The World Bank unveiled its plan to end extreme poverty by 2030 recently.
The rapid progress of India, China and Brazil blazed the path towards exceeding the global Millennium Development Goal of halving poverty by 2015. Now the Bank wants to rid the world of extreme poverty forever.
Ending extreme poverty will require the acceleration of economic growth in developing countries and translating that growth into jobs while eliminating inequality, said World Bank President Jim Kim in a blogger call yesterday morning. Work must be done to mitigate the shocks caused by natural disasters and eliminate the insecurity linked to food, fuel and poverty, he added.
Linking all of these problems, for Kim, is climate change.
“Climate change is not just an environmental challenge. It’s a fundamental threat to economic development and the fight against poverty,” he said. Continue reading →
Paul Ryan’s addition to the Romney ticket catapults the election season forward. It also provides a bit more clarity on what a Romney presidency may look like.
While other reports will focus on Ryan’s affinity for Ayn Rand, P90X and the impact of his proposed budget on jobs and US economy, I am interested on what his arrival has to say about the Romney team’s plan for foreign aid.
I will try to take the information provided by statements and actions of each of the candidates to provide a comparison for the two on the foreign aid budget and programs.
Foreign Aid in Theory
In a Google+ Hangout that was done in conjunction with the State of the Union address this year, President Obama fielded a series of questions from people participating and via YouTube. One young man asked the President why the US should maintain its aid budget when there are people at home, such as returning veterans, who are struggling.
“We only spend about 1% of our budget on foreign aid, but it pays off in a lot of ways. If we are contributing to improving an economy in a country, if we are giving people an opportunity, if we are preventing a famine which results in a huge number of refugees, that potentially saves us from having to deal with some military crisis further down the road that could be more expensive.”
The Obama/Biden website makes no mention of aid or development.
We had the opportunity to hear Romney’s thoughts about foreign aid thanks to the fall Republican debates. He said in October:
Foreign aid has several elements. One of those elements is defense, is to make sure that we are able to have the defense resources we want in certain places of the world. That probably ought to fall under the Department of Defense budget rather than a foreign aid budget.
Part of it is humanitarian aid around the world. I happen to think it doesn’t make a lot of sense for us to borrow money from the Chinese to go give to another country for humanitarian aid. …
And finally there’s a portion of our foreign aid that allows us to carry out our activities in the world such as what’s happening in Pakistan where we’re taking – we’re supplying our troops in Afghanistan through Pakistan.
But let me tell you: We’re spending more on foreign aid than we ought to be spending. And Congressman Paul asked, is there a place we can cut the budget? Let me tell you where we cut the budget. Discretionary accounts you bring back to 2008 level. We … cut federal employment by at least 10 percent through attrition. And finally, we say to federal employees: You’re not going to make more money than the people in the private sector who are paying for you. We link their compensation.
Aid also does not make an appearance on the Romney website as well, but he does devote a sections on Africa and Latin America that emphasize trade.
Global demand for Africa’s natural resources will grow. Demographics indicate that by 2050, Africa’s population will double to two billion and one in four workers on the planet will be African. These trends, when coupled with robust economic growth, point to the emergence of stronger economic actors on the world stage and greater partnership opportunities for the United States. While Africa is changing, global competitors like China are taking advantage of these changes and are rapidly outmaneuvering the United States by making strategic inroads throughout the continent and gaining an economic and political advantage over the United States.
BottomLine: Obama has made it clear that he supports foreign aid. Romney has made statements opposing aid, but generally chooses to focus on trade and defense. The lack of inclusion of aid/development on both candidate websites indicates that both do not consider it to be a priority issue.
The Aid Budget
Obama release his FY 2013 budget proposal that includes $51.6 billion in discretionary funding for the State Department and USAID. Representing a 1.6% increase from the FY2012 budget.
Romney has made no real proposal with what he would do about the budget, but his new running mate provides some insight into what may come. The Ryan Plan calls for $40.905 billion in discretionary spending for FY2013.
USAID would fold the Development Assistance program into the Millennium Challenge Corporation. Ryan writes, “America’s experience with having two development assistance programs has shown that MCC’s model better reflects this principle when compared to DA. MCC’s emphasis on outputs rather than inputs needs to be the foundation of all U.S. foreign assistance programs.”
Funding to ‘peripheral foreign affairs institutions’ such as the Inter-American Foundation, the African Development Foundation, the East-West Center, the Asia Foundation, and the Center for Middle Eastern-Western Dialogue are to be cut for being ‘redundant.’ Feed the Future would be cut and disaster assistance funding would see a significant reduction. (Read all his suggestions here starting a pg 53)
A visual representation of the two budgets pulled together by Devex.
BottomLine: Obama wants to maintain aid spending with small growth. Ryan wants to make deep cuts and consolidate/eliminate what he considers to be unnecessary programs and expenditures. That is followed by a modest pace of growth that appears to reflect inflation.
Obama’s strategy for Africa that he unveiled back in June places a significant emphasis on trade. The word ‘aid’ makes one appearance in the document and it is proceeded by the phrase “less reliance on.” The plan breaks down into what they call the four pillars of the US strategy towards Africa: (1) strengthen democratic institutions; (2) spur economic growth, trade, and investment; (3) advance peace and security; and (4) promote opportunity and development.
Points two and three are heavily focused on the issue of economic growth/development and trade. The document focuses on areas such as improving regional integration, increasing access go global markets and increasing opportunities for women.
“It is in the interest of the United States to improve the region’s trade competitiveness, encourage the diversification of exports beyond natural resources, and ensure that the benefits from growth are broad-based. We will pursue the following actions as we seek to accelerate inclusive economic growth, including through trade and investment,” says the report.
This is reinforced by recent remarks from US Department of Commerce Under Secretary of International Trade Franciso Sanchez. “The Obama administration is committed to encouraging trade and investment with Sub-Saharan Africa, which is a region rich with emerging opportunities for U.S. exporters,” Sánchez said. “The International Trade Administration is actively engaged in projects and initiatives that support the President’s strategy and provide new opportunities for American businesses to export their goods and services, thereby creating jobs in the United States and strengthening our economy.”
The Romney website, as seen earlier, makes it clear that trade sits at the forefront. It is most present in his plan for Latin America.
In his first 100 days in office, Mitt will launch a vigorous public diplomacy and trade promotion effort in the region — the Campaign for Economic Opportunity in Latin America (CEOLA) — to extol the virtues of democracy and free trade and build on the benefits conferred by the free trade agreements reached with Panama and Colombia, as well as those already in force with Chile, Mexico, Peru, and the members of the Central American Free Trade Agreement…The campaign will also seek to involve both the U.S. and Latin American private sectors in efforts to expand trade throughout the region with initiatives that not only help American companies do business in Latin America, but also help Latin American companies invest and create jobs in the American market. The goal of CEOLA will be to set the stage for eventual membership in the Reagan Economic Zone for nations throughout Latin America and the creation of strong and mutually beneficial economic ties between the region and the United States.
Another signal is the recent addition of former World Bank president Robert Zoellick. For some it was a bit of a head scratcher, but it may be a stronger indication for how a Romney administration will deal with foreign aid than the Ryan plan. There are even some rumors that Zoellick could fit in quite well as Secretary of State given his previous experiences and connections.
“Bob Zoellick couldn’t be more conservative in the branch of the GOP he represents,” said Danielle Pletka, vice president at the American Enterprise Institute to Foreign Policy. “He’s pro-China to the point of mania, he’s an establishment guy, he’s a trade-first guy. He’s basically a George H.W. Bush, old-school Republican.” However, insiders are saying that Zoellick has little power over the policy decisions for the Romney campaign. That may mean that the Zoellick indicates little about the Romney platform
BottomLine – Both sides support trade and make it clear that their aims are to find ways to transform developing economies. Romney seems to lean more heavily on the side of trade over aid, but the difference on this half of the equation seems to be very little.
Conclusions
The Obama administration is rather easy to judge in terms of foreign aid. Decisions like placing Clinton in charge of the State Department, the founding of GHI and Feed the Future and recent high level events like Frontiers for Development help fill out a picture that is generally supportive of foreign aid.
Romney is trickier. The most information comes from his running mate. While informative, it does not mean that Romney will take to heart every aspect of the Ryan plan. This might be an area where he will push harder than Ryan or soften further. The condemnation of aid came during the primary season when it is more of a pageant to look pretty for fellow conservatives. Presidential debates will get a bit closer to the truth of what a Romney administration might do in regards to foreign aid.
There are also two other factors worth considering. First, it is congress who actually sets the budget. The president can make a budget request, but the gritty negotiations take place in the house and the senate. Races for seats in congress will be important as shifts in party numbers can make it easier or harder to cut into foreign aid. Finally, if no agreement is made on budget cuts, the sequestration will be triggered causing across the board cuts. It appears that such cuts are a likely reality given the wrangling in congress.
While it is not often considered one of the more important issues during the campaign, the foreign aid budget is yet another place where the two candidates do not appear to see eye to eye.
The online news organization GlobalPost has taken data from the World Bank to create a good infographic and database on the Best and Worst Places to do Business in Africa (interactive at the site; below is just a screen grab):
GlobalPost
Not too surprisingly, the Democratic Republic of Congo (which lately has seen a new eruption of violent civil unrest due to a renegade military man in eastern Congo) scores badly, along with Chad.
Somewhat surprisingly, Nigeria is pegged as one of the best places in Africa to do business.
There’s certainly a lot of oil wealth there, and business opportunities. But there’s also a lot of corruption in Nigeria, which makes it a great place to do business if you’re okay with bribery (like Dick Cheney and Haliburton is alleged to have been) but maybe not so great if you don’t want to pay a ‘dash’ to get that contract. Looks like the World Bank didn’t factor this into its rankings.
So by way of comparison, here’s an infographic from The Guardian that illustrates the best and worst places for corruption (again, just the screen grab here so go to link for interactive map and data):
U.S. physician and anti-poverty activist Dr. Jim Kim has been confirmed as the new president of the World Bank.
The news – while controversial internationally – was well received in the global health and development field in Seattle.
“In an era when hiring a politician or a banker in the U.S. might not be a very good choice, hiring Jim Kim was brilliant,” said Dr. King Holmes, chair of the University of Washington’s Department of Global Health and director of the UW’s Center for AIDS and STDs.
“He’s very competent and has demonstrated that in a variety of areas,” Holmes said.
The selection of Kim, also as expected, has prompted a lot of resentment — in part because it furthers the American monopolization of the position and also because some saw Kim as ‘anti-growth‘ or, more legitimately perhaps, as having the wrong kind of expertise needed.
Nominee for president of the World Bank, Dartmouth College President Jim Yong Kim, stands while being announced by U.S. President Barack Obama in the Rose Garden on March 23 in Washington, DC. Kim, who is seen as a surprise pick, is a Korean born physician that is prominent in global health circles.
Lant Pritchett is Professor of the Practice of International Development at the Harvard Kennedy School.
Outsiders must be a little mystified as to why the Obama administration’s nomination of Jim Young Kim to lead the World Bank has kicked up so much dust in the development community. I suspect the casual observer thinks: “Such a nice man, a doctor devoted to HIV/AIDS and to the poorest in the poorest places. Why the fuss?”
But picking a new World Bank head is a little like picking a new Pope. The process isn’t just about the individual candidates for the position, but about the overall direction of the faith. And so, the controversy over Kim’s nomination is not really about Kim himself. It’s a debate about a philosophical schism in the development community.
The original idea of development really gained strength with the de-colonialization that followed World War II in Asia and later in Africa. Just as objects in nature go through a process of development to achieve their full potential — acorns become oaks, tadpoles become frogs, human embryos become people — the idea was that newly sovereign states would experience a historical process whereby India would become Britain, Korea would become Japan, and Cote d’Ivoire would become France.
President Barack Obama’s nomination of renowned physician activist Dr. Jim Kim to become head of the World Bank is controversial – apparently because he’s both a physician and an outspoken advocate for a particular approach to fighting poverty.
This has led all sorts of development experts — most of them economists — to give at best faint praise to Kim as a “good person” but then go on to damn him for not having the right kind of knowledge and/or expertise to run this institution devoted to promoting overseas development.
Many of my favorite development (economics) experts like Bill Easterly and Chris Blattman point to a book co-authored by Kim called Dying for Growth, in which he and his colleagues “present evidence that the quest for growth in GDP and corporate profits has in fact worsened the lives of millions of women and men.”
Blattman cites another opponent of Kim’s nomination, Lant Pritchett, who says:
Kim’s views against economic growth and private investment (detailed in his book, Dying for Growth) are already raising eyebrows in the press and causing concern among world leaders.
Oh dear me! The proposed head of the World Bank is “against growth!” Really? Continue reading →
While it is not often considered one of the more important issues during the campaign, the foreign aid budget is yet another place where the two candidates do not appear to see eye to eye.
