Excerpt from the World Bank’s just-published World Development Report 2010 (which this year takes climate change as its theme – overview pdf):
Enshrining a principle of equity in a global deal would do much to dispel such concerns and generate trust. A long-term goal of per capita emissions converging to a band could ensure that no country is locked into an unequal share of the atmospheric commons. India has recently stated that it would never exceed the average per capita emissions of high-income countries. So drastic action by high-income countries to reduce their own carbon footprint to sustainable levels is essential. This would show leadership, spur innovation, and make it feasible for all to switch to a low-carbon growth path.
Hey, did the Bank just endorse Contraction and Convergence? Not quite. As I explained a few weeks back, converging to equal per capita emission levels is not the same as converging to equal per capita emission entitlements – the difference being the small matter of whether poor countries get to benefit from emissions trading markets worth, oh, a few billion dollars. Shame the Bank missed that trick. Not so UNCTAD, on the other hand, as we saw a couple of weeks ago:
… if population size were to be given an important weight in the initial allocation of permits across countries, many developing countries would be able to sell their emission rights because they would be allotted considerably more permits than they need to cover domestically produced emissions.
Interesting coda: I was having lunch the other day with a senior official from an international agency that shall remain nameless. I was saying I couldn’t figure out why low income countries didn’t get out there and demand quantified emission targets – allocated on the basis of immediate convergence to per capita convergence in emission entitlements. His answer: because they lack an equivalent to the OECD – i.e. a think tank that supports them as a bloc.
Back in the 1970s, he continued, UNCTAD was increasingly showing signs of fulfilling this role; but it started to get too good at it, so major donor nations deliberately scaled back its funding. All the more welcome, then, to see UNCTAD punching above its weight on the biggest development issue of the 21st century. Bravo.
(PS. You might think that the G77 performs the role of an OECD for poor countries, on climate as on other issues. But you’d be wrong, on two counts. First, there’s the point that G77 lacks a secretariat – in contrast to OECD’s small army of extremely smart people in Paris. But second and more fundamentally, there’s the point that however cohesive G77 might look like from the outside, the fact is that low and middle income countries have increasingly divergent interests on climate change.
Partly it’s a question of where climate finance goes: middle income countries want to see lots of cash being pumped into low carbon development programmes that will help them to grow and to access clean technology, whereas low income countries are far more concerned with adaptation.
But more fundamentally, it’s about the emission entitlements issue. Pretty much all low income countries have per capita emissions far below the global average – so if emission permits were shared out on an equal per capita basis, they’d be making real money. Not so most of the major emerging economies – above all China, which already has per capita emissions above the global average, and would hence be a net purchaser of permits from the get-go, whenever the convergence date might be. No surprise, then, that G77 skirts around the issue, preferring to lead on the need for developed countries to cut their own emissions and cough up more climate finance…)
A few days ago the House of Commons International Development Committee released its latest report (entitled Aid Under Pressure: Support for Development Assistance in an Economic Downturn) and there are a few points which might be of interest to Global Dashboard readers.
As its title would suggest, the report focuses on the impact of the financial crisis on international development efforts. It opens on a grim note with the news that DFID estimates that by the end of next year 90 million more people will be living in extreme poverty as a result of the crisis. Moreover, the WHO believes that up to 400,000 additional children could die as a result. The International Development Committee adds that progress towards the MDGs may have been set back by up to three years.
A major point made in testimony given to the Committee was that initial expectations that the developing world would be insulated from the impact of the crisis have proven false. Whilst the contagion effect of the crisis has only directly harmed western economies, the indirect knock-on effects have applied pressure to transnational business flows worldwide. The World Bank reports that of the 107 counties it categorises as ‘developing’, 40% are ‘highly exposed’ to the downturn.
Unsurprisingly-though quite rightly-the International Development Committee’s response to all this is to insist on the importance of maintaining ongoing aid commitments, as agreed at the G20 summit in July.
Aside from that, the issue of tax havens is highlighted and it would seem that the British government is increasingly committed to making progress in this respect. Gordon Brown in particular has been forthright on this issue, but his government seems somewhat hamstrung at present and we shall have to await developments.
In the wake of the London Summit, institutional reform is back on the agenda. The need to overhaul the IMF and World Bank, particularly in regard to apportionment of votes within those organisations needs to be a priority for the post-crisis politics of global governance. Indeed, reform has been presented as a condition for the boost to IMF funding that the G20 agreed upon earlier this year. Broader questions of operational versatility are also important. In these respects, the Committee’s report is strong on good ideas and analysis, but light on suggestions for how Britain can help bring about the desired changes. For that perhaps we need to wait for the DFID White Paper due later in the summer.
On a seemingly superficial note, the Committee proposes that DFID’s name be changed and puts forward ‘British Aid’ and ‘DFID UK’ as possibilities. The intention, it seems is to increase the ‘visibility’ of UK international development spending. Of course, DFID does a lot more than aid, so I think we can immediately dismiss the first suggestion. As a reserved Brit, the idea of being so brash as to use ‘UK’ on international development work is too reminiscent of the US tendency to splash the Stars and Stripes on aid parcels. It seems… immodest, somehow. But it might be a good idea all the same – US aid is part of its soft power and in the same way, the work of the Department for International Development has the potential to be a significant contributor to British attempts to win ‘hearts and minds’, particularly in countries like Afghanistan. After all, the Committee’s report points out that DFID is the largest donor to the World Bank’s International Development Association. Maybe blowing our national trumpet more boldly isn’t such a bad idea. Though one wonders if there isn’t a snappier name out there somewhere – suggestions welcome, of course.
Here in Britain, the fallout from recent revelations about MPs’ expenses continues. Meanwhile, it seems that World Bank officials have been up to similar tricks. Admittedly we cynics may scoff at their lack of imagination – after all, they haven’t been buying birdhouses or maintaining their moats with public funds. But Peter Bosshard at International Rivers, reviewing a book by former Bank staffer Steve Berkman, highlights some dubious claims all the same (hat tip: Bretton Woods Project). Berkman’s book:
reports how Nigerian officials charged $2,200 for 18 cups of tea and snacks at a roadside stall under a World Bank loan (and got away with it). A project office with eight staff in the same country charged a switchboard for 60 telephones, 48 air conditioners, 14 shredders and 12 refrigerators to the operating expenses of another Bank project – all at prices well above the going market rates. They also claimed expenses for television and video sets at 249,999 Naira apiece – more than ten times the equipment’s street value, but just one Naira less than the amount which triggers stricter controls.
Few will be surprised to hear about World Bank money disappearing – Berkman quotes an internal report which found that ‘stealing from Bank funds is the rule, not the exception’. But all the same (and perhaps I’m being naïve), one would have thought that World Bank employees would have enough problems with the endemic low-level fraud that their organisation is known for, without contributing to it themselves. Of course, unlike British parliamentarians, World Bank officials aren’t politicians and being insulated by their institution, will never have to face the wrath of the public.
As David just noted, this morning’s Lex column in the FT is relatively upbeat about the dangers of protectionism, arguing that “the disaggregation of global supply chains, the source of the huge efficiencies that companies pass on to consumers, will not be easily undone.”
Whether or not that’s right (and like Willem Buiter, Martin Wolf is also a good deal more downcast than the Lex team), it’s interesting to compare today’s Lex column with what they had to say about capital flows to emerging markets just a couple of days ago. Here’s the bit that made me sit up:
Take Brazil and India, the globe’s ninth and 12th biggest economies, according to the International Monetary Fund’s latest estimates. While the developed world is expected to shrink by 2 per cent this year, the IMF reckons Brazil will grow by 2 per cent, and India by 5 per cent. Why? One answer is that they have stable banks, relatively closed economies, and large internal markets. This has insulated them from much of the global turmoil.
The contrast with East Asia is stark. Singapore’s economy shrank at an annualised 17 per cent rate at the end of last year, South Korea by some 20 per cent. Yet this is not for lack of capital. Asian economies, after all, are global creditors. Their economies have shrunk instead because they are heavily oriented towards collapsing international trade. Meanwhile, their local markets are undeveloped and weak. Asia’s challenge is how to best deploy its accumulated surpluses to boost domestic demand.
Thanks to Flickr user Oliver Ingrouille
Prepare to heave at this New York Times screed on how tough life is for bankers these days.
“Nobody in the investment banking world is expecting pity, or even a sympathetic ear, these days,” the article begins, before quoting banker after banker who not only feels “unfairly singled out“, but wants destitute home owners to accept the lion’s share of the blame:
Financiers tell their not-for-attribution account of the mortgage crisis like this: Americans undersaved and overspent for decades, relying on rising property values to bankroll their lifestyles.
But nobody on Wall Street forced United States homeowners to take out loans on houses they couldn’t afford, or refinance mortgages to spend money on cars they shouldn’t have bought.
Of course, others are at fault too. Ratings agencies failed to warn innocent financiers of the risks they were taking, while regulators… well, they should be ashamed of their many failings. Bankers did just one thing wrong. They trusted us too much – and we let them down.
Now they are spat on as they cross the sidewalk from their limousines and are too embarrassed to admit what they do at champagne receptions. “I’d almost rather say I’m a pornographer,” says one poor soul. “At least that’s a business that people understand.”
Then there’s the last devasting blow – having their bonuses cut:
“Fact is that this is a terrible way to make a living — except for the money,” Ken Miller, a former vice chairman at Credit Suisse First Boston and now a private investor, said. “The lifestyle is terrible — the hours, the sucking up. These guys must feel like they’re the victims of a capricious god.”
Yes indeed, Ken, it seems they do.