Global Prosperity Wonkcast
International development experts share their views about ways wealthy countries can promote prosperity in developing countries.

CGD's Casey Dunning, Charles Kenny, and Jonathan Karver recently wrote an analysis with the provocative title "Hating on the Hurdle," that offered constructive criticism of the Millennium Challenge Corporation's (MCC) approach to penalizing corruption using a “hard hurdle.”

The paper elicited an engaged written response from Alicia Phillips Mandaville, managing director of development policy at the MCC, who later came to CGD for a roundtable discussion on the issue with staff and invited guests.

Here at CGD there’s nothing we like better than the opportunity to engage with policymakers directly. So I was delighted when Alicia accepted my invitation to join me, Charles and Casey on to the Wonkcast to share key ideas in the discussion with our listeners. You can listen to the full audio above.

Direct download: MCC_Hard_Hurdle_on_Corruption.mp3
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Clare Walsh, a senior official in the Australian Department of Foreign Affairs and Trade and the chair of the Development Working Group of the G-20, recently visited CGD for a round-table discussion with CGD senior staff. Afterwards I hosted her and CGD senior associate, Scott Morris, a former senior US Treasury official, on the Wonkcast.

Having closely followed the creation of the G-20 Development Working Group during Korea’s G-20 presidency in 2010, I was eager for an update what the group’s current agenda. I also wanted to delve more deeply into something that has puzzled me: just how do the deliberations of the Working Group—which is comprised of smart, well-informed and well-intentioned folks like Clare and Scott—translate into changes in the policies of the G-20 member nations?

Among the outcomes of the 2010 Seoul Summit was the Seoul Consensus (named deliberately to contrast with the older Washington Consensus), which included nine pillars, ranging from such issues as infrastructure,  trade and financial inclusion to food security and knowledge sharing.

The agenda has since become more sharply focused and under Australia’s presidency, which will culminate in Leaders’ Summit in Brisbane, Queensland, in mid-November, the focus will be on three key areas:  

·         Increasing financing for infrastructure investment in developing countries by encouraging the right conditions to attract private sector investment in developing economies.

·         Ensuring that developing countries can reap the benefits of the G20’s efforts to improve the international tax system, including in combatting base erosion and profit shifting and increasing the information shared between tax authorities.

·         Assisting developing economies to expand the use of formal financial services and take action to reduce the cost of transferring remittances into developing economies.

All well and good, I say, but just how do ideas such as these get translated into real-world change? 

“You shape the initiative over a series of meetings and you can actually deliver something at the end,” Clare explains. “There’s no one size fits all. The first thing put on the table will be one country’s perspective, but then it gets molded” by ideas and comments from the representatives of other countries, she explains.

Scott, who participated in G-20 Development Working Group meetings when he was working at Treasury, adds that although representatives go into meetings with clear marching orders from their respective governments, “there is a balancing act of having sufficient flexibility to have a meaningful negotiation.”

The working group’s emphasis on domestic resource mobilization will focus on how to eliminate base erosion, or the loss of domestic tax funds as a result of illicit financial flows, an area where CGD research fellow Alex Cobham and others at CGD have been actively involved in both research and policy dialogues, including especially recent work on the automatic exchange of tax information.

Topping the G-20 development agenda, however, is infrastructure—an issue on which everybody seems to agree that much more is needed.

“Infrastructure is a top priority for the G-20, full-stop.” Clare says. “The Development Working Group is taking its cue from the G-20 as a whole and focusing on barriers to private investment in infrastructure.”

Clare explains: “There is obviously an issue around foreign direct investment and why private sector isn’t investing to the level that many of these countries would like. There’s also some issues around project preparation. What’s the pipeline of support? How is support being provided at the national, and even at the regional levels, so that you have good quality projects being developed in a timely way that can attract investment?”

Scott, who in February published a list of Five Ways to Breathe New Life into the G-20 Infrastructure Agenda, says he is heartened to see infrastructure given such prominence in the Development Working Group and the wider G-20 agenda.

“I think that speaks well of the G-20’s approach to development because it is the right priority, but it’s also a good example of where the G-20 can bring value to a complex issue,” he says.

 

For more on the G-20 Development Working Group and what to expect from the Brisbane Summit, tune into the full Wonkcast. 

Direct download: Clare_Scott_final.mp3
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With the Office of the US Trade Representative (USTR) reported to be considering a downgrade of India, trade ties between the two countries are even rockier than usual. Worse, the decision could be announced soon after a newly elected Indian government takes office in May, potentially starting a new relationship on a very sour note.  Arvind Subramanian, a senior fellow at CGD and the Peterson Institute, recently warned about these risks in a piece in India’s Business Standard

It sounded pretty serious to me, so I invited Arvind and CGD senior fellow Kimberly Elliott, author ofDelivering on Doha: Farm Trade and the Poor . to join me on the Wonkcast to help me better understand what troubles the US-India trade relationship. 

At the core are disputes about intellectual property rights, in particular, pharmaceuticals.

“India-US economic relations have been deteriorating quite a bit in the last few years,” says Arvind. If the US does downgrade India (the confusing technical term is “Priority Foreign Country status”), India would be grouped along with the most egregious countries in terms of not doing enough to respect intellectual property rights, Arvind explains.

At stake for the US pharmaceutical industry (known to its critics as “Big Pharma”) is not just India’s own vast market, but potentially markets in other developing countries as well, Arvind says. “What India has been doing with intellectual property is potentially a model for other developing countries to emulate,” he says. “If that happens, there are consequences for Big Pharma all around the world.”

If India is violating intellectual property rights rules, why not bring a case at the World Trade Organization (WTO)?  According to Arvind, “the US is not willing to do that, partly because it feels like it might lose that case and therefore its legitimacy would be undermined.”

Kim explains that at the heart of the dispute are differing interpretations of international trade rules about what constitutes a violation of intellectual property rights. US interests favor a stringent interpretation, while developing countries such as India argue that that the rules provide for a lot of flexibility. Rather than file a WTO case and risk losing, the US might prefer to bring the issue into the political arena by downgrading India’s status.

Kim agrees that such a risk exists, and she welcomes Arvind warning against it. But she doesn’t consider it likely. Priority Foreign Country designation is “pretty rarely used, and the USTR is pretty careful about when and how they use it,” she says.

Since this clash in interpretations over intellectual property rights stretches far beyond US-India ties, I ask Arvind and Kim to state their views on the dispute in a broader framework of global access to medicines.

“I think the core problem with trying to negotiate global rules,” Kim explained, “is that intellectual property is all about striking a balance—you want to incentivize innovation, on the one hand, but the societal benefits come from spreading those innovations as broadly as possible.” This balance should be stuck differently in rich and poor countries, she argues. “It costs a lot to develop a new and effective drug… developing countries with small, poor markets can’t afford those prices. You need a different set of rules for poor countries to ensure global access.”

I ask whether part of the argument is that small, poor markets are not going to provide much incentive for development of new medicines anyway, since investors will base their decisions on expected market in the large, rich markets.

Arvind agrees, saying that “the balance between what you should do to incentivize and what you should do to provide cheaper drugs is different when you’re small and when you’re big.”

But he emphasizes that markets change as countries grow—in the past 20 years Brazil, India, and China have all become very large markets. Their influence changes as they become richer and larger, in part because they become able to pay a fairer share of R&D.

When asked about what advice they would give the USTR about its upcoming decision on India’s status, both Kim and Arvind agreed that it was a tricky situation.

Kim suggests that the USTR should not downgrade India but instead bring parts of Indian law that seem to be in violation of international rules to the WTO.

Arvind says: “Don’t even get close to naming India as a Priority Foreign Country. Let a new government come into power, [and] start a new dialogue on broader trade issues.”

He emphasizes that “there is much more to the relationship than pharmaceuticals” and the US-India relationship should not be dragged down by intellectual property disputes.

Listen to the full Wonkcast for more on US-India trade ties and intellectual property rights rules.

 

My thanks to Kristina Wilson for recording and editing the Wonkcast, and to Kristin Sadler and Aaron King for a draft of this blog post. 

Direct download: arvind_kimfinal.mp3
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My guest this week, behavioral ecomomist Sendhil Mullainathan,is a Harvard professor and non-resident fellow at CGD who is transforming how people think about poverty, and what can be done to support poor people in improving their lives. Sendhil was recently at CGD to discuss his new book, Scarcity: Why Having Too Little Means So Much, in which he explains that limited bandwidth—the ability to stand back from one’s life, assess trade-offs, and make rational choices—is a problem for all of us, but an especially difficult problem for those who live daily with scarcity.  

Sendil’s wonderful book begins with an explanation of why busy people, like him, get overcommitted, then lack the bandwidth to take the seemingly simple steps (like saying no to new commitments) that are necessary to address the problem. He goes on to explain the problem of scarcity with the analogy of a business traveler who attempts to pack for a trip with a too-small suitcase, spending precious bandwidth—mental energy—trying to decide what to place in the bag, only to inevitably leave out something important. I shouldn’t have been surprised then that Sendil arrived for our interview late, his belongings spilling out of a tiny, over-stuffed suitcase.

It was an apt moment for a man who takes care to stress, in his writing, in the Wonkcast, and in his subsequent talk to a packed CGD audience (video here<link>) that the affluent and the poor have the same behavioral responses to scarcity—it’s just that the poor experience scarcity much more frequently and profoundly. “Something that kicks in when we have too little. And that same force kicks in whether you're a busy CEO [for whom time or space in a suitcase is scarce] or a poor person living on the equivalent of a dollar a day. That psychology is the same and universal.”

The tendency to become preoccupied with the thing we lack can be useful for meeting a deadline or stretching a dollar to make rent, but it also has a more pernicious aspect that causes us to neglect the important in favor of the urgent. Sendhil offers the examples of a CEO distracted by thoughts of an overdue project while spending time with her kids and a rag picker who rents her cart, even though setting aside a little money each day to eventually buy one would enable her to cut costs and increase her income.

The CEO’s and the rag picker’s dilemmas effect everyone, regardless of economic status, but Sendhil emphasizes that the inability to focus on important, long-term investments or tasks has an even larger and more negative impact on the poor:

“There are studies on sleep psychology, where they have people pull all-nighters with literally no sleep and then they see the effect of that on IQ and bandwidth,” which not surprisingly are quite substantial, Sendhil explains.  Other studies have shown that poor farmers awaiting their harvests, short of food and stretching what little cash they have until the crops come in, experience about 3/4 of that effect. “So it's as if the poor are pulling an all-nighter every day. This is a huge effect,“ Sendhil explains. 

Sendhil believes the magnitude of this problem should influence the design of programs intended to help poor people, but often the bandwidth of the poor is treated like a free resource. For example, some early conditional cash transfer programs imposed multiple requirements on recipients without regard for bandwidth required to keep track of them all—or the consequences of shifting scarce bandwidth from one priority to another.  Similarly, HIV prevention education programs have sometimes been scheduled for the pre-harvest period, based on the notion that poor farmers seem to have plenty of time on their hands, not recognizing that their minds will be preoccupied with scarcity.

 

Sendhil explored the implications of this research in a 2012 CGD policy paper, Behavioral Design: A New Approach to Development Policy, co-authored with Saugato Datta, that predated the book but touches on many of the same themes, exploring the development policy implications in greater depth. Sugato was a guest on the Wonkcast when that paper was first published, and was among the panelists at the recent CGD event.  

Direct download: Sendhil_3.28_final.mp3
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In India, the government subsidizes open heart surgery but fails to provide sufficient vaccinations for all children. In Egypt, the government pays to fly affluent citizens overseas for advanced medical care, yet one-out-of-five Egyptian children are stunted—they are shorter and/or weigh less than they should for their age because of poor health and insufficient nutrition.

 Developing countries and outside donors spend billions of dollars a year on health care in the developing world. Yet without systems for setting priorities, highly effective, low-cost treatments too often go unfunded even as public money is spent on much more expensive procedures.

 What can be done? CGD senior fellow Amanda Glassman, my guest on this week’s Wonkcast, believes that part of the solution is to create a new institution that draws upon medical and scientific literature to support low- and middle- income governments and donors in resource allocation decisions for healthcare.  This recommendation was first put forth by CGD’s Priority-Setting Institutions for Global Health working group, co-chaired by Amanda and Kalipso Chalkidou from NICE International.  

 I’ve invited Amanda on the show to tell me more about some encouraging news concerning international progress on health care priority setting:

 

 “We learned that the Bill and Melinda Gates Foundation and the UK aid agency have funded an International Decisions Support Initiative (IDSI) at NICE International,“ a branch of the UK’s National Institute for Health and Care Excellence,” Amanda tells me.

 

 Americans who care about development often look at the UK’s Department for International Development (DfID) with envy, so some may be surprised to learn that NICE is a separate entity whose primary job is to advise the UK’s national health service.

 “They also have an arm that works internationally to help developing countries, and to some extent donors, develop their own processes for assessing cost-effectiveness,” Amanda explains. The new funding, a modest $3 million, will make it possible to extend this work.

 “The idea is to show that institutions can be built in countries willing to prioritize spending according to value for money criteria,” Amanda explains. “In the next phase, we hope to see more funding going toward this kind of activity.”

 

 Listen to the Wonkcast to learn more about how the new initiative will function, and the importance of tailoring recommendations to country characteristics and values.

 “The point is to have a process or rules of the game that allow all kinds of considerations to be brought out and discussed in a transparent way, in an evidence-based way,” Amanda explains.  

 

 

 

 

Direct download: Amanda_3.18_final.mp3
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My guest on this week’s Global Prosperity Wonkcast is CGD visiting fellow John Briscoe, named this week as the winner of the 2014 Stockholm Water Prize.

 

Presented annually by the Stockholm International Water Institute to an individual or organization whose work has contributed to “the conservation and protection of water resources and to improved well-being of the planet’s inhabitants and ecosystems,” the Stockholm Water Prize is the most prestigious such award in the world.   

 

Growing up in South Africa, a land of water scarcity, inspired John to pursue a career in water and development.

 

“Water is very visceral for all of us, but particularly for those of us who have grown up in arid environments,” John explains. “At one level it is very intellectual and practical, but at another level it is very deep in our psyche.”

 

As a young man, John lived in a flood-prone village in Bangladesh. I ask him to tell me about that experience (the quotes below, similar to our discussion in the Wonkcast, are lifted from a wonderful paper he wrote last year for the Stanford Center on Food Security and the Environment.

 

“Life in the village was nasty, brutish and short, with life expectancy of women 46 years,” he recalls. “As a young socialist-environmentalist I opposed a plan for an Asian

Development Bank-funded project that would put an embankment around the island, arguing that

this would destroy the ecology and only make the rich richer.”

 

“Twenty-two years later I returned to the village for two weeks, to find a different world. Life expectancy of a

woman was now 68 years, with life transformed primarily because the flood control and irrigation project meant that there were now three high-yielding crops a year.”

 

Today John bristles when those who enjoy the benefits of modern water infrastructure oppose efforts to help provide similar infrastructure to poor people in developing countries, an issue he addressed in a recent CGD blog post: Hydropower for Me But Not for Thee.

 

“It is important to try and see the world through the eyes of people who are affected by these projects—not through a discussion in the Washington Post, not through a discussion on Capitol Hill, not through a discussion with major lobby groups in Washington—but trying to see what happened on the ground,” he says.

 

Our interview also covers John’s experience drafting an influential World Bank water strategy and later working as World Bank country director in Brazil. We also touch on New England’s “Goldilocks” water endowment and how that helped to generate the capital later used to address water scarcity in the arid western US.

 

We end our talk with a discussion about whether and how Africa might learn from Brazil’s success.

 

 

Tune into the Wonkcast to hear more, including details about John’s time in Bangladesh, Mozambique, and Brazil. Read what CGD president Nancy Birdsall has to say about John winning the Stockholm Water Prize. Even better, read John’s terrific paper for the Stanford Center for Food Security and the Environment “Water and Agriculture in Africa: The Politics of the Belly or the Politics of the Mirror.”

Direct download: John_Briscoe_3.18_final.mp3
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My guest on the Wonkcast this week is Scott Morris, a senior associate here at CGD and former deputy assistant secretary at the US Treasury, where he oversaw US ties with the multilateral development banks.

Scott recently led a study group of CGD colleagues and outside experts that reviewed G20 efforts to increase financing for infrastructure in developing countries. The group produced a short note proposing five new deliverables for the G20 on infrastructure finance. 

Direct download: Scott_3.10_final.mp3
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The House Energy and Commerce Subcommittee on Energy and Power held a hearing recently on electricity access in the 21st Century. Todd Moss offered an international perspective, framing energy poverty as a serious and pressing development challenge.

Direct download: Todd_Moss_Testimony_on_Energy_Access_in_the_21st_Century.mp3
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What role can biometrics play in aiding development? My guest this week, senior fellow Alan Gelb, explains why new biometric identification technologies may be the key to radically expanding the social, political, and commercial opportunities for people in the developing world. Biometrics, he says, make it possible to fulfil for people everywhere the right to a unique, personal identity.

Alan explains that there are three principle ways in which people can identify themselves. The first can be something that you have, like a driver’s license or credit card. The second is something you know, like a PIN or a password; and the third is something that you are, like a finger print or iris scan. Biometric technology relies on this third method in order to uniquely authenticate individuals—and the costs are plummeting.   

Although biometrics are often associated with law enforcement and security, especially in the post-9/11 world, two upcoming conferences, the Third Biometric Summit in Miami in March and the Connect ID conference in Washington, D.C. later that month also will include discussions of a booming new market: providing individual identities to hundreds of millions of people in developing countries.

 

Biometrics “most rapid growth is in developing countries,” Alan tells me. “Increasingly the applications are moving from security and law enforcement to a variety of development programs.”

 

While having proof of identity is something many westerners may take for granted, Alan explains that the lack of identification is a major impediment for poor people in the developing world.

 

“There are probably about 750 million children, people under the age of 16, who do not have birth certificates, who have never been officially registered,” he says. “Some of these will catch up later through national ID programs but others will not.”

 

Not having identification prevents people from getting licenses of various types, opening bank accounts, registering property, and even from receiving services from the government. At a time when many people are concerned about governments hacking personal data, reading emails, and listening to phone calls, such unwilled obscurity might appeal to some people as an argument against the use of biometric identification.

 

While Alan acknowledges that such privacy concerns are legitimate, he argues they are not sufficient reason to discourage the use of biometrics to the benefit the poorest.

 

“It's very hard to argue that people at the bottom of the pyramid, and they almost always are at the bottom of the pyramid, should not have an ID on the grounds that ID may be abused,” he says. “Despite all the screams about ID, the ones who don't have it, who should be the most privileged by this argument, since they have the greatest privacy, are also the poorest. They have privacy only in the sense that nobody cares about them. They don't participate.”

Given the opportunity to receive identification, people line up. Alan argues that “there's a very strong lesson coming out of the comparative experience, which is that people will come forward, people are not afraid of technology, provided they think that it has something to offer them.”

Tune into the Wonkcast to hear more, including a discussion of the technical challenges in providing biometric identification at birth. And read Alan’s blog post in which he discusses some of the new trends likely to be hot topics at the upcoming biometric conferences in Miami and Washington.

Direct download: Alan_final.mp3
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Peace is breaking out on Capitol Hill? Can it be true? My guests this week, Tom Hart, the US executive director of the ONE Campaign, and Todd Moss, chief operating officer and senior fellow at CGD, discuss why President Obama’s Power Africa initiative and the complementary Royce-Engel bill have the potential to not only be a great success for Congress and the Obama administration, but also to radically transform the quality of life for the millions of Africans living without access to power.

 

Two thirds of people in African do not have any kind of modern electricity. For example, the average Ethiopian only has 52 kilowatt hours per year. While Todd had long been aware of these numbers, he says that they suddenly took on greater meaning for him when he went to buy a new refrigerator.

 

“I was in a store buying a new refrigerator and I noticed that my new fridge uses about 400 kilowatt-hours per year and I thought: this is crazy that my fridge would use more power than a person would.” Todd produced a chart that helped many people to better understand the extent of energy poverty in Africa.

Lack of modern energy in Africa touches every aspect of life from small entrepreneurs who are unable to grow their businesses to dramatic impacts on education and health.

 

“Not having electricity in Africa means kids can’t study after the sun goes down, so it impacts education, and something like 70-75% of schools don’t have electricity. It means moms cook on open fires inside their homes,” says Tom Hart ONE has worked for years on the fight against AIDS, malaria, and other communicable diseases in Africa. Tom asserts that this has been crucially important work but adds: “More people die from the inhalation of toxic smoke fumes than from AIDS and malaria combined.”  

Given these bleak figures, Tom and Todd say that they are encouraged by the Obama administration’s Power Africa initiative. They also agree, however, that complementary legislation, theElectrify Africa Act introduced by Congressmen Royce and Engel, includes adjustments that would set more ambitious targets and provide more efficient tools to meet them.

One such tweak involves modernizing policies governing the US Overseas Private Investment Corporation.

 

“They need multi-year authorization” and permission to retain a slice of their profits to increase staff levels and do more deals, Todd explains. “They’re actually sitting on a lot of cash. They have paid profits back into the US treasury for thirty years, including about $250 million dollars last year. They’ve already got the capital and the systems in place for the investments. They just need the people to make that happen. I know that sounds very minor but that’s actually the main sticking point. “

 

Todd emphasizes that while limited staff is a significant obstacle to OPIC’s effectiveness in Africa, it is not the only obstacle. OPIC needs more flexibility to invest in fossil-fuel projects, including natural gas that Todd says are necessary to make rapid progress in bringing modern energy to Africa. The issue has become more pressing as several African countries are on the brink of oil and gas booms that will see them become energy exporters—even as their own populations lack for electricity.

 

“Given the current policies, OPIC would not be allowed to participate in natural gas power plants where Ghana would turn its own natural gas into electricity for its own people,” Todd explains. “We think that some flexibility for very poor countries—we’re not talking about letting OPIC invests in coal plants in Brazil—we’re talking about natural gas in poor African countries, they should be allowed a little extra flexibility,” he says.

 

I tell him that even a climate hawk like me finds such arguments persuasive. But what about Capitol Hill? Is this another good idea that will fall victim to a combative and stagnant Congress?

 

Tom is hopeful. “We have yet to have a bad meeting about [the Electrify Africa Act] on the Hill,” he says. “It has been introduced by leading Republicans and leading  Democrats, and the House Foreign Affairs Committee, as well as the Africa subcommittees. It’s got 44 co-sponsors on both sides of the aisle. It’s quite tremendous when you see both Republicans and Democrats want to do something good and powerful, potentially transformative, that does not have a negative impact on the federal budget.”

 

Todd says he shares Tom’s optimism, viewing  the Royce-Engel legislation as, “a very impressive and long-lasting legacy for the United States and for the Obama administration in sub-Saharan Africa which is after all, becoming increasingly important to us just at a time when we’re losing a lot of our influence in that region.”

 

Tune in to the full Wonkcast to hear from Tom what ONE volunteers will be doing over the next two weeks to help speed along this bipartisan, low-cost, and potentially transformative bill.

 

Direct download: Todd_Tom_2.6_final.mp3
Category:general -- posted at: 3:57 PM