Ngozi Okonjo-Iweala for the World Bank

A post up at Foreign Exchange about the World Bank leadership competition, and why the Bank ought to select Nigeria’s Okonjo-Iweala over the U.S. nominee, Jim Kim. Short version: she’s a heavy-hitter with the right experience who, critically, solves the Bank’s legitimacy crisis.

By far the most important reason to appoint Okonjo-Iweala is that she has experience on both sides of the table in the international lending negotiations that are the bread and butter of the Bank’s work. As an economist who rose to be the Bank’s Managing Director, she oversaw its lending from 2007 to 2011, helping shepherd it through the global financial crisis. As Nigeria’s finance minister between 2003 and 2006, she represented her government in debt relief negotiations with Paris Club donors, succeeding in reducing the country’s debt burden from $30 billion t0 $12 billion. That remains the only time the Paris Club has allowed a debtor nation to buy back its debt below par.

What’s critical about the experience is that Okonjo-Iweala understood what it meant to face a debt burden that was so beyond repayment as to be punitive, and she worked to have it reduced. But she also understood that the single case of Nigeria didn’t negate the merits of international development lending and she went back to the Bank to provide critical funding to other nations.

She therefore embodies the argument that the Bank desperately needs to make if it is to regain its legitimacy in the developing world: that aid and development lending are powerful forces for good, so long as they are delivered justly. Appointing her turns control of the Bank over to those it serves while re-affiriming the Bank’s underlying mission.

Read it here.

Does Empowering Women Improve the Economy?

Esther Duflo, an economist I like and admire, made some troubling comments about women’s empowerment in a recent FT interview:

“Giving more to women will to some extent come at the expense of men. People sometimes try to sweep that under the rug by saying you will create so much additional resources that everyone will be better off.” She smiles wryly but firmly. “I don’t think that’s true.”

The comments fly in the face of a wealth of economic data showing that empowering women is a boon for economic growth, some of which I’ve written up for Forbes:

1. A 2007 Goldman Sachs report concluded that closing the gap between male and female employment would add 9% to US GDP, 13% to European GDPs and 16% to Japan’s GDP. Moreover, policies to facilitate female employment – like child care and parental leave rules that make it easier to work and have children – boost low fertility rates in the developed world. That means more women in the work force would actually alleviate one of the heaviest burdens on developed economies: an aging population’s expensive entitlements.

2. The World Bank reports that if women in the Middle East and North Africa were fully integrated into the workforce, average household earnings in the region would increase by 25%.

3. The Economist reports that rising numbers of women in the workforce in the developed world over the past decade have added more to global growth than China has. In the U.S., the State Department says the productivity gains attributable to the increase in female employment account for 25% of current U.S. GDP.

Read the whole post here.

Review: ‘Why It’s Kicking Off Everywhere: The New Global Revolutions,’ by Paul Mason

Paul Mason, the Economics Editor of the BBC’s Newsnight program, has a new book out. In it, he argues that the myriad forms of protest we’ve seen over the last year – the Arab Spring, the Occupy movement, student protests, protests against austerity budgets in Europe, are linked, part of a global revolution. Over at my Forbes blog, I’ve got a long review of the book.

The links are, according to Mason:

1. “the near collapse of free-market capitalism,” and in particular the opportunities it presents to the young;

2. rapid demographic growth creating a “youth bulge,” where young people come to represent a growing percentage of a country’s overall population, compounding and amplifying the impact of point 1;

3. growth in educational attainment, which Mason uses to argue that the young people sans opportunity are those who played by the rules and feel their economic loss more acutely as a result. He calls them “graduates with no future”;

4. “an upswing in technical innovation, a surge in desire for individual freedom and a change in human consciousness about what freedom means.” Technology and individualism, Mason says, allow protests to assume a networked structure than can overpower traditional hierarchies.

I’ve been skeptical of this argument since it first appeared on Mason’s blog a year ago.

The three core problems Mason identifies – youth unemployment, the youth demographic bulge, and the diminishing returns on education- are real ones. But in Mason’s account, they are depicted as three components of the same, global problem. That’s simply not accurate.

To learn exactly what’s wrong with Mason’s economic assumptions, and how a more rigorous look at the economic data undermines his argument, read the whole thing.

Europe’s constitutional literalism

Some frustrated words about the state of European political economy:

What we have, in other words, is a meta-debate about whether policy options are permissible, instead of a debate about whether they are sound. A debate in which what is permissible is defined narrowly, as whatever is specifically ‘foreseen’ in documents written years ago, instead of broadly, as whatever those documents do not explicitly forbid. And a debate in which it is hard to avoid the conclusion that policy options are being construed as impossible because they are politically unpalatable to the people who would have to carry them out.

More here.

First Thoughts on the Eurozone Summit

Burning a bit of midnight oil – a post up at Foreign Exchange on the eurozone summit and its results. Really short version: ‘It is hard not to see a game of hot potato at play here which eventually has to come back to the ECB.’

Read the whole post here.

Baseball and the Marriage Premium

At Foreign Exchange:

In honor of the World Series, which starts tonight*, I dug out a research paper I’ve been sitting on for a while.

The paper, ‘Productivity, Wages, and Marriage: The Case of Major League Baseball‘ looks at the wages of baseball players and identifies a 16% gap between the wages of married players and unmarried players.

Economists have been documenting the marriage premium – the income boost (anywhere from 10 to 40 percent) married men have over their unmarried counterparts – for decades. But researchers have historically gotten stuck when it comes to providing explanations for the phenomenon: Do married men perform better because their wives are doing more of the housework? Do married men perform better because women tend to marry high performers anyway? Do married men perform about the same, but employers discriminate in their favor because they come across as reliable?  Without data about productivity, it’s hard to say.

That’s what makes the baseball study distinctive: baseball is a geek’s sport, filled with statistics, and – in a post-Moneyball world – increasingly managed by the numbers. That allowed the paper’s authors, Francesca Cornaglia and Naomi E. Feldman, to control for productivity (using both Batting Average and On-Base Plus Slugging) and sorted players into groups by age (early and late career) and ability (low, medium, or high performers). They were not only able to show that there is a marriage premium, but able to test the prevailing theories about why it exists.

Go read.

It Takes Courage: Christine Lagarde at the IMF

I’ve written the cover story of the next issue (dated September 12) of Forbes, a profile of Christine Lagarde, the new head of the IMF. This is Forbes’ annual Power Women issue, containing the magazine’s ranking of the world’s 100 most powerful women. Lagarde comes in at #9.

Here’s a snippet of my piece:

Not a moment too soon, given a world in financial turmoil and an IMF shaken to its core by the scandal of her predecessor, Dominique Strauss-Kahn, who resigned over allegations of sexual assault in May. A moderate Socialist, DSK pushed for lenient fiscal policies and stringent financial regulations and opposed austerity programs in beleaguered euro zone economies like Ireland, Portugal and Greece. Lagarde, an unabashed free marketer, takes a much flintier approach to the crisis. It’s time, she says, to return the IMF to its roots, “that fiscal consolidation line, which I think is right.”

She knows this is a tough sell. “You first have a period [after making cuts] where growth takes a hit and goes negative”—and with that come unavoidable human costs in lost jobs and social services. Political feuding over controversial cuts will only make the pain worse. How should ordinary people cope? She pauses. “It takes courage.”

Read the whole story (and watch some video from my interview with Lagarde) here.

Hillary Clinton Seeking World Bank Presidency

Have a quick post up at Foreign Exchange on a Reuters story from this evening, suggesting Hillary Clinton is looking to leave the State Department for the World Bank.

All of a sudden, we might be on the verge of having four women in the four most powerful development policy roles.

I celebrate this. But I am not satisfied. Because despite the increased visibility of women in development policy, the central role of gender equality in economic development is under-appreciated or misunderstood.

More on why women in power doesn’t necessarily mean empowerment for all women here.

The IMF Succession

I’ve got a post up at Foreign Exchange arguing for a non-EU replacement for DSK:

If one grants the premise of the European argument (that the IMF should be controlled by the people who need it most), one has to grant that the people who need it most aren’t European, and will be less so as time goes on. Indeed, the best way to address the controversy surrounding and resentment toward the IMF in many parts of the developing world, rather than making crass jokes, is to remind people that its primary function is – and has always been – to fight poverty, and to push for a developing world candidate on the grounds that it should be more accountable to those it serves.

More, including my own favorite candidate, here.

In Defense of Political Economy: new ideas on development from the World Bank

A new blog post at Foreign Exchange, finally. This one’s on a new report from the World Bank that makes some strong points about the relationship between conflict, security and economic development:

The central argument of the report is that economic development is imperiled, or even undermined, by political instability and conflict. That’s not a new line, but historically, it’s a line that has been deployed by critics of foreign aid or development spending: given that poor countries are also warring states or corrupt states where aid dollars often fail, the critics say, aid dollars are wasteful at best, and detrimental at worst.The answer, historically, has come from organizations devoted to solving conflicts or protecting the rule of law as ends in themselves, who often try to remind donors of the economic dividends of their work.  Development institutions meanwhile have defended their work by the argument that economic investments can solve political problems and therefore that the politics need not be tackled, or even engaged with, first. [That’s why, for example, the central development document of the last decade, the Millennium Development Goals, doesn’t include benchmarks for democracy and good governance.]

The new answer is that aid dollars should be spent directly on solving these ‘political’ problems, that in fact there are no problems in the developing world today with purely economic or political character, that this is a chicken-or-egg debate in which neither factor actually comes first.

This has much to do with the changing nature of conflict.

Read the rest here.