Development Bank Research Bulletin

Fast-track to become a World Bank vice-president

A Conversation was between a man named Baboo & his son.

Baboo: I want you to marry a girl of my choice
Son: "I will choose my own bride!"
Baboo: "But the girl is Bill Gates's daughter."?
Son: "Well, in that case...ok"?

Next Baboo approaches Bill Gates.
Baboo: "I have a husband for your daughter."
Bill Gates: "But my daughter is too young to marry!"
Baboo: "But this young man is a vice-president of the World Bank."
Bill Gates: "Ah, in that case...ok"

Finally Baboo goes to see the president of the World Bank.
Baboo: "I have a young man to be recommended as a vice-president."
President: "But I already have more vice-presidents than I need!"
Baboo: "But this young man is Bill Gates's son-in-law."
President! : "Ah, in that case...ok"

The oldest civilization, reborn. China Rises

A new documentary, China Rises (along with an interactive website) was recently produced by the New York Times, Discovery Times Channel, and the Canadian Broadcasting Corporation. It is a well done, engaging program, that covers the recent and extraordinary "rise" of China. Done in four chapters that cover politics, economics, society and the environment, it gives a balanced picture of the challenges and opportunities that China faces in the coming decades. Particularly enjoying are the clips of the "various Chinas": peasant, ultra-modern metropolis, urban slums, and everything in-between. The interviews with entrepenurs, farmers, and policymakers are well done. In short, a must see program that deserves a wide audience.

China: the balance sheet. All you wanted to know but where afraid to ask.

The Center for Stategic and International Studies (CSIS) along with the Institute of International Economics (IIE), two of Washington's most influential think thanks, have just published China: the Balance Sheet, in perfect timing for President Hu's visit.  The small book is wonderful.  It is intended as a convenient "one stop shop" for all you wanted to know about China --it extraordinary rise and future--, and is authoritatively well written. The main argument of the book is that a prosperous and stable future for the US, and the world, crucially depends on how US handles the "China Question".  Hence, "getting China right" is and will be the challenge for policymakers not only in the United States, but in Europe and the rest of the world as well.  To acomplish such a feat, requires understanding of the profound changes that have been taking place in China, as well as the challanges it faces.  Is this the tipping point for China: Growth or collapse? Democratization or disorder? Opportunity or threat? Partner or rival?

China everyday becomes more complex and more contradictory.  Its rise will be the story and driver of the XXI century.  It's more important than ever to understand and ask the right questions.

John Snow blames it on the rest of the world

Today John Snow, US Secretary of theTreasury, published an article in the Post that tries --again-- to blame the huge US twin deficits on the rest of the world.  The problem he implies, is not that the United States is the only economy in the history of the world to fight a war and reduce taxes at the same time; nor the unbeleivable fiscal profiglacy of this administration (remember the "bridge to nowhere"?).  Blame it on the Asians for their huge savings, low investment and government spending.  Yours truly saw him this morning walking on the street after a meeting part of the bi-annual IMF-WB spring meetings, where thousands of journalists, policymakers, and yes, bloggers, converge.  Being an innefectual secretary of the Treasury, with little understanding of economics, it was no surprise that he looked gloomy and weary.  What a difference with Rubin.

Easterly vs. Sachs

Bill Easterly, former World Bank official and currently professor of economics at NYU, has just published "The White Man’s Burden:  why the West’s efforts to aid the rest have done so much ill and so little good”.  The only point of the book is that aid (2.5 trillion US dollars in the last four decades) has been, and will be, useless to reduce poverty and bring development to poor nations.  It runs squarely against Jeffrey Sachs and his book “The End of Poverty”, which argues otherwise.

To reduce poverty for the millions of human beings that live with less than 1 dollar a day is a Herculean task.  Clearly, one would not expect a single person –or organization—to have all the answers, nor a single approach to be valid.  Debate is necessary, as it would enrich the prescriptions and understanding of the greatest challenge for this century.  However, Easterly misses an extraordinary opportunity to bring fresh ideas and serious debate, by making his attacks against Sachs seem childish and personal.

Easterly in his presentation of the book is juvenile and tries to be funny by pushing the Bono-Sachs relationship too much.  Is the call for doubling aid to poor nations invalid just because Bono and Angelina Jolie endorse it?  Or is there more scientific evidence?  When confronted with this question, Easterly responds that those countries that have received more aid are the ones that have grown less.  Well, maybe that’s why they received so much aid in the first place!  He also argues that all those nations that became failed states (Somalia, Haiti, Liberia, Zimbabwe, etc.) were under IMF surveillance before failing.  Is this concluding evidence that IMF causes a collapse of the government and society?  Well, no again, as if the autopsy performed to dead patients in a hospital shows that they were receiving medicine before they died!

Finally Easterly seems to conclude that imposing free markets and democracy is enough to stop the plight of the poor.  At a different level of development that might be the case, but Sach’s focus is on those cases where the people are dying at an incredible rate (30,000 children every day from diarrhea), not even eating or being strong enough to bring anything to market.

This could have been a good book and a good debate.  Unfortunately the pages radiate two feelings: that Easterly greatly resents the World Bank for sacking him (after all, he spent 16 years doing what he criticizes now), and that he resents Sachs for his popularity.  Opposite to what the Economist said about “The End of Poverty”, in this case man and book are unimpressive.

Iraq: war vs. containment

Three Chicago economists (Davis, Murphy, and Topel) have produced a highly controversial paper, as mentioned by R-Squared in a previoius commentary "Chicago economists produce a paper on how war in Iraq helps save Iraqi lives". 

hey evaluate –from the standpoint of 2003—the expected costs of going to war in Iraq versus the costs of continuing the containment policy.  All in all, “going to war was the best decision”.

Policy decisions of such magnitude are usually made under considerable uncertainty, a tight timing, and substantial stress.  Economics can improve the decision making process: by seriously and consistently evaluating all alternatives under the table.  Maybe the best contribution of their paper is that it clearly establishes that the alternative of going to war was not doing nothing.  In fact, the alternative was continued containment or other options.  These had costs, and serious decision-making should consider them as well.

How do the authors arrive to these findings?  As for the benefits and costs of war, they evaluate:

· X number of Iraqi deaths now, versus Y later
· Upfront costs of war, versus prolonged costs of containment
· A big shock to Iraqis today versus a long period of continued economic misfortune
· The humanitarian costs of continued repression under Sadam

Do they do a good job of evaluating the alternatives?  Judge for yourself.

Outsourcing and the wealth of nations

Following up on R-Squared's post about India, I want to share this one. Was the picture taken in some place in California, or in Pune, India? If your answer was the former, you are in for a surprise. It was part of an interesting article that apperared on the Post. Indeed, the world may be flattening.