This paper reassesses the importance of colonial status to investors before 1914 by means of multivariable regression analysis of the data available to contemporaries. We show that British colonies were able to borrow in London at significantly lower rates of interest than non–colonies precisely because of their colonial status, which mattered more than either the convertibility of their currencies into gold or the sustainability of their fiscal policies. Allowing for differences not only in monetary and fiscal policy but also in economic development and location, the Empire effect was, on average, a discount of around 100 basis points, rising to around 175 basis points for the underdeveloped African and Asian colonies. We conclude that colonial status significantly reduced the default risk perceived by investors.
This paper extends contemporary theorizing on national income inequality to the possible role of regional integration in explaining the recent increase in income inequality in Western European countries. Regional integration is conceptualized as the construction of regional political economy through intensified political and economic interaction and exchange. It is argued that political integration increases inequality through welfare state retrenchment, while economic integration increases inequality by exposing labor to international competition but later decreases inequality as welfare states adopt social protections to compensate for this competition. These arguments are assessed with data from 12 Western European countries for the 1969-1999 period. Results from random—effects and fixed—effects models support these arguments. Also consistent with these arguments are the findings that the welfare state dampens the effects of political and economic integration, and that the effects of political integration weaken at higher levels of economic integration. This study suggests that European integration is an important factor in understanding income inequality in Western Europe.
This paper offers empirical evidence that real exchange rate volatility can have a significant impact
on long-term rate of productivity growth, but the effect depends critically on a country’s level of
financial development. For countries with relatively low levels of financial development, exchange
rate volatility generally reduces growth, whereas for financially advanced countries, there is no
significant effect. Our empirical analysis is based on an 83 country data set spanning the years
1960-2000; our results appear robust to time window, alternative measures of financial development
and exchange rate volatility, and outliers. We also offer a simple monetary growth model in which
real exchange rate uncertainty exacerbates the negative investment effects of domestic credit market
constraints. Our approach delivers results that are in striking contrast to the vast existing empirical
exchange rate literature, which largely finds the effects of exchange rate volatility on real activity
to be relatively small and insignificant.
Political scientists typically conceive of causation purely in "mean–centric" terms: the statement "X causes Y" is taken to imply that an increase in the value of X changes the mean of the distribution of Y. This article challenges that point of view. Many independent variables of interest to students of politics have an effect by altering the variance, not the mean, of the distribution of the dependent variable. This form of causation is alien to methodology textbooks and greatly underappreciated in empirical work. Thinking about the causes of changing variance opens up a theoretical dimension that has heretofore been neglected; understanding the causes of changing variance can provide a more fine–grained empirical description of the political world.
For Western economists and journalists, the most distinctive facet of the post-war Japanese business world has been the keiretsu, or the insular business alliances among powerful corporations. Within keiretsu groups, argue these observers, firms preferentially trade, lend money, take and receive technical and financial assistance, and cement their ties through cross-shareholding agreements. In The Fable of the Keiretsu, Yoshiro Miwa and J. Mark Ramseyer demonstrate that all this talk is really just urban legend.In their insightful analysis, the authors show that the very idea of the keiretsu was created and propagated by Marxist scholars in post-war Japan. Western scholars merely repatriated the legend to show the culturally contingent nature of modern economic analysis. Laying waste to the notion of keiretsu, the authors debunk several related “facts” as well: that Japanese firms maintain special arrangements with a “main bank,” that firms are systematically poorly managed, and that the Japanese government guided post-war growth. In demolishing these long-held assumptions, they offer one of the few reliable chronicles of the realities of Japanese business.
The literature on the benefits and costs of financial globalization for developing countries has
exploded in recent years, but along many disparate channels with a variety of apparently
conflicting results. There is still little robust evidence of the growth benefits of broad capital
account liberalization, but a number of recent papers in the finance literature report that
equity market liberalizations do significantly boost growth. Similarly, evidence based on
microeconomic (firm- or industry-level) data shows some benefits of financial integration
and the distortionary effects of capital controls, while the macroeconomic evidence remains
inconclusive. At the same time, some studies argue that financial globalization enhances
macroeconomic stability in developing countries, while others argue the opposite. We
attempt to provide a unified conceptual framework for organizing this vast and growing
literature, particularly emphasizing recent approaches to measuring the catalytic and indirect
benefits to financial globalization. Indeed, we argue that the indirect effects of financial
globalization on financial sector development, institutions, governance, and macroeconomic
stability are likely to be far more important than any direct impact via capital accumulation
or portfolio diversification. This perspective explains the failure of research based on crosscountry
growth regressions to find the expected positive effects of financial globalization and
points to newer approaches that are potentially more useful and convincing.
Revised version of International Monetary Fund, Working Paper WP/06/189, August 2006.Download PDF
Book reviews of: America at the Crossroads: Democracy, Power, and the Neoconservative Legacy
by Francis FukuyamaTaming American Power: The Global Response to U.S. Primacy
by Stephen M. WaltDiplomacy Lessons: Realism for an Unloved Superpower
by John Brady Kiesling1.During the cold war Americans believed that in order to eliminate risks of nuclear war, a policy of edgy coexistence with the Soviet Union was worth pursuing. Few believed that America should prepare for a military showdown with Moscow. In the debates between doves and hawks, everyone assumed there would be a very long contest with the Communist world.The rapid collapse of the Soviet Union left the US as the only superpower, or so it seemed. George H.W. Bush talked about a new world order, in which the "real world" of American supremacy and the formal world of the UN Charter would somehow merge. But Bush Senior was soon gone, and Clinton had no large international vision. This may have been a blessing, and relations improved with allies, including France and Germany, which had occasionally been miffed by shrill official statements about the US as the "indispensable nation" endowed with greater foresight than others.People such as Dick Cheney and Donald Rumsfeld, who had long thought it time to proclaim US hegemony, were enraged by Clinton's failure to do so. When George W. Bush came to power, September 11 provided what seemed an unchallengeable opportunity for a drastic change in strategy and in diplomacy. The "war against terrorism" was now seen as a kind of World War II reborn, yet it was without a clear enemy and without allies comparable to Stalin's Soviet Union, or even Churchill's British Empire. A brief era of American triumphalism—or imperialism—led to but did not survive the disaster in Iraq and the fall in American popularity and influence abroad that the war provoked.The US is back to debating what to do next but the setting of this debate is quite different from that of the past. In addition to the familiar world of interstate conflicts, some of the most horrible wars of recent years have been internal; and some of the most spectac-ular acts of violence have been committed by private groups of terrorists not allied to any state. More than a few of the members of the UN—Zimbabwe, Somalia, Uzbekistan—are "failed" or murderous states, whose inhabitants live in a nightmare of chaos and violence. The "realists," i.e., those who believe national interests are fundamental—must now take into account the UN, which for all its flaws serves to certify legitimacy, as the current administration discovered when it defied the predominant opinion of the Security Council in attacking Iraq.It is also a world in which globalization—partly under American leadership—erodes effective sovereignty of states (although least for the US) and creates a world economy that offers a very complex combination of permanent competition—especially for oil— and incentives to cooperate, not only for states but for private interests. There is now a transnational society that includes multinational corporations, nongovernmental organizations, criminals, and terrorists. This global economy, with its unprecedented combination of private and state capitalisms, can be immensely destructive, as when it eliminated millions of jobs in developed countries. It deepens inequality—at home and abroad. It lacks an adequate network of regulatory agencies and what international governance exists is stronger for economic relations through such organizations as the IMF and WTO than for political ones. So far, violence between states competing in the global economy has been limited, but in the contest for energy sources military force is already being used, for example in Nigeria, and could well increase. This, then, is the kind of world in which the "sole superpower" (as well as the largest source of global warming) must act: a world that is anything but flat.America is now being widely criticized as a new empire. Already toward the end of World War II De Gaulle wrote about FDR's will to power, a will that soon took the form of an American-controlled network of unequal alliances, military bases abroad, and economic dominance. The harshest criticisms of US imperial aims were made against Bush after 2001: the US and much of the rest of the world fell out over America's new unilateralism and its refusal to accept the International Criminal Court, the Kyoto Protocol, and arms control generally. Most nations were appalled by America's flaunting of its dominance; its use of preventive war, particularly the invasion of Iraq, was widely seen as proof of a will to reshape and dominate the Arab world. America's new mixture of patriotism and religiosity annoyed many secularists at home and abroad, and the American way of fighting terrorism by bombing and torturing Iraqis and mistreating Afghans shocked many previously well-disposed allies.Another category of criticisms concerns the American belief that globalization should come only in the orthodox form of American free-market and pro-business policies. Many Europeans see this as a denial of the state's responsibility to provide social justice, public services, and safety nets for the poor, the unemployed, and workers. Other sources of dismay were America's reluctance to include in international agreements provisions for standards of health or workers' rights, or to accept codes of conduct for multinational corporations, as well as the connections between American corporations and American political agencies —not only in occupied Iraq.The most flagrant and widely deplored contradiction is between America's self-image as a force for democracy and human rights and a reality in which many rights at home are sharply limited, the death penalty continues along with the torture of "enemy combatants," while the US repudiates the international laws of war. Abroad, the US support of dictators and its failure to protect victims of genocide in Rwanda and Darfur have contributed greatly to anti-Americanism. Foreigners can observe for themselves, on the one hand, the weakness of public services throughout the US, the cult of low taxes, and the distrust of any redistributive role for government and, on the other hand, the formidable apparatus of American military and intelligence services throughout the world and in the US itself. The strength of America's destructive power and the lack of American interest in nation-building and development abroad have become all too evident.Anti-Americanism is also fostered by various American illusions: "all human beings want what we want— freedom," to paraphrase George W. Bush; hence democratization should be easy. Democratization has become confused with elections, and the legal institutions and protection of rights needed for a workable democracy are neglected. America sometimes downplays or denies its own nationalism in its rhetoric, and yet America has asserted its sovereignty more forcefully than any other advanced nation in recent history (including Mrs. Thatcher's Britain). Most other countries are more affected and limited by US policies than the US is by anyone else's. Therefore most countries are very uneasy about a world in which the US is the single superpower.Thus, while the mighty US faces a huge number of problems that affect other nations as well—including those of global warming and the depletion of natural resources—at the same time it distrusts or attacks global institutions such as the International Criminal Court that could be of some help. It shows little understanding of the pride, fears, and humiliations of others, and has damaged its "soft power"—the power of influencing others through persuasion and example—by its policies in Iraq, its recent abuses in Abu Ghraib and Guantánamo, and its restrictions on foreigners eager to come to the US.2.Several recent books have tried to go beyond such failures of the Bush foreign policy, particularly the war in Iraq and the violence committed in carrying it on.Francis Fukuyama's book might have been called "Goodbye to Neoconservatism," which has dominated the Bush administration. He describes neoconservatism as a doctrine with four components: (1) "a belief that the internal character of regimes matters and that foreign policy must reflect the deepest values of liberal democratic societies," (2) a belief that American power "has been and could be used for moral purposes," (3) "a distrust of ambitious social engineering projects," and (4) "a skepticism about the legitimacy and effectiveness of international law and institutions to achieve either security or justice." He discusses how these aims have been contradicted by American support for dictatorship in the Transcaucasus, and its failure to provide adequate aid for people in Darfur or for the eradication of AIDS in Africa. He now calls for "multi-multilateralism," involving "new institutional forms," public and private, national and international, mainly aimed at meeting the economic needs of the global economy. He thinks such multilateral relations will be more efficient than treaty-based formal institutions such as the UN and its specialized agencies.Since he believes this multilateralism is necessary, he criticizes America's attachment to absolute sovereignty. He also denounces the negative effects of American economic and political domination, which "rests on a belief in American exceptionalism that most non-Americans simply find not credible." Nor is it tenable, since "it presupposes an extremely high level of competence" which we don't have, and a domestic political system with greater attention to, and willingness to finance, foreign policy goals than the American one. Moreover, "although political reform in the Arab world is desirable, the US has virtually no credibility or moral authority in the region."Fukuyama believes that US power is most effective when it is latent and not seen (he mentions for example recent relations with India and other parts of East Asia), and most important when it is used to shape international institutions. He is obviously very far from his former neocon allies. Success in promoting democracy abroad depends on the past historical experience of a country, on the willingness of its government to organize free elections and thus "permit some degree of freedom for the groups that are part of civil society to organize" (as in Serbia or Ukraine), and on the political will within a society to overcome "bad governance, weak institutions, political corruption." His model for an "engine of institutional reform" is the European Union's process of admitting new members, which requires them to satisfy democratic requirements before being allowed to join the EU.Why did Fukuyama, in view of his emphasis on multilateral institutions, ever sympathize with neoconservatism in the first place? The "realistic Wilsonianism" he now embraces, along with his condemnation of excessive use of American force and threats abroad, is obviously very far from the neoconservatives' credo. Also, how could he fail, as he does, to emphasize a crucial element in neoconservative doctrines— imperial ambition and pride? It has served to connect the neoconservatives and the apostles of brute force— like Cheney and Rumsfeld—who don't take seriously the democratic proselytizing of the neoconservatives. The imperial nationalism of both groups reminds one of that of the French Revolution, which wanted both to export the "principles of 1789" and to expand French rule of other countries. In neoconservative thought, the idea of expanding hegemony was as important as that of encouraging democracy. The neoconservatives failed to understand the difficulties of both.Stephen M. Walt's book is no less critical of the Bush administration's record than Fukuyama's. Walt and his former colleague John Mearsheimer were prescient opponents of the invasion of Iraq. His book is, however, primarily an incisive analysis of how the world's other countries have responded to American supremacy and tried to limit it. His chapter on "the roots of resentment" is particularly impressive. It is not only American power and official policies that are resented but also—in varying parts of the world— American political values, cultural products, and the activities of "US corporations, foundations, media organizations, and various nongovernmental organizations." He writes that "the combination of a universalist political philosophy and a strong evangelical streak" is "bound to be alarming to other countries, including some of our fellow democracies." Walt deplores Americans' failure to understand foreign hostility. American leaders and much of the public, he charges, suffer from "historical amnesia," fostered by "US textbooks and public rhetoric" which portray America's international role as "uniformly noble, principled and benevolent."Walt finds that while there have been few formal alliances to contain the US, other countries resort to "soft balancing," defined as "the conscious coordination of diplomatic action in order to obtain outcomes contrary to US preferences." The refusal of the main European countries to back the war in Iraq is the most obvious example. At the moment, Venezuela, Bolivia, and Cuba have formed an alliance against American power in the Caribbean and Latin America, and in one degree or another, Brazil, Argentina, and Mexico are resisting American economic and diplomatic pressures. Some states, he writes, are also mobilizing their domestic resources in ways that limit the US capacity to pressure them. Such a strategy can emphasize conventional military power, as can be seen in the growing strength of Chinese military forces. It can also take the form of terrorism and building weapons of mass destruction, both apparently aims of the current regime in Iran. The US should try to discourage other nations from taking such measures, Walt argues, by seeking "to convince most states that they have little to fear from US power unless they take actions that directly threaten vital US interests." He believes a principal task of US policy is to persuade other nations that its "privileged position is legitimate," which requires that the US respect established international law and procedures, something it has failed to do before and throughout the war in Iraq.Some nations, he believes, have collaborated with the US for protection against threats, as for example Lebanon and Jordan, which wanted US help against the threat of Syria. Some foreign leaders "bond" with Bush—Blair being a cautionary example. He also mentions the efforts of foreign powers to influence Congress and the administration, the most flagrant case being the Israel lobby, the subject of his taboo-breaking essay with John Mearsheimer in the London Review of Books and of Michael Massing's recent article in these pages.Writing as a traditional realist, Walt argues that America's national interest demands that it try to achieve a just peace between Israel and the Palestinians. If that fails because of Israel's unwillingness to grant the Palestinians a workable state, the US should continue to support Israel's existence but no longer act as if Israel's interests and US interests were identical. Instead, the US should end its excessive military and economic support of Israel.Moreover, he argues, large US forces are no longer needed in Europe and only air and naval bases are needed in Asia. The US should avoid preventive war, intervene in the Middle East only with the participation of others, and withdraw from military engagements, if they become necessary, after a "threat has been thwarted." The US should also deemphasize its nuclear weapons programs so as to decrease "other states' incentives to get nuclear weapons of their own." Bush, by putting North Korea and Iran in the "axis of evil," only ensured that they would act more aggressively.Similar conclusions are reached by John Brady Kiesling, for nineteen years a career foreign service officer with wide experience in the Near East and in Greece; he resigned publicly— with a strong letter explaining his decision to Colin Powell—when he became convinced that the Bush administration was determined to invade Iraq. His book provides the invaluable perspective of someone who has seen American foreign policy from the inside. What we learn from his lively, often witty, and incisive report is invaluable. The Bush administration hoped that some Greek leaders and much of the public would support its invasion of Iraq in view of past US aid to Greece and collaboration with its military. In fact, he writes, the Iraq war was unpopular throughout Greece and US standing there suffered because of it. American success depends "on respecting domestic politics in other states as well as our own. Those politics ultimately compel America to embrace the rule of law...as the basic principle of effective diplomacy."Notwithstanding the advice of Kiesling and others, the administration simply didn't understand that a Greek politician who supported the war would be in trouble. He also argues that "when the US promotes local and regional security and prosperity, even to the short-run benefit of tyrannical regimes, it creates the soil in which democracy can grow." This happened in Taiwan, where US protection helped to allow democratic forces eventually to take power.Kiesling gives his own account of conflict between two types of foreign service officers: US diplomats "whose playing field is the foreign country in which they are posted," and those he calls bureaucrats, such as the Bush administration's champions of
self-aggrandizement and political fantasy at home, whose job is reinforcing the prevailing inclination of the chief policymakers. Lurking in some obscure or less obscure university is all the intellectual underpinning required for any fatuous scheme.
He mentions the neoconservatives who, in the months before the Iraq war, introduced Professor Bernard Lewis to Dick Cheney.Successful counterterrorism, Kiesling writes, requires respect for the lives of innocents. Iraqis, for instance, see dozens of their innocent fellow citizens again and again being sacrificed in American bombing attacks that often are not successful against terrorists in any case. Yet their dismay and anger are not understood. Kiesling's condemnation of torture is eloquent: "The US war on terrorism is at heart a war to strengthen the rule of law in societies whose citizens are themselves often helpless victims of illegitimate violence." The use of torture by the US only makes a mockery of attempts to sustain the rule of law. As a working diplomat, he was appalled by bureaucrats who "took the word of their president that preemption of terrorism required unilateral violence and the death of innocent civilians."Kiesling argues that US insistence on expanding its own nuclear arsenal destroys any effective nonproliferation strategy. He finds secret intelligence operations often damage US interests—for instance, when the CIA backed corrupt warlords in Afghanistan. "Secrecy's role in the US government is to keep senior officials from learning from their mistakes." The "war on terrorism" for Kiesling has been a "failed reprise" of the moral clarity of the cold war. It has turned the most powerful nation into the most frightened one. He hopes for a political leadership "brave enough" to bring into the open the "hidden environmental, social, and other costs" of the American way of life. He writes in the tradition of George Kennan when he argues that while Americans may argue that their security depends on the spread of morality and justice abroad, they should first practice both at home.3.What would be the outline of a decent and effective American foreign policy?The first prerequisite, in my view, is to improve America's own economic and moral condition, a change that would be well received abroad. This would mean a return to the rule of law and to the protection of civil liberties, and an end to efforts to escape from the obligations of international law in the fight against terrorism. The US should accept, despite its flaws, the Kyoto Protocol on global warming and try to improve it; and it should sign the International Criminal Court treaty. Accepting both would undo some of the damage of recent years. The US also needs a fiscal policy that would take seriously the reduction of America's deficit and debt, and therefore of American dependence on foreign countries that are willing to subsidize the US by buying its debt in exchange for what we provide in return—security for Japan, access to US markets in the case of China. Otherwise the US will remain, in Charles Maier's words, an empire of consumption. Greater investment at home in technological and educational progress is indispensable. A serious effort, including a tax on carbon emissions, to reduce the consumption of oil in favor of new sources of energy is essential for several reasons: to preserve the global environment from global warming and other dangers, to escape from dependence on corrupt and tyrannical regimes in the Middle East and elsewhere, and to protect against the temptation to seize control of oil production in, say, Iraq as an insurance against possible trouble in Saudi Arabia.A second prerequisite is a willingness to break dramatically with the foreign policies of both Republicans and Democrats. Throughout the postwar era, and especially after the fall of communism, these policies have oscillated from multilateralism to imperialism, but they have assumed, as Walt does, that the world could only benefit from American primacy, seen as both a fact of power and a condition of world security and prosperity. Even Democratic critics of neoconservative hubris and critical commentators such as Walt have not put in doubt the need for the US to set the course for its partners and for the world. Nor have the merits of the US being the world's only superpower been seriously questioned, except on the isolationist fringe and among the libertarians of the Cato Institute. These deeply ingrained views, by now as ritualized as the late thoughts of Mao, need to be changed. They do not correspond with the realities of power. The US has an undeniable, overwhelming superiority in raw military might and in the capacity to project it. But as soon as we turn to other kinds of power—"hard" economic power, which is the power to reward, or bribe, and to coerce; "soft power"; and what I would call "building power," the power to help others construct their institutions —we see that we live in an increasingly multipolar world. This has become all the clearer in view of the recovery of Japan, the spectacular rise of China and India, and the growth of the EU, notwithstanding the current sluggishness of the European economy.Global economic competition is now a clash of varieties of capitalisms, each one expressing a specific, mainly national, conception. And in recent years the US has lost ground, whether in its influence in international economic organizations such as the WTO or in its generally inadequate efforts to help nations like East Timor and Sri Lanka and Haiti to build badly needed national institutions. This is the result of many factors: the war in Iraq, the war on terrorism, and the US ideological hostility to "nation-building," a view that is overtly expressed by the US military but is generally supported by the conservative American preference for the market.In fact, if we switch from a consideration of the ingredients of power to whether it can actually be deployed, we find that much American military power is practically unusable because of international risks (as with nuclear weapons) and domestic opposition both to the draft and to protracted wars with high casualties. Finally, even when US military power can be used, it is often ineffective or worse, as is shown by US failures to anticipate political problems in Iraq and to protect the population there from insurgent and sectarian violence. Military power, in short, can serve as a deterrent, but America should avoid using it to destroy cities, people, and regimes. For the most part, only soft power, and the power of state-building and of promoting economic development, can have beneficial results.Even if America's power were as enormous as US politicians assert, there is a huge difference between American hegemony now and past empires. Nineteenth-century Britain had much less military power than the US today, but it had much more ability to get things done within its empire than the US in today's world. Hence the need for shifting from a policy of primacy (however cautious and considerate, as in Walt's analysis) to a genuine policy of partnership based on reciprocity and compromise. No doubt a world of 191 UN members and thousands of nongovernmental organizations requires leadership but this can be exerted by more than one nation (as has usually been the case in the EU); and that one nation should not always be the US. The leader, or group of leaders, needs to work by means of persuasion and diplomacy, not command. The world political system too needs a degree of democratization.A true partnership is particularly necessary concerning several major issues. The first, and most urgent, is the Middle East. Two conflicts there have bred terrorism, jihadism, and hatred of the West, particularly of America. First, the Israeli–Palestinian conflict has been scandalously neglected since the fiasco of Camp David in 2000, despite the "road map" which has remained largely fictional. By now it should be clear that the occupation has long been the root of the trouble. It does not justify Arab terrorism aimed at civilians, but it goes a long way toward explaining it. Cutting off aid to the Palestinians because they voted for Hamas was exactly the wrong thing to do: it was punishment for exercising democratic choice. A unilateral "solution" imposed by Israel is no solution at all, only a recipe for continuing war.The US and its partners—the so-called Quartet—need to work hard for a two-state solution close to the one almost reached at Taba in early 2001. Then and now, a settlement would require that the Palestinians give up, in practice, the right of return to Israel, but it would provide them with a workable state that is not truncated or walled-in and has financial support. In arriving at such a settlement, Hamas— obviously divided between extremity and moderation—could be legitimately pressured to recognize Israel explicitly and to condemn terrorism unequivocally. In the immediate future, what is needed is a cease-fire based on a Palestinian declaration renouncing rocket attacks on Israel, and an Israeli declaration renouncing incursions and air strikes in Gaza. Moreover, the Palestinians would release the Israeli corporal held by their gunmen, Hezbollah would release the soldiers captured during its cross-border attack, and the Israelis would release the Palestinian officials they have seized. To achieve these outcomes, as war spreads in Lebanon, would require far more active American participation than has been the case so far. The destruction of Hamas by disproportionate Israeli reprisals would have the same effects as destruction of the Palestinian Authority by Sharon earlier: it would escalate violence, further radicalize the Palestinians and much of the Arab world, and encourage further attacks on American passivity or "complicitly."In dealing with Iraq, what I proposed in these pages two years ago seems all the more necessary—a deliberately and carefully planned American withdrawal that would force the feuding politicians and the conflicting ethnic and religious factions to confront the reality of civil war and continued killing, and to try to find a political solution to the insurgency and to sectarian conflict. As long as American forces stay there, they both exacerbate the discord and terror and provide Iraqis with an alibi for ceaseless haggling. If the Iraqis want peace and unity as much as the American champions of "staying the course" assert, it is up to them to act accordingly. The argument about how much good we could still do by staying is, to put it mildly, undermined by how little we have done to provide protection and essential services to a population that the US invasion exposed to bitter violence and hardships. We need to pull out completely, leaving behind no imperial residues. Whatever protection (of Sunnis, for example) will be needed should be entrusted to UN peacekeeping forces to whose creation and support we should be prepared to contribute both money and weapons. We should also get out of Afghanistan soon: our presence has not deterred a Taliban revival or the emergence of an opium economy dominated by the Taliban and warlords; non-American NATO forces should be supplemented by non-European forces under UN command.Secondly, what is needed for the US is—as Walt suggests—a drastic long-term policy of demilitarization carried out in collaboration with foreign partners. It should begin at home. The US military and domestic security budget exceeds $550 billion and amounts to almost 20 percent of US expenditures. It seems more like a program of public works than one of national security, and the American economy has other badly neglected domestic needs. Our military budget is more likely to be a provocation than a deterrent to America's current rivalry with China. A reduction of 50 percent in military expenditures would allow the US to take better care of its poor, to establish a decent health care system, to improve education, and to invest in conversion to more efficient fuels. It would also liberate funds for urgently needed nation- building, health care, and development in Asia, Africa, and Latin America. This drastic change ought to be part of a plan that would aim, globally and regionally, at reductions in the nuclear arsenals of the established powers and at a new policy against nuclear proliferation.This policy would include security guarantees to powers such as North Korea and Iran that have plausible fears of attack provoked by the hostility of their neighbors and the US. The guarantees would entail nonaggression pacts, the reduction or departure of American forces near these countries' borders, and the kinds of arms control agreements that were worked out in the later phases of the cold war between the US and the Soviet Union. Such agreements would reassert the right of all signers of the nonproliferation treaty to nuclear energy for civilian uses—a right many more states may want to use so they would not have to depend on foreign oil supplies. It would offer them a range of choices including the transfer of uranium enrichment activities to foreign suppliers that already have them. If a country insists on enriching nuclear fuel itself, it should come under strong international pressures to accept a very strict and intrusive inspection regime.General rules are needed to prevent ad hoc deals, such as the new US–Indian agreement accepting India's nuclear weapons programs. Nevertheless, a serious recent study of nuclear proliferation concludes that US policy should be "more flexible, not less," and take into account the preferences of states for different "levels of commitment" and different kinds of non-proliferation schemes. A policy of demilitarization would aim not only at putting an end to preventive war— which the 2006 US National Security Strategy statement still supports— but at ultimately eliminating most weapons of mass destruction, and in the meantime at narrowing the gap between those who possess them and those who do not.Thirdly, as for the UN, any useful changes in its structure are being blocked by the unholy combination of John Bolton and a number of developing countries, such as Brazil, India, Egypt, and South Africa, that are suspicious of the UN Secretariat's potential power. They are now opposing the reform plan endorsed by Kofi Annan. But in view of the poverty and instability of many states, the UN is in great need of more funds, more military forces, and more efficient and authoritative governance. It will be essential to reinforce existing international and regional organizations and to establish new ones in economic matters now unregulated (such as capital movements), as well as measures to ensure their accountability to the people they serve.Another component of a new policy would be an effort, in association with other states, to consolidate the progress made in such states as East Timor, Georgia, and Uganda, and to rescue failed states such as Zimbabwe, the Central African Republic, Haiti, and Chad, which have been disastrous for their citizens and for other states, not only because, in most cases, of extremely bad leaders but because, as Lawrence Freedman has put it, of "sudden population movements, environmental disasters, [and] local conflicts being exported through expatriate communities."A new policy should also provide for a concentrated effort to protect human rights: while democracy cannot and should not be imposed from the outside, widespread violations of human rights, as in Darfur today, should be, along with defense against aggression, the only legitimate cause for collective armed intervention, preferably through forces put at the disposal of the Security Council. Removing genocidal regimes should be legitimate if authorized by the UN or, if the UN is paralyzed, by an association of genuine democracies.Most challenging of all is the need to form a new "partnership" of advanced countries for the economic development of the underdeveloped ones. For many reasons—political, economic, and philosophical disagreements—this will be difficult to organize; the attempt to eliminate absolute poverty and to prevent the poor from succumbing to epidemics would be a worthy first step. At the same time national and international action to prevent the destruction and mass migration expected from global warming should become an urgent priority. An issue that threatens all countries, it requires energetic, diverse, and imaginative measures for the curtailment of CO2 emissions. A revised and strengthened version of the Kyoto Protocol would be a beginning. Most other problems shrink compared to this one.These proposals may appear utopian. And yet striving to realize them would make for a safer world; they would not abandon or damage any of America's main interests; they would allow regional disputes to be dealt with primarily by the members of the regions, and with the assistance of international and regional agencies. The US would not be the only "indispensable nation," or the nation that knows best what the real interests of others are. There is always a danger when dependent nations gain autonomy, but autonomy is the condition of responsibility. A world in which several large or middle-sized powers would have a larger say than they do now does not mean a return to the balance of power mechanisms of the eighteenth and nineteenth centuries, in which war decided disputes. Competition has to continue, but—as Kant speculated—it should be constrained by the ever-increasing costs of war, and by the benefits (as well as the dangers) of interdependence. As Kiesling puts it, "Morality and self interest are inseparable, provided we persuade our politicians to take a long enough view of these interests. In the long run, security cannot be purchased at the expense of justice."—July 13, 2006Stanley Hoffman is a Weatherhead Center faculty associate; Paul and Catherine Buttenwieser
University Professor, Department of Government, Harvard University Notes I have discussed many of these issues in Gulliver Unbound: The Imperial Temptation and the War in Iraq (Rowman and Littlefield, 2004), America Goes Backward (New York Review Books, 2004), and Chaos and Violence: What Globalization, Failed States, and Terrorism Mean for US Foreign Policy (Rowman and Littlefield, forthcoming 2006). Samantha Power, in 'A Problem from Hell': America and the Age of Genocide (Basic Books, 2002) and in her subsequent writings about Darfur, has been an eloquent voice against America's failure to protect the victims of genocide. So has Nicholas Kristof on Darfur. My analysis of the "American style" in Gulliver's Troubles: Or, the Setting of American Foreign Policy (McGraw-Hill, 1968) remains, alas, valid almost forty years later. The most recent is Crimes of War: Iraq, edited by Richard Falk, Irene Gendzier, and Robert Jay Lifton (Nation Books, 2006)."The Israel Lobby and US Foreign Policy," London Review of Books, March 23, 2006; Michael Massing "The Storm Over the Israel Lobby," The New York Review, June 8, 2006. Brady Kiesling, "Iraq: A Letter of Resignation," The New York Review, April 10, 2003.Among Empires: American Ascendancy and Its Predecessors (Harvard University Press, 2006), Chapter 6—a thoughtful and erudite exploration. See also the review by Robert Skidelsky, The New York Review, July 13, 2006. See Dominique de Villepin's remarks in Le Requin et la mouette (Paris: Plon, 2004). See Gareth Evans and Robert Malley, "A Proposal to Curb the Escalating Tensions in Gaza," Financial Times, July 6, 2006. See "Out of Iraq," The New York Review, October 21, 2004. Jacques E.C. Hymans, The Psychology of Nuclear Proliferation (Cambridge University Press, 2006), pp. 220– 221. His arguments against the adoption by the foes of nuclear proliferation of a principle of a "duty to prevent" it by force if necessary are convincing. See The National Security Strategy of the United States (March 2006), Vol. 4. Henry Kissinger has commented that "if each nation claims the right to define its pre-emptive rights, the absence of any rules would spell international chaos" (International Herald Tribune, April 13, 2006).The Transformation of Strategic Affairs, Adelphi Paper 379 (Routledge/ International Institute for Strategic Studies, 2006), p. 32. I have suggested such an association in Gulliver Unbound, and Fukuyama makes a similar proposal in America at the Crossroads. "Regime change" requires, however, remembering Auguste Comte's precept: "one can only destroy what one can replace"; it is the replacement of a genocidal regime that is the most difficult task. In addition to Al Gore's movie and book, An Inconvenient Truth(Rodale, 2006), see Tim Flannery, The Weather Makers (Atlantic Monthly Press, 2006), and Elizabeth Kolbert, Field Notes from a Catastrophe (Bloomsbury, 2006) all reviewed by James Hansen in The New York Review, July 13, 2006.
Many studies have replicated the finding that the forward rate is a biased predictor of the future change in the spot exchange rate. Usually the forward discount actually points in the wrong direction. But virtually all those studies apply to advanced economies and major currencies. We apply the same tests to a sample of 14 emerging market currencies. We find a smaller bias than for advanced country currencies. The coefficient is on average positive, i.e., the forward discount at least points in the right direction. It is never significantly less than zero. To us this suggests that a time-varying exchange risk premium may not be the explanation for traditional findings of bias. The reasoning is that emerging markets are probably riskier; yet we find that the bias in their forward rates is smaller. Emerging market currencies probably have more easily-identified trends of depreciation than currencies of advanced countries.
More than six months have passed since last fall's violent urban riots, and France finds itself engaged in another parliamentary debate on the integration of immigrants. The right wing, which advocates a “chosen immigration,” and the left, which anticipates a “disposable immigration,” share a firm belief in French Républicanisme, a social contract that owes much to Jean-Jacques Rousseau's fantasy of an irresistible general will overcoming particular interest.Républicanisme, the French ideological equivalent of the American dream, proposes that a universal citizen, abstracted from social and economic conditions (whether residential, religious, ethnic, or racial), engages in a direct relationship with the state. It reciprocates by downplaying the role of such identities in the political process. In so doing, the state rejects what it perceives as political balkanization and identity politics as incompatible with the realization of the common good. The main flaw of this near-sacrosanct ideal of Républicanisme is that it inhibits the use of anti-discrimination laws. Even while studies repeatedly reveal widespread discrimination in France, few people are motivated to seek legal redress. The first report of the new anti-discrimination authority shows that only 1,800 claims were filed in 2005, and that only 600 have been followed by action.The frustration and resentment expressed by French minorities is largely caused by the contradiction between a fantasized equality and real-life discrimination. Yet, there is nothing inevitable in this sorry state of affairs.Over the last few months, developments have opened new perspectives. Last November, the first federation of “Blacks of France” was created, bringing together blacks who are French citizens by birth, because they were born in French overseas departments such as Martinique and Guadeloupe; black youth of the second generation, often from Sub-Saharan Africa, who become citizens when they turn 18; and other blacks, who have a range of backgrounds.Another positive development was the appointment in March of the first black prime-time anchor on the most widely watched television channel. Only a few weeks ago, the cover of an influential newsmagazine read “Us, Blacks of France” and featured Keyza Nubret, a French black woman manager.Not surprisingly, this colorful France (estimates vary between 2.5 million and 5 million for the number of blacks in France) is made visible outside of the realm of the Republican state. May 10, the commemoration day of the abolition of slavery, was marked by tensions between the austere gravitas of the Republic and the wish of most black associations for more lively ceremonies.Still these events signal the official entry into the French public sphere of an interest group whose “groupness” is based on shared ascribed characteristics—a minor earthquake in the French political landscape.Sadly, since this welcomed wind of change has started to blow, the academic world has remained intriguingly silent. With the exception of a few courageous souls, what still marks so many members of the French intellectual class is their overall commitment to the ideology of Républicanisme and its ideal of assimilation. While Paul Gilroy's “There Ain't no Black in the Union Jack” had a palpable effect on debates about what Englishness means, France has yet to produce an intellectual of comparable influence. Only by coming to terms with their own cultural imperialism will French intellectuals contribute to the challenges of better incorporating the members of minority groups into the French polity. Only then will they live up to the powerful (Sartrian) tradition of the engaged intellectual.The slowly emerging reality of a colorful France does not mean that the principles of French citizenship are to be thrown overboard and that ethnic quotas have to be instituted everywhere from prime time to public service. Rather, it means that representation matters, and that France cannot prosper if it continues to deceive its immigrants by promising equality while delivering segregation.Michèle Lamont is professor of sociology and African and African-American Studies at Harvard University. She is also a faculty associate of the Weatherhead Center. Éloi Laurent is an economist at l'Observatoire Français des Conjonctures Economiques in Paris and a visiting scholar at the Center for European Studies at Harvard University.
Central bank cooperation depends on a few crucial parameters: the extent to which central bankers
agree on theory (end means relationships); the extent to which they can agree on goals (social
purpose); the capacity (technical and institutional) to achieve their collective goals; and whether the
broader political environment facilitates or impedes cooperation. This article explores these questions
by first providing an overview of central banks and bankers. Among the G-10 countries, central
bankers are likely to share political independence, relatively long term horizons, and (increasingly)
academic backgrounds. These conditions may be conducive to high levels of cooperation in the future.
Second, I explore the “easiest” form of cooperation – information sharing – and conclude that this is an
area in which central bank cooperation will become increasingly routinised. Cooperation to address
global financial stability is a more difficult cooperative dilemma, with tensions between the need for
efficient regulatory management and the inclusion of a broader range of cooperating institutions. In the
area of exchange rate and monetary policy coordination, consensus among the major exchange rate
authorities regarding the effectiveness of coordinated exchange market interventions has withered,
though this does not preclude a new consensus from emerging in the future. One of the most
significant challenges to central bank cooperation in the future will be how to include rising monetary
and financial powers, particularly China, into the cooperative management of international monetary
Also Bank for International Settlements Working Paper #200.Download PDF
The current debates in and about the veil in Europe carry with them not
only the terms of the emergence of political Islam in the past several
decades, but also this historical memory and that of the earlier
cultural encounters and colonial wars between Europe and the domains
now named the Middle East and North Africa. While I do not mean to
collapse these projects into a singular entity, the historical legacy
of fixing the meaning of a Muslim woman's veil as the sign of her
gender oppression has remained with us to this very day.
The second half of the twentieth century was marked by dramatic changes in women's economic participation in the United States and other Western industrial countries (Bergmann 1986; Davis 1984; Oppenheimber 1970, 1994). The most important departure from previous decades was the rapid rise in labor force participation among married women. In the United States, this trend began in the 1940s and early 1950s; in each subsequent decade, white married women's labor force participation increased by about 10 percentage points, reaching 60 percent by the end of the century (Blau and Kahn 2005).
This paper argues that current account statistics may provide a poor indication for the real
evolution of a country’s net foreign assets. This may be due to a series of factors including the
mismeasurement of FDI, unreported trade of insurance or liquidity services and debt relief.
Because of these problems we suggest estimating net foreign assets by capitalizing the net
investment income and then estimating the current account from the changes in this stock of
foreign assets. We call dark matter the difference between our measure of net foreign assets and
that portrayed by official statistics. We find dark matter to be important for many countries and
that it relates to FDI flows, domestic volatility, and debt relief. We also find that, once dark
matter is taken into account, global net asset positions appear to be relatively stable. In particular,
the exports of dark matter of the US appear to be fairly steady and large enough to keep the US
net asset position stable, casting doubts on the need for a major adjustment of the dollar or a
large rebalancing of the global economy.
World mass migration began in the early nineteenth century, when advances in transportation technology and industrial revolutions at home enabled increasing numbers of people to set off for other parts of the globe in search of a better life. Two centuries later, there is no distant African, Asian, or Latin American village that is not within reach of some high-wage OECD labor market. This book is the first comprehensive economic assessment of world mass migration taking a long-run historical perspective, including north-north, south-south, and south-north migrations. Timothy Hatton and Jeffrey Williamson, both economists and economic historians, consider two centuries of global mobility, assessing its impact on the migrants themselves as well as on the sending and receiving countries.Global Migration and the World Economy covers two great migration waves: the first, from the 1820s to the beginning of World War I, when immigration was largely unrestricted; the second, beginning in 1950, when mass migration continued to grow despite policy restrictions. The book also explores the period between these two global centuries when world migration shrank sharply because of two world wars, immigration quotas, and the Great Depression. The authors assess the economic performance of these world migrations, the policy reactions to deal with them, and the political economy that connected one with the other. The last third of Global Migration and the World Economy focuses on modern experience and shows how contemporary debates about migration performance and policy can be informed by a comprehensive historical perspective.
Supporters of the anti-globalization movement argue that "globalization has dramatically increased inequality between and within nations" (Mazur, 2000), and in particular that it has marginalized the poor in developing countries and left behind the poorest countries. Meanwhile, more moderate mainstream politicians argue that the poor must invest in education to take advantage of globalization (Clinton, 2000).
Such views are difficult to reconcile with a standard Heckscher-Ohlin trade model with two countries, two goods, and two factors (skilled and unskilled labor, or alternatively capital and labor). Under a simple model, globalization should benefit the poor in poor countries and reduce inequality in poor countries, and within the developing world the poorest countries and least educated workers should have the greatest opportunity to benefit from globalization.
In Globalization and the Poor Periphery before 1950 Jeffrey Williamson examines globalization through the lens of both the economist and the historian, analyzing its economic impact on industrially lagging poor countries in the nineteenth and early twentieth centuries. Williamson argues that industrialization in the core countries of northwest Europe and their overseas settlements, combined with a worldwide revolution in transportation, created an antiglobal backlash in the periphery, the poorer countries of eastern and southern Europe, the Middle East, Africa, Asia, and Latin America. During the "first global century," from about 1820 to 1913, and the antiglobal autarkic interwar period from 1914 to 1940, new methods of transportation integrated world commodity markets and caused a boom in trade between the core and the periphery. Rapid productivity growth, which lowered the price of manufactured goods, led to a soaring demand in the core countries for raw materials supplied by the periphery. When the boom turned into bust, after almost a century and a half, the gap in living standards between the core and the periphery was even wider than it had been at the beginning of the cycle. The periphery, argues Williamson, obeyed the laws of motion of the international economy. Synthesizing and summarizing fifteen years of Williamson's pioneering work on globalization, the book documents these laws of motion in the periphery, assesses their distribution and growth consequences, and examines the response of trade policy in these regions.
Restrictions on migration of low-skilled workers to richer countries are arguably the
largest distortion in the world economy and the most costly to the world’s poor. Yet rich
countries seem unlikely to eliminate these restrictions due to concerns about the impact
of migration on inequality among natives, public finances, and native culture. A rapidly
growing new type of migration may not be subject to these concerns. Many "new rich"
countries issue special visas for foreigners, women in particular, to work as private
household workers. "Old rich" countries often choose low levels of enforcement against
illegal immigrants working in this sector. We argue that by allowing high-skilled native
women to increase market labor supply, this type of immigration increases the wages of
low-skilled natives and provides a fiscal benefit by correcting tax distortions toward
home production. Calibration suggests welfare gains to natives from a program, such as
Hong Kong’s or Singapore’s, under which roughly 7% of the labor force are foreign
private household workers, may increase the ratio of native low-skilled workers by 3.9%
and increase native welfare by 1.2% of income, roughly 100 times the level estimated by
Borjas and increases the relative wages of native low-skilled to high-skilled by 3.9%.
Paradoxically, however, even if these programs are pareto improving, they may conflict
with ethical norms requiring stronger social obligations to long-term residents than to
other foreigners. Short-term programs may be more acceptable.
This paper describes the results of initial work analyzing a panel of rural households in
Peru between 1994 and 2004 to determine household responses to changes in relative
prices of traditional versus export-oriented products. Our principal interest was to better
understand how household responses to external economic shocks influenced rural
welfare, income distribution and poverty. Since a large percentage of Peruvians living in
poverty are located in rural areas, learning more about how these households respond to a
changing external environment provides insights into the factors that influence their
ability to improve their absolute and relative economic position.The results of our analysis indicate that changes in relative prices had a significant impact
on the adoption of new agricultural products, and the magnitude of response was
mitigated by households’ degree of tenure security and access to regional and local
markets. Analysis of household expenditures over the period indicate that those who
adopted export crops experienced a significant growth in consumption proportional to the
change in acreage devoted to exportable products, and were less likely to be classified as
impoverished at the end of the period. Instrumental variables estimates suggest that this
association is causal.
The protests in France over job security for young workers have exposed the fault lines between globalization and public policy. On the one hand, the French government has recognized that the country's labor laws are uncompetitive and a drain on the economy. The public reaction, however, shows the depth of popular misunderstanding regarding the realities of our globalizing economy.Nations can no longer sit within their borders and pursue policies incompatible with an increasingly integrated world economy. The types of services, manufacturing and entrepreneurship that generate national wealth are more mobile than ever, and they will forsake countries that shackle business and labor with unnecessary burdens.With this in mind, the Federal Reserve Bank of Dallas set out to document the connection between globalization and public policy. We found that the more globalized nations tend to pursue policies that achieve faster economic growth, lower inflation, higher incomes and greater economic freedom. The least globalized countries are prone to policies that interfere with markets and lead to stagnation, inflation and diminished competitiveness.For our study, we began with research by Foreign Policy magazine and AT Kearney, a management consultancy firm, which ranked 60 countries by degree of globalization. Singapore, Ireland, the United States and other countries at the top of the rankings are far more integrated into the world economy than the insulated nations at the bottom like Iran, Egypt and Bangladesh. As the accompanying charts show, we divided the countries into four groups and looked at how each faction performed on policies that shape economic performance.Take inflation. In a world where investment capital can flit anywhere in the world with the click of a computer mouse, nations should see the virtue of price stability and preserving the value of money. And they do: the more globalized countries we studied had an average inflation rate of 2.3 percent from 2001 to 2003, compared with 10 percent for the nations in the least globalized quarter.This pattern is repeated in more than a dozen aspects of effective public policy, as measured by the World Bank, Harvard University, the Heritage Foundation, Transparency International and the Fraser Institute, a Canadian public policy group. (Although these groups used various ranking systems to portray their data, we took the liberty of converting each to a 1-to-10 scale, with 10 being the most successful, for the accompanying graphs.)The gist is clear: as nations become more integrated into the world economy, they tend to maintain fewer barriers to trade and the movement of money. They are less likely to impose punishing corporate taxes and onerous regulations. Their technology policies are more favorable to innovation. Nations more open to the world economy score above the less globalized countries in respect for the rule of law and protection of property rights. More globalized countries also offer greater political stability.Not all policies fit neatly into this framework. We found that more globalized counties do no better in limiting the size of government, which we consider vital to economic prosperity. They are worse than the less globalized in containing public entitlements and subsidies, which must be paid for by higher individual income taxes. Perhaps it is because they are richer and have the means to spread those riches through their societies.The French contretemps illustrates why labor policies are less sensitive to globalization than factors like taxation and trade barriers. As long as workers refuse to acknowledge that they are competing in a world economy, they will petition a wealthy government to protect their jobs. This in turn slows job growth and raises unemployment, creating a greater demand for expensive and expansive safety nets for idle workers.Still, globalization may yet alter labor policies. France, Germany and other countries are beginning to recognize that their labor rules are uncompetitive, and the timing of change is a political question, not an economic one.So, do our statistics show that globalization is necessarily the cause of good policies? That would be overstating it—our data simply show the two trends are complementary. But it is clear that countries with solid policies will be more successful in the global economy, encouraging further openness and deeper cross-border connections. The chicken-and-egg debate shouldn't detract from the fundamental fact that globalization and good policies go together.Globalization's critics argue that a more open world economy sets off a race to the bottom by encouraging countries to jettison protections for consumers, workers and the environment. In reality, the opposite is true. If our data demonstrate anything, it is that globalization prompts a race to the top by pushing countries to abandon policies that burden their economies in favor of those that fuel growth and economic opportunity.Richard W. Fisher and W. Michael Cox are, respectively, the president and the chief economist of the Federal Reserve Bank of Dallas. Peter Hoey is an illustrator in Arcata, Calif. Richard W. Fisher is also a former Fellow of the Weatherhead Center for International Affairs.
Preferences for redistribution and state intervention in social policies, as well as the generosity of welfare states, differ significantly across countries. In this paper, we test whether there exists a feedback process of the economic regime on individual preferences. We exploit the “experiment” of German separation and reunification to establish exogeneity of the economic system. From 1945 to 1990, East Germans lived under a Communist regime with heavy state intervention and extensive redistribution. We find that, after German reunification, East Germans are more in favor of redistribution and state intervention than West Germans, even after controlling for economic incentives. This effect is especially strong for older cohorts, who lived under Communism for a longer time period. We further find that East Germans’ preferences converge towards those of West Germans. We calculate that it will take one to two generations for preferences to converge completely.
Proponents and critics alike agree that the policies spawned by the Washington
Consensus have not produced the desired results. The debate now is not over
whether the Washington Consensus is dead or alive, but over what will replace it. An
important marker in this intellectual terrain is the World Bank’s Economic Growth
in the 1990s: Learning from a Decade of Reform (2005).With its emphasis on humility,
policy diversity, selective and modest reforms, and experimentation, this is a
rather extraordinary document demonstrating the extent to which the thinking of the
development policy community has been transformed over the years. But there are
other competing perspectives as well. One (trumpeted elsewhere in Washington) puts
faith on extensive institutional reform, and another (exemplified by the U.N.
Millennium Report) puts faith on foreign aid. Sorting intelligently among these
diverse perspectives requires an explicitly diagnostic approach that recognizes that
the binding constraints on growth differ from setting to setting.
We study episodes where economic growth decelerates to negative rates.
While the majority of these episodes are of short duration, a substantial fraction last
for a longer period of time than can be explained as the result of business-cycle
dynamics. The duration, depth and associated output loss of these episodes differs
dramatically across regions. We investigate the factors associated with the entry of
countries into these episodes as well as their duration. We find that while countries
fall into crises for multiple reasons, including wars, export collapses, sudden stops
and political transitions, most of these variables do not help predict the duration of
crises episodes. In contrast, we find that a measure of the density of a country's
export product space is significantly associated with lower crisis duration. We also
find that unconditional and conditional hazard rates are decreasing in time, a fact that
is consistent with either strong shocks to fundamentals or with models of poverty
Nablus, West BankTHE crescent has risen. The militant Islamic group Hamas won an astonishing 76 of 132 seats in the Palestinian legislative elections this week. The United States and the European Union must finally recognize Hamas's ascendance as a fait accompli.Until now, these key third parties have equivocated: they pressed Israel to allow Hamas to participate in the elections but threatened to cut aid and ties to a Hamas-dominated Palestinian Authority. The practical reality, however, is that Hamas is a pivotal player in Palestinian politics, and no peace process can succeed without at least the tacit acceptance of its leaders. Moreover, Hamas's participation in Palestinian politics is not necessarily a bad thing, and resisting it will very likely do more harm than good.As a political party, Hamas revealed itself to be disciplined, pragmatic and surprisingly flexible. It fielded well-regarded candidates, including doctors and academics. In some cases, Hamas aligned itself with independents once affiliated with the secular Fatah party. And although the Hamas charter calls for the destruction of Israel and the liberation of Palestine “from the river to the sea,” the party's campaign manifesto made no mention of these goals.Instead, when asked about making peace with Israel, Hamas representatives offered nuanced, if evasive, answers. As Ziad Daiah, a Hamas representative in Ramallah, told us: “We are not interested in the Oslo-type peace process that went on for 10 years and wasted time. But if Israel will start new negotiations, with direct benefits for Palestinians in a useful time frame, we will accept that.”Judging from the thousands of green posters plastered around the West Bank and Gaza, external matters like the peace process were not central to Hamas's electoral agenda. Rather, its campaign focused on popular concerns like fighting corruption, establishing good governance and restoring the rule of law. Hamas's victory speeches have emphasized the need to revamp public services.To be sure, we should be careful not to read too much into Hamas's electioneering. The Hamas charter retains poisonous language toward Israel, and the group has yet to renounce its views on the place of violence in the Palestinian resistance. And Hamas's Islamist agenda continues to alarm many secular Palestinians, even those who welcome its entry into politics.Still, Hamas statements indicate that these attitudes are not set in stone. As Mohammed Ghazel, a Hamas leader in Nablus, told the Israeli newspaper Ha'aretz, “The charter is not the Koran.” And Hamas has done more than any other armed faction to honor the truce that President Mahmoud Abbas brokered in February. Although Israel continues to arrest its members, Hamas has done little to retaliate. Such restraint might have been an electoral strategy, but it still proves that if the incentives are right, Hamas can hold its fire.In any case, the United States and Europe cannot trumpet democratic ideals abroad and then ignore the popular will of Palestinian voters, 78 percent of whom turned out for this election. Refusing to engage with Hamas, however skeptical one may be of its intentions, will only further legitimize the party; it could even give rise to violence. Moreover, cutting off aid to the Palestinian Authority, which is already in a fiscal crisis and enormously dependent on foreign aid, could bankrupt it, further destabilizing the region.Hamas has indisputably become the force to be reckoned with in Palestinian politics. Even Israel seems to have awakened to this reality. A radio reporter recently asked Shimon Peres, the former Israeli prime minister, about negotiating with Hamas. “We are not fighting against a name,” he said. “We are fighting against a situation. If the situation changes, then what difference does a name make?”If the Israelis are contemplating engagement, it's time the Americans and Europeans did, too.Fotini Christia is a fellow at the Olin Institute for Strategic Studies at Harvard. Sreemati Mitter works for the Palestinian Initiative for the Promotion of Global Dialogue and Democracy in Ramallah, West Bank.
Governments are often urged to take steps to improve the health of their citizens. But there is controversy about how best to achieve that goal.1 Popular opinion calls for more investment in medical care and the promotion of behaviors associated with good health. But, across the developed countries on which we focus here, variations in the health of the population do not correspond closely to national levels of spending on medical care, and there remain many uncertainties about how governments can best promote healthy behavior.2 Expanding access to health care offers greater promise but, as many chapters in this book note, health care is only the tip of the iceberg of population health.
Working draft for a chapter for Successful Societies: Institutions, Cultural Repertoires and Health, edited by Peter A. Hall and Michele Lamont (under review).Download PDF
China and India are similar in many ways. Both are populous, physically large,
socially diversified, economically poor countries. In 1978 they had roughly the same per
capita GDP in terms of purchasing power parity (Maddison, p.304). But their labor
forces have very different characteristics. A significantly higher fraction of China’s
population is in economic employment, China is significantly more urbanized, less of
China’s labor force is in agriculture, and in rural areas a significantly higher fraction of
rural employment is non-agricultural. Population growth in both countries has declined
significantly in recent decades, but the decline has been markedly sharper in China. India
has significantly greater protection against imports than China, although it has lowered
non-agricultural tariffs in recent years. India is less hospitable to foreign direct
investment (FDI) than is China, and is more dependent on official foreign assistance. By
2000 India’s real per capita GDP had doubled from 1978; China’s had nearly quadrupled.
These differences, and others, influence the degree of integration of these economies into
the world economy, and in particular the role that their labor forces play in the world