Globocop No More: United States After Unipolarity

♠ Posted by Emmanuel at 3/29/2012 09:34:00 AM
LSE IDEAS has been churning out special reports at such a furious pace that I almost forgot to mention this one concerning The United States After Unipolarity. The title pretty much sums up what the contributions here say, although the various contributors do question the extent to which the--pardon the phrasing--globocop role will be outsourced to other nations or regions if not relinquished altogether. In the latter sense, what we may have is not a "changing of the guard" but rather the removal of guard duties not only in security matters but also in global economic governance and so on. While some folks such as yours truly are convinced that movement to a multipolar, superpowerless world is (a) inevitable and (b) a good thing, LSE IDEAS head honcho Michael Cox is less optimistic. As usual with LSE IDEAS, there is no "house" opinion evident (not that we'd want to have one):
However not all authors are equally pessimistic for America’s future. In a foreword, Professor Michael Cox, Co-director of LSE IDEAS, suggests that Europe’s debt crisis could strengthen the US by leaving it perfectly placed to exploit the economic revolution in Asia and to be the “strategic balancer to China’s rising power.” 
Still, the dominant theme in the contributions is that America's debts will drown it in a sea of red on present course, diminishing its residual urges for playing globocop. Again, it's not necessarily a bad thing considering that they've spent an estimated $4 trillion on foreign misadventures--including Afghanistan which it's in the process of losing without ifs and buts. Anyway, back to the press blurb:
Professor Morgan, from the University of London, writes that predictions for the US to hit its highest ever debt level in 2023 mean that resources will increasingly be eaten up by social security and medical benefits, leaving the nation increasingly unable to exert power with military or economic levers. He says: “From 2020 onward the future for US military power looks bleaker without a domestic correction of fiscal course. “The United States is slowly awakening to the reality that growing public indebtedness represents the greatest threat to its power and prosperity in the twenty-first century.”

Others authors in the study share this analysis: Dr Adam Quinn, from the University of Birmingham, suggests America will have to start making hard choices about areas in which it will leave itself vulnerable as shrinking military budgets remove the luxury of universal protection. The report points out that the final bill for US involvement in Afghanistan, Iraq and Pakistan is estimated at more than $4 trillion.
Alike with our other reports such as the one on India not likely to become or even aspire to superpower status, PDFs of the individual contributions are available online, although you will have to purchase print copies for posterity. Here's the summary on our (LSE IDEAS, not the main LSE website) page:
Much has been made over the last few years of the prospect of a power transition taking place in world politics, as the United States' dominance of the international system appears increasingly under threat. If this narrative of American decline is at least partially correct then the United States will be forced to rebalance its foreign policy to a world that is no longer 'unambiguously unipolar'.

In this report, we asked a selection of experts to assess the challenges the Obama administration has faced in making that adjustment across a series of policy areas, from redefining how America funds and uses its military, through addressing global economic imbalances, to changing how others in the world view and work with the United States. The authors argue that the Obama administration has attempted to adjust US foreign policy in recognition of changes in the international order. They point to the domestic constraints and political cleavages that stymie that adjustment, and to the international difficulties that arise not just from pursuing a post-unipolar foreign policy, but also from the realities of a post-unipolar world itself.
Read More

Tired of the World Bank? Enter BRICS Dev't Bank

♠ Posted by Emmanuel in ,,,, at 3/28/2012 11:58:00 AM
You hoped that the IMF and the World Bank would reflect more of the changes in the world economy by giving more input and leadership to major emerging economies. But, as the IMF succession process proved and the current World Bank "search" (stitch-up is the more accurate term) is proving, Western dominance is still on the cards at these institutions. What can I say? Some people resist change. There has been much lip service from them about including new voices, but at the end of the day, nothing's really changed.

So, if you're tired of poor countries lending to rich countries for things other than what institutions like the IMF were designed for, what we may have here is a "league of their very own" solution. You can be sure that LDC observers with any awareness are unhappy about the IMF currently lending a majority of its funds to Europe. As it so happens, something on the agenda of the ongoing BRICS meetings in New Delhi concerns the creation of a development bank by developing nations for developing nations. (Note that it's the BRICS summit not just the BRICs summit after the inclusion of South Africa in 2010 in addition to Brazil, Russia, India and China.) From the Indo-Asian News Service:
A BRICs development bank will be very useful, particularly to Africa, but a major challenge that may come on its way is aligning the interest of the member countries, said experts. "Within the BRICS group, governments are seeking tangible areas of collaboration, clearly one is [a] development bank. The point of BRICS bank is a very noble venture," said Martyn Davies, CEO of the market research firm Frontier Advisory. "It will be very beneficial, particularly to the sub-Saharan Africa," Davies said at a seminar organised by his company in partnership with Johannesburg Stock Exchange.

The matter is on the agenda of the BRICS' -- Brazil, Russia, India, China and South Africa -- two-day summit in Delhi starting Wednesday. Davies said the main challenges in setting up a BRICS bank will be risk management and aligning the respective interest of the member countries. "Cash is not a problem," he added. State Bank of India's (SBI) Africa head Mathai Vaidyan said the idea is good, but it will be very difficult to arrive at a consensus.
It's a continuation of dicussions by various industry representatives about how investment among LDCs can be enhanced:
Tuesday's seminar themed "The Commercial Strategies of Emerging Markets and New Emerging Multinationals in Africa" was attended by senior bankers and business representatives from the BRICS nations.The meeting shared the experiences and challenges faced by companies from BRICS countries, as well as ideas on how the emerging markets can boost investment in Africa. "I think the challenge is the creation of efficient bureaucracy through which capital will be deployed into infrastructure development, particularly in Africa," Davies told Xinhua. The Africa head of a Brazilian company added: "If it matches the interests of all members, let's go for it."
There is a massive literature on Western nations using Bretton Woods institutions for their own objectives rather than development per se. Given that Western nations helped set them up, regional development banks alike the Asian Development Bank, Inter-American Development Bank and African Development Bank are not entirely free from this criticism either. So, why not an LDC development lender? Certainly these countries do not lack for investible funds at this point in time given that most are running sizable external surpluses.

That said, the political obstacles are formidable in terms of siting, coordination and supervision and so forth were they to push through with the BRICS Development Bank [BDB--you heard it here first; Jim O'Neill, eat your heart out!--or probably not]. Who's to say that these countries will by themselves be free from the bickering at the IMF and World Bank which is driving them to set up shop elsewhere?

I must also note that such plans are hardly unique. Witness the still missing in action Banco del Sur. Ah well, I suppose it's a start. May it lead to something concrete and useful--something noticeably lacking in the history of South-South cooperation.

UPDATE: Also see an earlier al-Jazeera article on the purported BRICS Development Bank.
Read More

Did Global Financial Crisis Curb Carbon Emissions?

♠ Posted by Emmanuel in ,,,, at 3/27/2012 12:23:00 PM
In a rather disappointing word, no. Intuitively, you may have expected worldwide carbon emissions to drop given a slowdown in global economic activity. However, it is a tale of two different worlds--the Global North (developed nations) and the Global South (the developing nations). While the likes of North America and Europe did experience fairly significant slowdowns in both economic activity and corresponding carbon emissions, that pattern did not hold in the developing world.

While searching for material on global environmental governance for my IPE class--I am the very model of a modern IPE instructor--I came across a very informative piece from Science Daily regarding recession and carbon emissions. The gist of it is as I mentioned above was nary a blip in LDCs' emissions, powered especially by major emerging economies:
The sharp decrease in global carbon dioxide emissions attributed to the worldwide financial crisis in 2009 quickly rebounded in 2010, according to research supported by the Carbon Dioxide Information Analysis Center at the Department of Energy's Oak Ridge National Laboratory. In 2010, emissions reached an all-time high of 9.1 billion tons of carbon, compared with 8.6 billion tons in 2009. The downturn was also followed by milestone carbon dioxide emissions from the developing world's emerging economies. In developing countries, consumption-based emissions, or those emissions associated with the consumption of goods and services, increased 6.1 percent over 2009 and 2010.

As a result, 2009 marked the first time that developing countries had higher consumption-based emissions than developed countries. "Previously, developed countries released more carbon dioxide, but that's no longer true due to emerging economies in developing countries, such as China and India," said Tom Boden of ORNL's CDIAC. "This trend will likely continue in the future based on current developments." 
The news release further argues that the increasing energy intensity of the world economy (more energy inputs needed per GDP of output) accounts for this unpromising pattern. The accompanying graph tells the story. Note that it separates these emissions into production and consumption:

The problem is one of historical fairness in curbing carbon emissions: how can developed nations tell developing ones with a straight face that they should drastically cut emissions now that they are now responsible for the lion's share of them? After all, developed nations are responsible for more of them when viewed in a historical perspective. As one of my students pointed out, it's a rehash of Friedrich List's "kicking away the ladder" criticism, but instead involving carbon-intensive means of development instead of tools of industrial policy. Having developed through the use of carbon-intensive industries, are these industrialized nations now "kicking away the ladder" to development they themselves once used?

It puts me in a bind. While perhaps unfair to LDCs, the honest truth is that Mother Earth could not care less if these emissions emanate from rich or poor nations.

NOTE: The US Energy Information Administration has specific emissions figures for countries such as superpolluters China and the United States that mirror the findings above. Indeed, the current slowdown in manufacturing activity in China--five straight monthly declines--may bode better for the environment than the global financial crisis did.
Read More

World Bank Boss: Kim, Okonjo-Iweala or Ocampo?

♠ Posted by Emmanuel in ,,, at 3/26/2012 05:30:00 PM
I'd like to say the competition to become the next World bank president is heating up if it weren't for the common understanding that it will be another American stitch-up. While I'd have preferred the term "whitewash," the White House has thrown those of us who are critical of Western domination of these institutions a curveball by nominating an Asian-American candidate in Jim Yong Kim. Thinking it over, I can offer a number of pros and cons. Starting with the good stuff I can think of--I am a charitable lad, yes...

  1. Global health is one of the areas where multilateral development institutions have actually made significant strides. Disease prevention is usually a large-scale intervention, and it is here where top-down efforts have shown promise. Witness the eradication of smallpox and the near-eradication of river blindness for instance. Since Kim's global advocacy is more on TB and HIV/AIDS, the more tentative results there are not really indicative of a lack of skill but of the increased difficulty in addressing the illness at hand;
  2. Becoming a university president--especially at a venerable Ivy League institution like Dartmouth--involves no small amount of political skill (Larry Summers notwithstanding);
  3. It will be a welcome change to have a physician by training head the World Bank instead of yet another economist or political scientist;
  4. It is also good that Jim Yong Kim is not a loyal party figure alike Zoellick and his American predecessors but rather someone who does not really come from the inner circles of US politics.

On the downside, though...

  1. This "pick a non-Caucasian to silence the critics" strategy would work better even as a token if he came from an LDC. Remember, South Korea famously joined the OECD in 1996 just before the outbreak of the Asian financial crisis a year after. We kicked it out of the G-77 after acceding to this rich country club, so he's not really someone who comes from today's Global South;
  2. His post as a university president aside, he will need to juggle conflicting interests from rich countries wishing to keep their hegemony at the World Bank as is and poor ones that are interested in being more involved in global governance but have found it hard to be among the big boys. There is not much from his previous experience that may prepare him for the rough-and-tumble of development politics.
Let's now turn to Ngozi Okonjo-Iweala, the Nigerian who's put her name up for candidacy via her supporting countries' World Bank representative. Also there's Jose Antonio Ocampo, the Colombian candidate put forward by a number of Latin American nations. Alike the bid by the Mexican Agustin Carstens to replace the infamous Dominique Strauss-Kahn at the IMF, it's probably best not to take these two bids very seriously (unfortunately)...
  1. The Jim Yong Kim ploy aside, the US shows no signs of breaking its stranglehold on World Bank leadership anytime soon, so both bids are forwarded more as "protest" votes;
  2. Alike Carstens, both LDC candidates are hampered by iffy support from disunited developing countries. After all, they've again failed to rally around a single candidate. Alike the Americans with their blinders, those that have volunteered someone have chosen a person from their own region. Not much "third world solidarity" here, eh? United we stand, divided we fall it is once more;
  3. Moreover, many other LDCs would probably be dissuaded from backing someone other than the US pick in justifiable fears of retribution from the West through vetoing future World Bank loans and grants;
  4. What's more, many "realists" would prefer to just aim for the backup spots alike being a World Bank managing director (the #2s). Indonesia's Sri Mulyani Indrawati probably understands this glass ceiling more than most. Call it the Zhu Min strategy;
  5. Okonjo-Iweala and Ocampo are hardcore development persons familiar with those working in this area and many LDC grandees. However, this status may actually detract from the idea of bringing in new blood in development work.
So in some (symbolic) ways Jim Yong Kim marks a real break as the American nominee--in terms of being a doctor by profession and an outsider to US politics. That said, these token gestures are unlikely to comfort the likes of yours truly since the guy probably knows who butters his bread when push comes to shove. At least U2's Bono was non-American. The more things change, the more things stay the same.

UPDATE: There is a lot of relevant material on the succession debate from the "World Bank President" site co-authored by my colleague Peter Chowla of the Bretton Woods Project.
Read More

'The World Economy Reeks Again, So Buy Yen'

♠ Posted by Emmanuel in , at 3/23/2012 09:53:00 AM
I have an avowed love-hate relationship with newswire coverage of various financial markets. With regard to currencies, one of the things I am most cautious about is the need to constantly provide explanations of why currency movements occur. I suppose having to provide a laundry list of reasons is a necessary task in the news business. Yet, the ephemeral nature of the task makes it subject to no small amount of improvisation and, dare I say it, conjecture.

Something that's fascinated me as of late are movements in the Japanese yen. Despite the continuing deflationary situation, the aftermath of the terrible tsunami and their budget deficit over 200% of GDP, the yen managed to strengthen to all-time (nominal) highs. Many reasons have been given for the mighty yen--some convincing, others less so.
However, the yen appears to have run out of nitro or whatever is fuelling its ascent in recent weeks as the currency has shown signs of coming back to Earth and the gravity of Japan's unpromising economic situation reasserts itself. Or think again. What we've have in the past few days is the yen strengthening against most other major currencies as "risk off" conditions indicative of the global economy slowing down once more favour it once more as a safe haven bet (of sorts). From Reuters:
The safe-haven yen held on to overnight gains in Asia on Friday, having risen across the board as investors gave risk currencies like the Australian dollar a wide berth on worries about the health of the global economy. Surveys on Thursday showed manufacturing shrank for a fifth month in China, while factory activity in Germany and France -- Europe's two biggest economies -- suffered big falls.

This prompted investors to dump growth-linked currencies and take shelter in the yen, which rose against the dollar, euro, Aussie and kiwi. The dollar fell more than 1 percent on Thursday to a 1-1/2 week low of 82.31 yen, before recovering a bit of ground to last stand at 82.60. "Fears of a Chinese hard landing are on the rise; overdone we think," said Vincent Chaigneau, strategist at Societe Generale. "Concerns over Europe are burgeoning again, rightly so given the weak economy and the toxic focus on enlarging the firewall," he added. 
So we have above the World Economy Reeks explanation for safe haven flows into the yen without necessarily comprehending why the Japanese yen would be a safer choice than, say, the Canadian dollar. At the risk of adding to this already long laundry list of explanations of how Things Going Wrong Elsewhere Affect the Yen, consider too the annual Yen Repatriation Story in the run-up to the end of March when Japan's financial year ends. Some IPE bozo explains the phenomenon thusly:
Longtime FX followers will know that yen movements around this time of the year are attributed to repatriation flows as firms wrap up their fiscal year at the end of March. That is, they need to reconvert their foreign exchange holdings back to yen for the purposes of financial reporting as they close the books. 
However, the MoF indicates that it canvassed Japanese MNCs' requirements for purchasing yen for the said event and found that there would be no large requirement this year. Go figure; FX is an especially wacky game to speculate in.
Read More

Why the US Ain't in the Inter-Parliamentary Union

♠ Posted by Emmanuel in , at 3/22/2012 08:43:00 AM
Here's another factoid you can use to embarrass even the most vaunted international relations pooh-bahs alike my blogging colleagues (especially of the garden-variety American sort): Ask them whether the United States is a member of the Inter-Parliamentary Union composed of nations that have legislatures. The response you'll probably get involves something along the lines of (1) "I didn't even know there was such as thing" and (2) "as a global promoter of democracy, the US is probably a member of it."

Both responses are embarrassing in the sense that, (1) even if the Inter-Parliamenary Union is obscure--hence my fondness of it--the folks who blather endlessly about democracy promotion are mostly unaware of its existence. What's more, (2) there has been no clamour on the part of these ostensible champions of democracy to regain lost US membership in the institution.

In any event, here's a neat description from a Congressional Report Service document on democracy promotion that I found while researching something related that speaks to this discrepancy of non-membership. From footnote 83:
The IPU was established in 1889 as an association of individual parliamentarians and the world’s first permanent multilateral political forum. The United States was one of the original participants in IPU activities begun in 1889 and formally joined in 1935 when the House and Senate enacted statutory authority for U.S. participation in the IPU (49 Stat. 425). Congressional participation in the IPU gradually diminished. In July 1997, Congress (through the Clerk of the House and Secretary of the Senate) notified the IPU that, given the diminished congressional  participation, the U.S. Congress could no longer justify the annual U.S. contribution of almost $1 million or 15% of the IPU annual budget and  had decided to reduce its membership status and proposed to make an annual donation of $500,000 to support the aims of the organization. The IPU Executive Committee did not accept the offer so, in 1998, Congress passed legislation to end U.S. participation on October 1, 1999 (ultimately attached to P.L. 105-277, Sec.  2503). It would presumably require new legislation to restore U.S. membership.
It is odd how American lawmakers in 1999 could not justify spending a million dollars annually on an institution that it was a founding member of that spoke to its avowed ideals. Meanwhile, they soon had little trouble justifying spending tens of billions annually year in and year out prosecuting (highly unsuccessful) misadventures in promoting democracy in places like Afghanistan and Iraq. While largely symbolic, what does US non-membership in the Inter-Parliamentary Union symbolize for these folks who endlessly bloviate about the importance of freedom?
Read More

Tracing Chinese (Linguistic) Hegemony in Asia

♠ Posted by Emmanuel in , at 3/22/2012 06:45:00 AM

For all the debate we have around here and practically everybody else especially those in policy circles about the meaning of China's rise--is it peaceful, is it developmentally beneficial for others, is it rising in such a way that it will eventually eclipse Western powers, etc--this sort of talk elides an important thing. That is, China has already had a profound influence on its neighbours for a very long time. Particularly through trade came the diffusion of several aspects of Chinese culture such as language.

A new feature from our friends over at World Policy Journal provides an example of China's enduring, multi-millennial linguistic influence in the region through the characters for "horse." It's a simple demonstration that reiterates the larger point that the Middle Kingdom's influence was once very considerable, and that it is not inconceivable that it can be again. Especially with trade flows emanating from there increasing by leaps and bounds, who's to say that those of us living near China aren't on the cusp of the PRC becoming dominant once more for better or worse?

The signs past and present, ah, point in that general direction.
Read More

Where's the Pork? US, Taiwan Fight Over Additives

♠ Posted by Emmanuel at 3/19/2012 03:31:00 AM
I am generally sympathetic to American agricultural techniques that others are squeamish about, but not with heavy-handed US trade advocacy that gives such techniques a bad name. Today we have another case in point in Taiwan .For one reason or another, erstwhile allies of the United States in the Asia-Pacific have vociferously contested the United States' attempts to sell what they believe are meat products of suspect safety. Witness the mass protests in 2008 against imports of older US beef into South Korea that are, by virtue of age, more susceptible to mad cow disease. Lest you think these were fringe protests, they almost toppled Lee Myun-Bak as tens of thousands took to the streets.

Nowadays we have a similar phenomenon going on in Taiwan. This time, though, the protests concern US pressure for the removal of Taiwan's ban on growth-enhancing additives--especially for pork. Controversies over the US using this sort of stuff are hardly new, nor are US efforts to remove barriers to their acceptance. Recall that nearly since the inception of the WTO in 1995, American trade authorities have been at it alike with its epic stand against the EU over beef hormones.

Whereas the likes of the EU have been proven to have political economies ideal for resisting American pressure on agriculture, Taiwan is not for a number of reasons. While the US is duty-bound to protect the ROC against PRC incursions, there are several other considerations besides. Ever since the PRC gained recognition at the United Nations as "the real China" and assumed its seat in the security council in 1971, Taiwan has been stuck in a diplomatic no-man's land. In political matters, its quasi-state status has been something other countries have taken advantage of. In economic matters, Taiwan has largely missed the boat on the proliferation of trade deals in the Asia-Pacific. Not only is it not a state in the eyes of most in the region, but those who are sympathetic to it are nonetheless wary of signing trade deals with Taiwan lest they offend the increasingly powerful PRC.

As it so happens, the United States is taking advantage of its "ally" Taiwan's vulnerability on both these fronts concerning the use of growth-enhancing additives. Alike in South Korea, the US throwing its weight around in agricultural matters has provoked a popular backlash as dung-throwing masses have accosted police forces in mass rallies. All these are occurring against the backdrop of Taiwan supposedly wanting to join negotiations to enlarge the APEC-based Trans-Pacific Partnership. Remember that Taiwan is, after all, an APEC participant:
Thousands of pig farmers throwing dung in the streets of Taipei. Demonstrators marching on America’s informal embassy wearing Uncle Sam hats and leering cow masks. Opposition lawmakers chanting slogans and occupying the speaker’s podium in parliament, disrupting the opening session and delaying the prime minister’s inaugural speech. These are all episodes in a growing row over meat imports into Taiwan that is pitting America, the island’s most important ally, against the vast mass of public opinion—and forcing the government of the recently re-elected president, Ma Ying-jeou, to manoeuvre frantically between the two.

At issue are American exports to Taiwan of meat that contains ractopamine, a controversial growth compound fed to cattle and pigs and which is banned by Taiwan, the European Union and China. The Americans want Taiwan to lift its ban. They point out that 27 countries have found meat from animals fed with ractopamine to be safe for humans, and are asking Taiwan to set maximum residual levels for allowable amounts instead. America has made clear that unless this is done it will not agree to any new economic initiatives with the diplomatically isolated island, including bilateral tax and investment agreements. And it will not champion Taiwan’s membership of the American-led Trans-Pacific Partnership (TPP), a nascent free-trade group.
The science of it is under scrutiny. While I am inclined to believe the US government's arguments about the practice's safety, many others beg to differ--including most Taiwanese:
Yet public opinion and Taiwanese meat producers vociferously support the ban. They claim that over 100 countries ban the drug (a claim the Americans contest). Toxicologists also argue that residual concentrations of the drug are five to ten times higher in offal, which is eaten by Asians but not often by Americans. 
Call it the guano of globalization. It bears repeating that Taiwan's diplomatic isolation is largely due to the US warming up to China all those years ago. But, instead of shoring up Taiwan's economic vulnerability, the US does this sort of thing despite the ractopamine ban likely being WTO-legal. Despite my reservations about the cause of these protests, all I can say for Taiwan is that with friends like these..
Read More

Mobile Phones 4 Everything, Water Security Edn

♠ Posted by Emmanuel in ,, at 3/16/2012 08:39:00 AM

By now I'm probably known to longtime readers as the information and communication technology for development (ICT4D) skeptic guy due to my Foreign Affairs contribution casting doubt on the US state department's digital diplomacy efforts as well as the MIT Media Labs' One Laptop Per Child (OLPC) initiative. Well, that's not entirely correct, I must say. For instance, I have been following the cutting-edge innovations in sending remittances through these very technologies. As with most things, ideas to harness ICT for development differ in the quality of execution. Many will fail, but some will succeed.

So it is with quite some interest that I read a new contribution in Global Policy concerning the use of mobile phones for water security in Africa, where several countries with the most extreme shortages of this valuable resource lie [click to enlarge image above]. Especially now when the finitude of water is becoming increasingly recognized, this previous resource benefits from being made more available in a timely manner. Not only are conflicts over water increasing, but the realities of climate change make it more important.

Hearteningly,many of the most advanced mobile telephony services are found in the African continent due more to necessity than anything else. Rob Hope, Tim Foster, Alex Money and Michael Rouse offer the following abstract and policy implications of their work:
--------------------------

Water security aims to provide safe, reliable, affordable and sufficient water for people, agriculture, industry and ecosystems, subject to societal choices across related trade-offs and risks. Managing resource risks, delivering effective governance, promoting financial sustainability and achieving social equity are central to achieving water security. We explore how innovations in mobile communications have created an inclusive, secure and low cost architecture for financial and data flows to reduce risk and enhance water security. In Africa, water security challenges associated with climate extremes and population growth outstripping improved water services’ access are juxtaposed with its global lead in mobile commerce innovations, including mobile water payments. Market driven expansion of mobile network coverage and low cost, mobile handsets mean more Africans will be connected to mobile phone services than those receiving improved water services in 2012. The confluence of rapid mobile network expansion, mobile phone ownership, mobile water payments and smart metering technologies offer new policy pathways to water security to accelerate progress on sustainable, safe water access, particularly for those in the greatest need and those most difficult to reach. We chart emerging mobile water innovations in Africa and policy implications in the region and beyond.

Policy Implications
  • Mobile communication innovations offer an inclusive, secure and low cost architecture for financial and data flows that can reduce or share risk to enhance water security.
  • The confluence of mobile network coverage, mobile phone ownership, mobile water payments and smart water metering technologies has significant but uncharted potential to enhance water security.
  • Innovations are being driven by the commercial interests of mobile network operators with the distributional impacts and implications yet to be evaluated or shaped by policy and governance regimes.
  • Living in rural and remote areas may no longer be synonymous with a higher risk of water insecurity as mobile connectivity could permit innovative management models at scale
--------------------------

At this point in time in the climate change game, all innovations of this sort that can actually address a significant problem are certainly welcome.
Read More

Iceland Considers Dollarization (Canadian $ That Is)

♠ Posted by Emmanuel in , at 3/14/2012 11:21:00 AM

More so in years long past, many countries used to adopt the US dollar as their own to assume the benefits conferred by the world's standard currency. Among other things, these included liquidity, price stability and being a reasonable store of value. While an independent monetary policy was forsaken--or at least "outsourced" to the Fed--many smaller economies came to the conclusion that adopting the US dollar outweighed the benefits. In recent years, of course, the dollar's uncertain status has begun to erode its advantages and hence the lure of dollarization.

For some time now, the small, open economy of Iceland has been looking to replace its krona with something less volatile in the wake of its financial crisis that eventually ended in tears via an IMF bailout. How do you quell the "violence of the market"? Being a small, open economy renders one's own currency more subject to the changing winds. As a European nation, Iceland naturally thought of joining the EU and particularly the EMU to solve this issue, but lately it's had second thoughts given the variegated PIGS implosions. That is, if many of those countries have gone to the IMF poorhouse anyway, what's the advantage for Iceland? In reality, the conditionalities applied there were less harsh than those in Greece or Portugal, allowing for populist measures to pass:
Not only are Icelanders taking note of the increasingly frantic efforts of politicians in countries hundreds of kilometres away to save the euro, they are finding that their own financial circumstances constitute less of an emergency. The conditions attached to their bailout by the IMF seem comparatively lenient.

The new government of 2009 was allowed to carry on borrowing and spending for another year before the cuts kicked in. In the meantime, devaluation - something impossible for eurozone members - meant all-important exports suddenly became competitive again. Unemployment is already falling. Many people's mortgages were quietly "re-negotiated" by the newly nationalised banks.

The richest 5-7% of the population have been subjected to a new wealth tax. The welfare state and the health service were shielded from the biggest savings and public sector workers have recently been awarded an above-inflation wage rise. Opinion polls suggest a clear majority of Icelanders now oppose joining the EU and the finance minister, overseeing all these changes, is among them. 
Now there is talk of adopting dollars instead of euros. But, the interesting this is that they're talking about Canadian dollars here. I've often thought of Canadians as the more civilized North Americans, on a far sounder economic footing than their restless, warmongering neighbours. These folks actually understand that deficits do matter. There are excellent reasons why the loonie (Canadian dollar) has strengthened so much against the play money used by those free lunch lovers across the border. You needn't wonder who's still got a triple-A debt rating, either.
----------------

Accordingly, the Globe and Mail brings us five reasons for the improbable adoption of the loonie by Iceland. As it turns out, some Canadians are pushing for it with gusto:

1. Seigniorage: “Printing money is a good thing for Canada,” [economist Justin] Wolfers said. “Every dollar in circulation is on the debit side of the central bank’s balance sheet, and they’re effectively borrowing from the Icelanders at a zero-per-cent interest rate.” So if there are no strings attached, why not? Or, as Mr. Wolfers put it, referring to Iceland, “as long as you’re a bastard, it’s all profit.”

2. A stable currency: Iceland could of course benefit from a devalued currency. Instead it would get a strong, stable currency that has been something of a haven during this post-crisis period of uncertainty. While strong, exporters at least know what to expect. Consider, too, that the Canadian dollar is liquid. The krona was "blasted through smithereens and very few banks can trade [it] in anything else than very small amounts..."

3. Respected central bank: Iceland would of course have no say in monetary policy, but it would have a currency overseen by a very strong central bank and governor, who led Canada out of the recession admirably. Mark Carney is also respected on the global stage, having recently been named to head up the Financial Stability Board.

4. Fiscal, economic stability: Iceland has no reputation in the wake of its banking collapse. Who would you prefer at that point, a euro zone crippled by recession and a two-year-old debt crisis, or Canada? With Canada, you get a stable, if lukewarm, economic outlook, a government that’s still rated triple-A, and a fiscal standing to die for (if you’re Greece or Portugal). And, we can count.

5. Our glowing hearts For Iceland, do not underestimate friendship in this post-crisis era of currency manipulation and mounting trade tensions. We’re a wonderful people, they’re a wonderful people. We’ve got a beautiful country, they’ve got a beautiful country. True, it gets cold in Canada in the winter, but remember we’re talking about Iceland. And surely we can forgive them for Björk.
 ----------------

It's a fairly off-the-wall thing to do to adopt the Canadian dollar, but hey, the economic rationale seems to be straightforward once you get over the initial shock of the idea.
Read More