments Fri, 12 Aug 2016 13:52:23 +0000 Siddharth Chatterjee and Werner Schultink http://www.ipsnews.net/?p=146531 Siddharth Chatterjee (@sidchat1) is the United Nations Resident Coordinator a.i for Kenya and the UNFPA Representative. Werner Schultink (@janwerners) is the UNICEF Representative to Kenya.]]> Elected national Children’s Government of Kenya for 2016. Photo credit: UNICEF Kenya\2016\Gakuo.

Elected national Children’s Government of Kenya for 2016. Photo credit: UNICEF Kenya\2016\Gakuo.

By Siddharth Chatterjee and Werner Schultink
NAIROBI, Kenya, Aug 12 2016 (IPS)

Consider this: in 1956 Sweden and Kenya’s population was roughly at 7 million. Today Sweden has about 9.8 million, while there are about 44 million Kenyans.

Fertility levels are declining gradually and Kenyans are living longer. It is estimated that there will be 85 million people in Kenya by 2050, with three quarters of these being below 35 years. While Kenya’s median age is 19, Sweden’s is 42.

Kenya’s mushrooming population presents an extraordinary opportunity and several challenges. The opportunity lies in the potential for a so-called demographic dividend of sustained rapid economic growth in the coming decades. There is reason for optimism that Kenya can benefit from a demographic dividend within 15 to 20 years. It is estimated that Kenya’s working age population will grow to 73 percent by year 2050, potentially bolstering the country’s GDP per capita 12 times higher than the present, with nearly 90 percent of the working age in employment. (NCPD Policy Brief: Demographic dividend opportunities for Kenya, July 2014.)

But Kenya’s demographic dividend is not guaranteed by its changing demographics alone. Key actions are required if children of today – who will be entering the labor force a decade’s time – are skilled, dynamic and entrepreneurial.

Unemployment among Kenya’s youth is now estimated to stand at 17.3 per cent compared to six per cent for both Uganda and Tanzania. A World Bank report says mass unemployment continues to deny Kenya the opportunity to put its growing labour force to productive use, thereby “denying the economy the demographic dividend from majority young population”.

Investment in children is Kenya’s best hope to set the right pre-conditions for this potentially transformative demographic dividend. Properly harnessed, the potential of the youth could propel the country forward as a dynamic and productive engine of growth in all the 17 Sustainable Development Goals (SDGs) set out last September.

At the beginning of this year, UN member states started the long journey to implement the SDGs and they all have 169 targets to achieve by end of December 2030. Some countries have already made good progress on the localization and mainstreaming of the SDGs in their development plans and budgeting processes. In fact, 22 of the 193 Member States that endorsed the SDGs voluntarily reported on their progress at the High-level Political Forum (HLPF) held last month in New York.

The Government Kenya played a very important role in the design of the global development agenda. About 20,000 Kenyans participated in the MyWorld Survey, in which they voted on the kind of world they wanted after the MDGs. Kenya was also one of many countries that commissioned consultations at national, regional and community levels to discuss the Post-2015 development agenda, and these culminated into a position paper that was presented for inclusion into the post-2015 development agenda.

The global development agenda dovetails with Kenya’s Vision 2030 in terms of timeline and key strategic focus and seeks as well to make Kenya globally competitive and prosperous for all citizens. Kenya Vision 2030 does capture the three dimensions of sustainable development including economic, social and environment. This makes it much easier to align the national development plan of Kenya to the SDGs.

However, as was evident with the millennium development goals (MDGs), the work of translating SDGs into results requires strategic actions. It requires that countries exploit fully the resources within in order to make the giant leaps needed to meet the targets.

Experts agree that for Kenya and the rest of Africa, these giant leaps will come through the youthful human resource, but only when the working age population becomes larger than people of non-working age.

In Kenya, there are about eight dependents for every working person, meaning that the state faces very high costs associated with economically unproductive populations. It means that Kenya must invest to create jobs, and invest in the young people with the skills to fill those jobs.

A society that wants to diversify its economy, achieve industrialization and socio-economic transformation and the SDGs must invest heavily in a strong, dynamic and empowered youth and women to drive this agenda. Kenya’s children will need quality learning that leads to educational attainment that is relevant to their lives, and gives them with the skills needed for the country’s changing labor market. Protection from ill health, malnutrition, violence, conflict, abuse and exploitation are also crucial for children – and their nation – to prosper.

In Kenya, the youth constitute an important segment of the country’s population, accounting for 35.4% of the total population and 66.7% of the adult population in 2009. The proportion of the youth category is expected to remain relatively high at 35.4% of the population in 2015, 34.8% in 2020, 34.6% in 2025 and 35.2% by 2030. This means that at least one in every three Kenyans will continue to be young.

Therefore, if Kenya and all other developing countries must successfully implement the SDGs, it is very important that young people, both boys and girls, no longer remain passive beneficiaries of development but must become equal and effective partners for development. This means that the problem of youth must be addressed as a policy and development issue, which must be mainstreamed in all planning and budgeting processes.

In addition, strong political commitment and leadership must be demonstrated at both national and local levels to address the problems of youth in Kenya. High growth rates must be translated into skills and jobs for the increasing young population and workforce in Kenya. Such actions will indeed help to keep young people away from being targets of youth radicalization and violent extremism.

Investing in youth is not only an investment in the future but also fundamental for the successful implementation of the SDGs.

Today 12 August 2016 is International Youth Day. Let’s commit to investing in youth. It is not only an investment in the future but also fundamental for the successful implementation of the SDGs.

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Youth Employment: Turning Workplace Partnerships into Opportunityhttp://www.ipsnews.net/2016/08/youth-employment-turning-workplace-partnerships-into-opportunity/?utm_source=rss&utm_medium=rss&utm_campaign=youth-employment-turning-workplace-partnerships-into-opportunity http://www.ipsnews.net/2016/08/youth-employment-turning-workplace-partnerships-into-opportunity/#comments Fri, 12 Aug 2016 09:53:45 +0000 Sofia Garcia http://www.ipsnews.net/?p=146528 Sofía García García is the SOS Children’s Villages Representative to the United Nations in New York.]]> Sofía García García is the SOS Children’s Villages Representative to the United Nations in New York.]]> http://www.ipsnews.net/2016/08/youth-employment-turning-workplace-partnerships-into-opportunity/feed/ 0 Expansionary fiscal consolidation mythhttp://www.ipsnews.net/2016/08/expansionary-fiscal-consolidation-myth/?utm_source=rss&utm_medium=rss&utm_campaign=expansionary-fiscal-consolidation-myth http://www.ipsnews.net/2016/08/expansionary-fiscal-consolidation-myth/#comments Thu, 11 Aug 2016 12:15:03 +0000 Anis Chowdhury and Jomo Kwame Sundaram http://www.ipsnews.net/?p=146514 Anis Chowdhury was Professor of Economics, University of Western Sydney, and held various senior United Nations positions in New York and Bangkok. Jomo Kwame Sundaram was UN Assistant Secretary General for Economic Development.]]>

Anis Chowdhury was Professor of Economics, University of Western Sydney, and held various senior United Nations positions in New York and Bangkok. Jomo Kwame Sundaram was UN Assistant Secretary General for Economic Development.

By Anis Chowdhury and Jomo Kwame Sundaram
KUALA LUMPUR, Malaysia, Aug 11 2016 (IPS)

The debt crisis in Europe continues to drag on. Drastic measures to cut government debts and deficits, including by replacing democratically elected governments with ‘technocrats’, have only made things worse. The more recent drastic expenditure cuts in Europe to quickly reduce public finance deficits have not only adversely impacted the lives of millions as unemployment soared. The actions also seem to have killed the goose that lay the golden egg of economic growth, resulting in a ‘low growth’ debt trap.

Government debt in the Euro zone reached nearly 92 per cent of GDP at the end of 2014, the highest level since the single currency was introduced in 1999. It dropped marginally to 90.7 per cent at the end of 2015, but is still about 50 per cent higher than the maximum allowed level of 60 per cent set by the Stability and Growth Pact rules designed to make sure EU members “pursue sound public finances and coordinate their fiscal policies”. The debt-GDP ratio was 66 per cent in 2007 before the crisis.

High debt is, of course, of concern. But as the experiences of the Euro zone countries clearly demonstrate, countries cannot come out of debt through drastic cuts in spending, especially when the global economic growth remains tepid, and there is no scope for the rapid rise of export demand. Instead, drastic public expenditure cuts are jeopardizing growth, creating a vicious circle of low growth-high debt, as noted by the IMF in its October 2015 World Economic Outlook.

Deficits, debt and fiscal consolidation

Using historical data, a number of cross-country studies claimed that fiscal consolidation promotes growth and generates employment. Three have been the most influential among policy makers dealing with the economic crisis unleashed by the 2008-2009 global financial meltdown.

First, using data from advanced and emerging economies for 1970-2007, the IMF’s May 2010 Fiscal Monitor claimed a negative relationship between initial government debt and subsequent per capita GDP growth as a stylized fact. On average, a 10 percentage point increase in the initial debt-GDP ratio was associated with a drop in annual real per capita GDP growth of around 0.2 percentage points per year. By implication, a reduction in debt-GDP ratio should enhance growth. Released just before the G20 Toronto Summit, it provided the ammunition for fiscal hawks urging immediate fiscal consolidation. The IMF has since admitted that its fiscal consolidation advice in 2010 was based on an ad-hoc exercise.

Using a different methodology, the IMF’s 2010 World Economic Outlook reported that reducing fiscal deficits by one per cent of GDP “typically reduces GDP by about 0.5% within two years and raises the unemployment rate by about 0.3 percentage point”. Domestic demand—consumption and investment—falls by about 1%”. Similarly, a 2015 IMF research paper concluded that “Empirical evidence suggests that the level at which the debt-to-GDP ratio starts to harm long-run growth is likely to vary with the level of economic development and to depend on other factors, such as the investor base”.

The second study, of 107 episodes of fiscal consolidation in all OECD countries during 1970-2007 by Alberto Alesina and Silvia Ardagna, found 26 cases (out of 107) of fiscal consolidation associated with resumed growth, probably influenced policy makers most. This happened despite the actual finding that “…sometimes, not always, some fiscal adjustments based upon spending cuts are not associated with economic downturns.”

Yet, in Harvard Professor Alesina’s public statement, “several” became “many” and “sometimes” became “frequently”, and mere “association” implied “causation”. In April 2010, Alesina told European Union economic and finance ministers that “large, credible and decisive” spending cuts to rescue budget deficits have frequently been followed by economic growth. Alesina was even cited in the official communiqué of an EU finance ministers’ meeting.

Jonathan Portes of the UK Treasury has acknowledged that Alesina was particularly influential when the UK Treasury argued in its 2010 ‘Emergency Budget’ that the wider effects of fiscal consolidation “will tend to boost demand growth, could improve the underlying performance of the economy and could even be sufficiently strong to outweigh the negative effects”. Christina Romer, then Chair of the US President’s Council of Economic Advisors, also acknowledged that the paper became ‘very influential’, noting exasperatedly that “everyone has been citing it”.

Researchers have found serious methodological and data errors in this work. Historical experience, including that of current Euro zone economies, suggests that the probability of successful fiscal consolidation is low. These successes depended on factors such as global business cycles, monetary policy, exchange rate policy and structural reforms.

Drawing on the IMF’s critique of Alesina and his associates, even the influential The Economist (30 September, 2010) dismissed the view that fiscal consolidation today would be “painless” as “wishful thinking”. Nevertheless, the IMF’s policy advice remained primarily in favour of fiscal consolidation regardless of a country’s economic circumstances or development level. There seems to be a clear disconnect between the IMF’s research and its operations.

The third study, by Harvard Professors Carmen Reinhart and Kenneth Rogoff on the history of financial crises and their aftermaths, claimed that rising government debt levels are associated with much weaker economic growth, indeed negative rates. According to them, once the debt-to-GDP exceeds the threshold ratio of 90 per cent, average growth dropped from around 3 per cent to -0.1 per cent in the post-World War II sample period. Since then, however, significant data omissions, questionable weighting methods and elementary coding errors in their original work have been uncovered. Nevertheless, the Reinhart-Rogoff findings were seized upon by the media and politicians around the world to justify austerity policies and drastic public spending cuts.

Bill Clinton, fiscal hawk?

Supporters of austerity based fiscal consolidation often cite President Bill Clinton’s second term in the late 1990s. However, the data shows that fiscal consolidation was achieved through growth, contrary to the claim that austerity produced growth. Clinton broke with the traditional policy of using the exchange rate to address current account or trade imbalances, opting for a strong dollar. Thus, the US dollar rose against major currencies from less than 80 in January 1995 to over 100 by January 2000.

The strong US dollar lowered imported inflation, allowing the Fed to maintain low interest rates even though unemployment fell markedly. The low interest rate policy not only boosted growth, but also helped keep bond yields close to nominal GDP growth rates. Thus, the interest burden was kept under control, with primary balances stable at close to zero.

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An Unequal Countryhttp://www.ipsnews.net/2016/08/an-unequal-country/?utm_source=rss&utm_medium=rss&utm_campaign=an-unequal-country http://www.ipsnews.net/2016/08/an-unequal-country/#comments Tue, 09 Aug 2016 19:38:57 +0000 Marc-Andre Franche http://www.ipsnews.net/?p=146487 By Marc-André Franche
Aug 9 2016 (Dawn, Pakistan)

One of the world’s great achievements of the past decades has been the significant fall in global poverty. Between 1990 and 2012, the proportion of humanity living under $1.90 a day fell from 37 per cent to only 13pc, driven in large part by the efforts of China. South Asia also witnessed a major decline in poverty, from 51pc to 19pc, with unequal progress across countries.

Despite this tremendous achievement, income inequality has increased both within and across countries. Today, high-income countries with 16pc of the world’s population represent 55pc of income while low-income countries with 72pc of the population account just over 1pc. Inequality matters for moral reasons; it also matters because of its implications for growth and development outcomes. Persi¬stent inequality hampers economic growth, impedes poverty reduction, fuels crime, squa¬n¬ders talent and human potential, and stifles social mobility. An unequal society is not only unfair, it is less prosperous and stable.

Escaping this inequality trap is the 21st century’s most critical challenge that lies at the heart of the global agenda which has been enshrined in the Sustainable Development Goals (SDGs) that has two goals, including the first SDG on ending poverty in all its forms; and the 10th SDG on leaving no one behind.

In Pakistan, the challenge of inequality is equally daunting. While consumption-based poverty dropped from 57.9pc to 29.5pc between 1998-1999 and 2013-2014 and multidimensional poverty — which includes health, education and living standards — fell from 55.2pc to 38.8pc between 2004-2005 and 2014-2015, inequality has actually grown. In 1987-1988, the Gini coefficient, which measures income inequality, was 0.35; by 2013-14 it had risen to 0.41. Pakistan’s richest 20pc now consume seven times more than the poorest 20pc.

Regional disparities are stark.

Regional disparities are stark and slow down growth and development. The government’s Multidimensional Poverty Index released recently found that 54.6pc of rural Pakistanis experienced poverty compared to 9.3pc of those in cities. Multidimensional poverty stands at 31.5pc in Punjab but rises to 73.7pc in Fata. While multidimensional poverty in Islamabad, Lahore, Karachi, and Rawalpindi is below 10pc it exceeds 90pc in Killa Abdullah, Harnai, Barkhan, Sherani Kohistan. Hence, some Pakistani districts are as well-off as any developed country while others are on par with the poorest in sub-Saharan Africa.

Inequality’s insidious effects pervades families. As women are mostly engaged in unpaid family work, their very real economic contribution is unaccounted for. Women own less than 3pc of land which impacts on their economic empowerment. Their participation in the labour force is a mere 18pc compared to 71pc for men. This is the lowest in South Asia after Afghanistan. Back in 1968 the renowned economist Dr Mahbub ul Haq identified 22 families which then controlled two-thirds of Pakistan’s industrial assets. In a 1973 article in The Times, Dr Haq called for reforming Pakistan’s economic, social and political institutions to help prevent the concentration of such immense wealth amongst the few.

Although the landscape has changed considerably since then, his recommendations remain painfully valid. Pakistan’s institutions, incentives, laws and norms continue to conspire to create rent for the rich and burdens for the poor.

These include tax exemptions on select sectors and indirect taxes which disproportionally affect the poor. The richest districts in Pakistan receive, on average, five times more public funds than the poorest, further aggravating inequality. The high cost of running for elections systematically excludes poor Pakistanis from political institutions. Discri¬mination on the basis of gender, economic status, religion and social identity restr¬icts upward mobility.

To date, Pakistan’s response to inequality has been superficial, focusing on symptoms rather than the root causes. As a result, inequality has persisted and even grown.

To tackle inequality seriously requires a holistic approach, addressing both its structural and distributional dimensions. Key institutions need to be reformed, and fiscal, monetary and other policies made equitable. Regional inequality may be addressed by investing adequate public funds in lagging regions and districts, and particularly in rural areas. Governments should use the Multidime¬nsional Poverty Index to inform allocations, especially under their Provincial Finance Com¬m¬i¬ssion awards, which are long overdue. Gender responsive budgeting can help mainstream women’s priorities in budgeting processes.

Most important, however, is to bring the debate on inequality back into the public realm. Politicians, bureaucrats, civil society, the media, many development partners and the wider public all continue to ignore the cancer of inequality on Pakistani society and economy. It is time to recognise that this inequality is not inevitable. Today, nearly 50 years after Dr Haq wrote his seminal diagnosis, it is time to act so Pakistan can escape its inequality trap and create the just, stable and dynamic society envisaged by its founders.

The writer is the outgoing country director for UNDP in Pakistan.
Published in Dawn, August 9th, 2016

This story was originally published by Dawn, Pakistan

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Blame It on Cronyism, Not the Free Markethttp://www.ipsnews.net/2016/08/blame-it-on-cronyism-not-the-free-market/?utm_source=rss&utm_medium=rss&utm_campaign=blame-it-on-cronyism-not-the-free-market http://www.ipsnews.net/2016/08/blame-it-on-cronyism-not-the-free-market/#comments Mon, 08 Aug 2016 21:02:42 +0000 Eresh Omar http://www.ipsnews.net/?p=146470 By Eresh Omar Jamal
Aug 8 2016 (The Daily Star, Bangladesh)

The current condition of global economic inequality should be of concern to all. An Oxfam report published this year titled, An economy for the 1%, revealed that “the richest 1% now have more wealth than the rest of the world combined.” It also said that “62 of the richest people now own more wealth than the bottom half of the world’s population. In 2015 it was the 80 richest, in 2014 it was 85 and in 2010, only six years back, it was 388 richest that owned similar wealth”, showing that inequality is actually growing at an increasing rate. This is also made evident by the fact that “the wealth of the poorest half of the world’s population has fallen by a trillion dollars since 2010, a drop of 38 percent” while “the wealth of the richest 62 has increased [during the same period] by more than half a trillion dollars to $1.76 trillion.”

op_3__Whereas many people around the world rightly blame the existing global economic system for the growing inequality, they also wrongly blame the free market. Wrongly because the system we have is anything but a free market, something that most fail to recognise. As Oxfam reported, “The 80 richest people have doubled their wealth between 2009 and 2014” during the period of austerity and quantitative easing. And as any economist that is not bought and paid for by the top 1 percent will tell you, neither of these have anything to do with the free market — they are a part of the cronyism that exists in our society.

The idea of a free market is based on the relationship between risk and reward, which determines the interest rate. When borrowers take out loans, they often put up their owned assets as collateral against the loan. They then try to invest what they borrowed prudently, hoping to earn a ‘reward’, pay back the loan and not lose the asset they had ‘risked’ as collateral against the borrowed amount. This is perhaps well understood. But as there are always two parties to any such transaction, lenders too are exposed to ‘risks’ because of which they acquire an ‘interest’ — reward — on the loan. As both parties face certain risks in going ahead with such transactions, both parties are also ‘liable’ to do their own ‘risk analysis’ — whether taking or giving the loan is beneficial.

This means that when there is a non-payment, the borrower and the lender are both liable, as both were supposed to do their own risk analysis which, in case of a default, they failed to do properly (except for in cases of force majeure). Yet, we have seen borrowers losing their homes through foreclosures or going bankrupt because of their failure to repay loans throughout the world, whereas big banks were bailed out using public funds for their ‘failed risk assessments’ or lack of ‘due diligence’, as was also the case in Bangladesh.

Just think about it. When you make bad decisions in your professional life, does the government ever bail you out? I would not think so. If we truly had a free market, these banks too would not have been bailed out. They would have gone bankrupt for making bad decisions like they should have in a free market. Furthermore, that alone would have discouraged most of these banks with highly ‘skilled professionals’ from making such ‘amateurish mistakes’.

In reality, however, they were anything but mistakes. For example, in Bangladesh, even the finance minister had said in Parliament that the loan scams in the banks were ‘dacoity’ (robberies). And it is because we do not have a free market and instead, have such ‘selective interventions’ by states that are largely serving the interest of the top 1 percent — bailing them out for committing robberies — that inequality throughout the world has increased and continues to do so. Meanwhile, those who are poor and have no involvement in these robberies have to endure extreme austerity measures that are literally inhumane, enhancing economic inequality in the process. For example, the current government budget saw the lowest allocation of funds to the healthcare sector since 2010-11 and to the education sector since 2009-10, while the proposed budget for the next fiscal year has a provision of Tk. 2,000 crore for investment in recapitalisation of the state-owned banks despite massive amounts of money being already injected into them over the past years, to save them from the consequences of their own disastrous policies.

All this combined is simply a form of wealth transfer that is being facilitated by the collusion between states and big banks. It has nothing to do with the free market and is, in fact, the opposite of it. Ironically, however, more and more people throughout the world, as they wake up to the fact that the current economic system is flawed, are starting to blame everything on the free market. And this is perhaps what we should be most concerned about, our lack of understanding of economics.

Such a lack of understanding can also be seen on part of the pro-free market economists who can identify that we do not have a free market but then say that if we did, we would have perfect equality by misquoting Adam Smith, the father of modern economics. Because what Mr Smith said was that the free market would only produce equality “in a society where things were left to follow their natural course, where there was perfect liberty [emphasis mine], and where every man was perfectly free both to chuse [choose] what occupation he thought proper, and to change it as often as he thought proper” (The Wealth of Nations, Adam Smith). Given, however, that we have never had conditions of ‘perfect liberty’, it is impossible to say whether Mr Smith’s assumption was right or wrong.

But regardless, what is important for people to realise is that the economic despairs plaguing the majority of the world’s population today, has very little (if at all) to do with the free market, and more to do with the fact that states are ‘selectively’ allocating resources to ‘special interests’ groups — largely the 1 percent. Because in order to cure the patient (economy), we must not get distracted by the symptoms; we have to first, identify, and second, treat the disease. To be able to do that, however, we must first educate ourselves in economics rather than letting the talking heads on TV, bought and paid for by the 1 percent, define what it is for us.

Henry George, one of the best economists of the 19th century, prophetically identified the tendency for such problems to arise in his book Poverty and Progress and how they can be best addressed, as so brilliantly defined by Cliff Cobb in more recent times, in the foreword to that book: “Many economists and politicians foster the illusion that great fortunes and poverty stem from the presence or absence of individual skill and risk-taking. Henry George, by contrast, showed that the wealth gap occurs because a few people are allowed to monopolise natural opportunities and deny them to others. If we deprived social elites of those monopolies, the whole facade of their greater ‘fitness’ would come tumbling down. George did not advocate equality of income, the forcible redistribution of wealth, or government management of the economy. He simply believed that in a society not burdened by the demands of a privileged elite, a full and satisfying life would be attainable by everyone.”

The writer is a member of the Editorial team.

This story was originally published by The Daily Star, Bangladesh

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Thinking Global? Act Provincialhttp://www.ipsnews.net/2016/08/thinking-global-act-provincial/?utm_source=rss&utm_medium=rss&utm_campaign=thinking-global-act-provincial http://www.ipsnews.net/2016/08/thinking-global-act-provincial/#comments Mon, 08 Aug 2016 20:45:25 +0000 Crispin Aranda http://www.ipsnews.net/?p=146467 By Crispin R. Aranda
Aug 8 2016 (Manila Times)

The least populated, northernmost province in North America even its own citizens dread to go has a per capita GDP of C$58,452 compared with C$3,439.28 for the entire Philippines.

Crispin R. Aranda

Crispin R. Aranda

If the northernmost province of the Philippines, say Ilocos Norte, has a per capita of more than P2.1 million, chances are there would be a huge migration flow from Imperial Manila instead of the reverse.

There would also be less Ilocanos leaving the province or the region since the high per capita reflects a good economy that translates into jobs, income, and a good quality of life.

Across the globe and closer to the North Pole, Nunavut is the newest, largest and northernmost province of Canada (North America). At the same time, it is both the least populous (31,906) and the largest in area of the provinces and territories of Canada at 1,750,000 sq. km. compared with the smaller 300,000 sq. km. of the Philippines.

In 2014, only 23 people migrated to Nunavut—a microscopic dot—given the fact that a total of 260,404 migrants applied for and obtained their permanent residency in Canada. In the same year 40,035 from the Philippines migrated to Canada, which placed the Philippines back on top of the list of countries with the highest number of immigrants.

Imperial Manila, Metro Manila or National Capital Region (as it is officially called), is the coveted place to be in the Philippines because it is the region of culture, economy, education, and government.

People from the North, South, and Central Philippines move to Metro Manila for jobs and opportunities making it the 7th most populous metropolis in Asia and the 3rd most populous urban area in the world, according to Demographia.

Canada set a target of up to 285,000 new permanent residents in 2015 to populate the country’s 10 provinces and three territories—Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Prince Edward Island, Québec, Saskatchewan, and Yukon.

In January 2015, Canada initiated the Express Entry—the current selection system for attracting and getting immigrants. In addition to the individual allocation of each province by virtue of Federal and Provincial agreements, each province may also set up its own mini-Express Entry and get more than the usual number of migrants calling a province their new home.

Of the 285,000 planned and targeted new immigrants last year, 65 percent will be in the economic immigration class, the remainder will be in the family reunification and humanitarian categories, including refugees.

In addition Canada has increased “the number of caregivers becoming permanent residents to 30,000 in 2015, an all-time high in that category.”

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Nomination programs common to all provinces

The migration statistics for the period indicated showed that without their own programs, applicants qualifying under the Federal immigration programs (Federal Skilled Workers, Federal Skilled Trades Workers, Canadian Experience Class, and International Student/Graduates) preferred the more urban places in Canada such as Ontario, Quebec, and British Columbia.

Alberta and British Columbia (BC) tweaked their nomination program to attract the entry level, semi -skilled in addition to the traditional skilled workers. Both provinces offer temporary to permanent migration pathways for those with the required years of experience in the tourism/hospitality, hotel and lodging, long-haul trucking, food and beverage processing, and manufacturing.

The oil price volatility in the world market and the Fort McMurray fire, however, contributed to the bleak employment scenario in Alberta. Statistics Canada reported on August 5, 2016 that “Alberta’s monthly unemployment rate climbed to its highest level in nearly 22 years in July, marking the first time the province has had a worse jobless rate than Nova Scotia.”

Calgary, the oil and gas capital of Canada, recorded an unemployment rate of 8.6 percent—the worst among 33 Canadian metropolitan areas surveyed. Another major Alberta city, Edmonton, showed an unemployment rate of 7.7 percent, the sixth highest in Canada.

Manitoba distinguishes itself from the other provinces by providing extra points and preference for applicants with close relatives in the province. Close relatives include siblings, niece or nephew, aunt/uncle (maternal or paternal), first cousin, parent or grandparent.

New Brunswick offers specific pathways for applicants with qualified family members (the applicant must to be a non-dependent child, brother, sister, niece, nephew, or grandchild of the Family Supporter in New Brunswick). Your Family Supporter would also be able to provide you with on-the-ground facts about career and employment prospects, especially with the report of the Conference Board of Canada that New Brunswick is likely to join Alberta in recession this year (published by CBC New Brunswick, June 13, 2016).

Perhaps the province with the least expectation of economic recovery, Newfoundland-Labrador, the easternmost province of Canada, has had short booms and long-term busts, especially in the oil exploration and mining sectors. With the drop in oil prices and the shutting down of Labrador’s key iron mines in 2014, jobs were hard to find, even as the provincial government found itself in deficit. Maybe that was the reason why Newfoundland is one of the few provinces charging a $250 non-refundable fee for Express Entry and provincial nominee applicants.

Bright spots west and middle of Canada

Past halfway of 2016 reveals only a few Canadian provinces have improved in economic performance, with Manitoba and British Columbia leading the way.

Manitoba distinguishes itself from the other provinces by providing extra points and preference for applicants with close relatives in the province.

A July 2016 report by the Conference Board of Canada, noted, “Manitoba’s GDP is set to expand by 2. 1 per cent this year and 2.6 per cent in 2017, which would allow the province to be a reliable source of growth … due to strong employment and wage gains in recent years.”

The Manitoba government banks on its rich natural resources and fertile farmland for a sustained positive economic performance. Manitoba is not dependent on any single industry or commodity, although manufacturing is Manitoba’s largest sector accounting for over 12 percent of total GDP. Manitoba is home to Canada’s largest factories for furniture, doors, windows, and cabinetry. The province is also North America’s largest producer of intercity and urban buses.

In addition, large service operations, including two of Canada’s major financial corporations—Great-West Lifeco and IGM Financial—and one of the country’s largest media companies—CanWest Global Communications Corp.—have established corporate presence in Manitoba.

On the other hand, British Columbia, brims with confidence. The provincial government reports that “all signs point to British Columba holding on to the top spot in the provincial growth rankings in 2016.”

Citing the latest economic data published last June, yhr Royal Bank of Canada (RBC) noted that impressive job market statistic showed “the solid momentum … in 2014 and 2015” will carry over this year.

Domestic spending of BC households will lead economic growth with expected renewed “substantial activity in the retail, services, and housing sectors. Exports are expected to be a key driver of BC‘s forecasted growth rate of 2.3 percent in 2017.

RBC concluded that “with healthy job market conditions, confident households, and strengthening population growth (fueled by positive in-migration), British Columbia stands to benefit from skilled migration and vice versa.

Processing of provincial nomination applications and subsequent permanent resident applications at the Canadian Embassy in Manila could take 1 to 2 years.

If the oil price market remains unstable and terrorism continues to plague Europe and disrupts economic activity, resulting in national sentiments against migrants, the provincial migration to global Canadian cities might be focused only on British Columbia, Manitoba, Ontario, and Quebec, provinces which have shown to have the most pull factors for migrants—Filipino city dwellers and provincial migrants included.

For the rest of us the reverse migration begins if and when Federalism begins and the killings stop.

This story was originally published by The Manila Times, Philippines

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Poverty, Vulnerability and Social Protectionhttp://www.ipsnews.net/2016/08/poverty-vulnerability-and-social-protection/?utm_source=rss&utm_medium=rss&utm_campaign=poverty-vulnerability-and-social-protection http://www.ipsnews.net/2016/08/poverty-vulnerability-and-social-protection/#comments Thu, 04 Aug 2016 14:11:45 +0000 Jomo Kwame Sundaram http://www.ipsnews.net/?p=146391 Jomo Kwame Sundaram was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.]]>

Jomo Kwame Sundaram was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.

By Jomo Kwame Sundaram
KUALA LUMPUR , Aug 4 2016 (IPS)

According to the World Bank, the MDG target of halving the share of the poor was achieved by 2008, well in advance of 2015, the target year. However, increased unemployment and lower incomes in recent times remind us that poverty is not an unchanging attribute of a shrinking group, but rather, a condition that billions of vulnerable persons risk experiencing.

Jomo Kwame Sundaram. Credit: FAO

Jomo Kwame Sundaram. Credit: FAO

Despite the various shortcomings of money measures of poverty, they nevertheless reflect the extent of vulnerability. For example, the estimated number of poor globally in 2012 more than doubles from 902 million to 2.1 billion when one raises the poverty line by 63% from $1.90/day to $3.10/day per person, suggesting that a very large number of those not deemed poor by the World Bank are very vulnerable to external economic shocks or changes in personal circumstances, such as income losses or food price increases.

Of the world’s poor, three-quarters live in rural areas where agricultural wage workers suffer the highest incidence of poverty, largely because of low productivity, seasonal unemployment and low wages paid by most rural employers. Vulnerability and economic insecurity have increased in recent decades with rising insecure, casual and precarious jobs involving part-time employment, self-employment, fixed-term work, temporary work, on-call work and home-working – often mainly involving women.

Such trends have grown with labour market liberalization, globalization, and declining union power. To make matters worse, macroeconomic policies in recent decades have focused on low inflation, rather than full employment, while limited social protection has exacerbated economic insecurity and vulnerability.

Additionally, lower economic growth rates, following the global financial crisis, would push 46 million more people into extreme poverty than expected before the crisis. This figure was later revised to 64 million, implying over 200 million people fell into extreme poverty due to food-fuel price hikes and the global financial crisis.

While some of these figures were subsequently revised downward, they suggest widespread vulnerability and economic insecurity, due to the inability of governments to respond with adequate counter-cyclical policies and in the absence of comprehensive universal social protection measures. During the East Asian financial crisis of 1997-1998, the official poverty rate in Indonesia shot up from 11% to 37% in just one year following the massive depreciation of the Indonesian rupiah.

Working poor

The working poor are defined as those employed, but earning less than the international poverty line ($1.25 a day in 2005 and $1.90 a day in 2011 in purchasing power parity [PPP] terms). Despite working, they cannot earn enough to get out of poverty. In most developing countries, most poor adults have to work, if only to survive, in the absence of adequate social protection.

According to the International Labour Organization (ILO), an estimated 375 million workers lived below the international poverty line in 2013. The number of working poor rises dramatically to close to 800 million when a $2-a-day poverty line is used. Women comprise the majority of the working poor, accounting for about 60%. It also found that progress in reducing the number of working poor has slowed markedly since 2008.

An estimated 1.42 billion people globally were in vulnerable employment in 2013, still increasing by around 1% in 2013, well above the 0.2% average increase in the years prior to 2008. The number was projected to exceed 1.44 billion in 2014, accounting for 45% of total world employment.

Social Protection

Most people who fall under the international poverty line are vulnerable, with no basic social protection. The lack of comprehensive universal social protection is a major obstacle to economic and social development, exacerbating high and persistent levels of poverty, economic insecurity, and inequality. Most countries do not have unemployment insurance or other similar social protection. In the most vulnerable countries, more than 80% have neither social security coverage nor access to health services.

The ILO’s World Social Protection Report, 2014/15 found a high or very high vulnerability in terms of poverty and labour market informality. Only 27% of the global population enjoy access to comprehensive social security systems, whereas 73% are only covered partially, or not at all. This means that about 5.2 billion people do not have access to comprehensive social protection, and many of them – in the case of middle- and low-income countries, nearly half their populations – live in poverty. About 800 million of them are working poor, of whom most work in the informal economy.

Although 2.3% of GDP worldwide is allocated to public social protection expenditure for income security during working age, there are wide regional, national and local variations, e.g. ranging from 0.5% in Africa to 5.9% in Western Europe. Only 28% of the global labour force is potentially or legally eligible for unemployment benefits. Yet, only 12% of unemployed workers worldwide actually receive unemployment benefits, with effective coverage ranging from 64% of unemployed workers in Western Europe to just over 7% in the Asia and Pacific region, 5% in Latin America and the Caribbean, and less than 3% in the Middle East and Africa.

Globally, about 39% and more than 90% of the population living in low-income countries have no right to healthcare. About 18,000 children die every day, mainly from preventable causes. On average, governments allocate 0.4% of GDP to child and family benefits, ranging from 2.2% in Western Europe to 0.2% in Africa, Asia, and the Pacific.

Fiscal austerity measures since the 2008-2009 global financial and economic crises have exacerbated the situation. Such measures are not limited to Europe; many developing countries have also adopted such measures, including reducing or ending food and fuel subsidies; cutting or capping wages; more narrowly targeting social protection benefits, and reducing public pension and health care systems.

These are contrary to the pledges countries made in adopting Agenda 2030 for the Sustainable Development Goals which include achieving universal protection and health care. Not surprisingly, fiscal austerity measures, including cuts in social protection expenditure, have not helped economic recovery, but instead, have exacerbated inequality

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