On the heels of the U.N.’s adoption in late September of the Sustainable Development Goals (SDGs) for 2030, an Asia Pacific volunteering alliance recently convened a forum for hundreds of youth and development partners from northeast Asia at the Korea Council on Foreign Relations in Seoul.

In his keynote address highlighting the role of volunteers in global development, Young-Mok Kim, president of the Korean International Cooperation Agency (KOICA), stressed the key role of Peace Corps volunteers and the Saemaul Undong village self-help model in Korea’s 50-year rise from a low-income to a high-income nation.

Since 1970, Korea’s Saemaul Undong (“New Community Movement”) has tested a combination of local self-help cooperative action with national development policy addressing poverty, relying on the spirit of rural communities. Local volunteering teams engaging youth and women have been tapped to guide and implement grassroots development projects and counter rural over-migration to urban areas, engaging in housing, local infrastructure and irrigation, credit unions, and cooperative businesses, among other holistic areas while enhancing an overall community spirit of ownership.

“As the first country to escape poverty and achieve economic and social development as well as democratization, the SDGs present us with an opportunity to expand our footprint and visibility in the development arena and live up to international expectations. In Korea, thanks to Saemaul Undong, the poverty rate was reduced from 34.6 percent to 6 percent and rural households’ income reached parity with that of urban households during the period from 1967 to 1984.” The Saemaul Undong model has been adapted in African and other developing nations and was featured in a special high-level forum on rural development during the recent U.N. General Assembly.

Kim stated: “It is important that we facilitate participatory engagement by harnessing the power of volunteerism to meet the key principle of the SDGs” and he indicated that the World Friends Korea (WFK) volunteer program learned from the nation’s experience with the Peace Corps. WFK has sent more than 50,000 volunteers abroad in service projects and to provide technical training. Kim noted KOICA ranks second in the world with regard to the number of volunteers sent to developing countries, sending 4,500 annually to 50 countries.

KOICA was a founding participant in the Asia Pacific Peace and Development Service Alliance (APPDSA) that was launched at the U.N. Economic and Social Commission for Asia and the Pacific (ESCAP) headquarters in Bangkok in October 2014 with the support of FK Norway, the Global Peace Foundation, KOICA, the Peace Corps and other partners. Kim hailed the effort “to form an alliance of upgrading our volunteer program and fostering the force of young people who can play crucial roles in the development cooperation arena.”

The multi-stakeholder platform forged in Southeast Asia is now engaging thousands of volunteers in climate-related projects, including massive river clean-up campaigns in Thailand and Nepal and ongoing “green Asia” tree-planting and eco-camps working to address desertification in Mongolia.   

After the Seoul convening, which launched the Northeast Asia volunteering initiative, I travelled to Kathmandu to assess the progress of the South Asia APPDSA Alliance hub for volunteerism. Convened in Nepal just prior to the April earthquake that took more than 9,000 lives, the Alliance’s South Asia convening provided a ready base of volunteers to implement the Kathmandu Call to Action after the disaster struck and served as a springboard for Rise Nepal, a youth-led relief and rebuilding initiative. To date, more than 1,600 young Nepali volunteers have helped nearly 3,000 households with emergency provisions, including food, and medical and hygiene supplies, and have constructed around 600 transitional homes.    

IBM stepped in to provide IT support, equipping youths with software and other technology to facilitate their efforts to rebuild their nation beyond short-term earthquake relief. Since the recent adoption of Nepal’s new constitution, this support is being broadened to include young leadership training in citizenship and service addressing longer-term goals, including SDGs across the South Asia region.

A recent Gallup article noted the power of the more than 1 billion people around the world who engage in volunteer service and the need to marshal their efforts to help countries meet their SDG targets by 2030. Since the Seoul forum, efforts are underway across the Asia-Pacific region to step-up specific volunteerism initiatives, provide technology that will further empower young volunteers, and document the results of ongoing environmental service projects such as the restoration of the Bagmati River in Nepal and counterpart efforts in Bangkok, Mongolia, and the Philippines.  

The growth of such multi-stakeholder volunteering alliances, coupled with KOICA’s experience in forging volunteerism-based community outcomes measurably addressing poverty, hold great promise in marshaling requisite human capital and innovation to help achieve the next generation development goals.

Volunteerism remains a powerful tool for good around the world. Young people, in particular, are motivated by the prospect of creating real and lasting change, as well as gaining valuable learning experiences that come with volunteering. This energy and optimism among youth can be harnessed and mobilized to help meet challenges facing our world today and accomplish such targets as the United Nations 2030 Sustainable Development Goals (SDGs).

On June 14, young leaders and development agents from leading non-governmental organizations (NGOs), faith-based organizations, corporations, universities, the Peace Corps, and United Nations Volunteers came together at the Brookings Institution to answer the question on how to achieve impacts on the SDGs through international service.

This was also the 10th anniversary gathering of the Building Bridges Coalition—a multi-stakeholder consortium of development volunteers— and included the announcement of a new Service Year Alliance partnership with the coalition to step up international volunteers and village-based volunteering capacity around the world.

Brookings Senior Fellow Homi Kharas, who served as the lead author supporting the high-level panel advising the U.N. secretary-general on the post-2015 development agenda, noted the imperative of engaging community volunteers to scale up effective initiatives, build political awareness, and generate “partnerships with citizens at every level” to achieve the 2030 goals.  

Kharas’ call was echoed in reports on effective grassroots initiatives, including Omnimed’s mobilization of 1,200 village health workers in Uganda’s Mukono district, a dramatic reduction of malaria through Peace Corps efforts with Senegal village volunteers, and Seed Global Health’s partnership to scale up medical doctors and nurses to address critical health professional shortages in the developing world. 

U.N. Youth Envoy Ahmad Alhendawi of Jordan energized young leaders from Atlas Corps, Global Citizen Year, America Solidaria, International Young Leaders Academy, and universities, citing U.N. Security Council Resolution 2250 on youth, peace, and security as “a turning point when it comes to the way we engage with young people globally… to recognize their role for who they are, as peacebuilders, not troublemakers… and equal partners on the ground.”

Service Year Alliance Chair General Stanley McChrystal, former Joint Special Operations commander, acclaimed, “The big idea… of a culture where the expectation [and] habit of service has provided young people an opportunity to do a year of funded, full-time service.” 

Civic Enterprises President John Bridgeland and Brookings Senior Fellow E.J. Dionne, Jr. led a panel with Seed Global Health’s Vanessa Kerry and Atlas Corps’ Scott Beale on policy ideas for the next administration, including offering Global Service Fellowships in United States Agency for International Development (USAID) programs to grow health service corps, student service year loan forgiveness, and technical support through State Department volunteer exchanges. Former Senator Harris Wofford, Building Bridge Coalition’s senior advisor and a founding Peace Corps architect, shared how the coalition’s new “service quantum leap” furthers the original idea announced by President John F. Kennedy, which called for the Peace Corps and the mobilization of one million global volunteers through NGOs, faith-based groups, and universities.

The multi-stakeholder volunteering model was showcased by Richard Dictus, executive coordinator of U.N. Volunteers; Peace Corps Director Carrie Hessler-Radelet; USAID Counselor Susan Reischle; and Diane Melley, IBM vice president for Global Citizenship. Melley highlighted IBM’s 280,000 skills-based employee volunteers who are building community capacity in 130 countries along with Impact 2030—a consortium of 60 companies collaborating with the U.N.—that is “integrating service into overall citizenship activities” while furthering the SDGs.

The faith and millennial leaders who contributed to the coalition’s action plan included Jim Lindsay of Catholic Volunteer Network; Service Year’s Yasmeen Shaheen-McConnell; C. Eduardo Vargas of USAID’s Center for Faith-Based and Community Initiatives; and moderator David Eisner of Repair the World, a former CEO of the Corporation for National and Community Service. Jesuit Volunteer Corps President Tim Shriver, grandson of the Peace Corps’ founding director, addressed working sessions on engaging faith-based volunteers, which, according to research, account for an estimated 44 percent of nearly one million U.S. global volunteers

The key role of colleges and universities in the coalition’s action plan—including  linking service year with student learning, impact research, and gap year service—was  outlined by Dean Alan Solomont of Tisch College at Tufts University; Marlboro College President Kevin Quigley; and U.N. Volunteers researcher Ben Lough of University of Illinois Urbana-Champaign.

These panel discussion directed us towards the final goal of the event, which was a multi-stakeholder action campaign calling for ongoing collaboration and policy support to enhance the collective impact of international service in achieving the 2030 goals.

This resolution, which remains a working document, highlighted five major priorities:

1. Engage service abroad programs to more effectively address the 2030 SDGs by mobilizing 10,000 additional service year and short-term volunteers annually and partnerships that leverage local capacity and volunteers in host communities.
2. Promote a new generation of global leaders through global service fellowships promoting service and study abroad.
3. Expand cross-sectorial participation and partnerships.
4. Engage more volunteers of all ages in service abroad.
5. Study and foster best practices across international service programs, measure community impact, and ensure the highest quality of volunteer safety, well-being, and confidence.

Participants agreed that it’s through these types of efforts that volunteer service could become a common strategy throughout the world for meeting pressing challenges. Moreover, the cooperation of individuals and organizations will be vital in laying a foundation on which governments and civil society can build a more prosperous, healthy, and peaceful world.

Event Information

Around the world today, there are more than 15.5 million refugees and over 28.8 million internally displaced persons (IDPs) uprooted by conflict, in addition to some 32.4 million displaced in 2012 from their homes due to natural disasters. These displacement crises are not simply humanitarian concerns, but fundamental development challenges. Forced migration flows are rooted in development failures, and can undermine the pursuit of development goals at local, national and regional levels.

Linking humanitarian responses to displacement with longer-term development support and planning is not a new concern. Beginning in 1999, for example, the “Brookings Process” – under the leadership of Sadako Ogata and James Wolfensohn – sought to bridge humanitarian relief and development assistance in post-conflict situations. But the challenge remains unresolved, and has acquired new urgency as displacement situations are becoming more protracted, and situations such as the Syrian crisis show no signs of resolution.

The Brookings Global Economy and Development Program and the Brookings-LSE Project on Internal Displacement held a roundtable on these issues on May 14, 2013 with Sadako Ogata, former UN High Commissioner for Refugees, former Director of the Japanese International Cooperation Agency, and Distinguished Fellow at the Brookings Institution. Megan Bradley, Fellow with the Brookings-LSE Project on Internal Displacement, facilitated the roundtable, which followed Chatham House rules.

The roundtable addressed several key topics including:

• The relevance of the concept of human security to addressing displacement and development challenges
• Displacement as a development challenge in fragile states
• Protracted displacement
• Contrasts in the approaches and processes adopted by humanitarian and development actors

The event report provides a brief overview of the discussion.

Event Materials

• Brookings IDP Roundtable with Sadako Ogata May 14 2013

BPEA co-editor Justin Wolfers describes new research that found: people dropped out of the labor force before the recession started; there are better ways to forecast unemployment; homebuyer expectations helped inflate the bubble; the U.S. is not actually as politically polarized as most people think; central banks’ recent experiments with capital controls haven’t delivered results; and the U.S. is making inroads fighting poverty.

Video

• U.S. Not Actually as Politically Polarized as Most Think
• Poverty Has Fallen Much More than Previously Thought
• New Unemployment Model Can Outperform Forecasters
• Perceptions Matter: Homebuyer Expectations Helped Inflate Bubble
• Central Banks’ Recent Experiments with Capital Controls Haven’t Delivered Results

The headlines seem pretty good. Unemployment fell a tick to 7.3 percent. And jobs growth continued, with payrolls expanding by 169,000 in August, which is just shy of the 175,000 new jobs that analysts were expecting.

But beneath the headline: blech!

The most important news was the revisions to what we had previously thought was a healthy and perhaps self-sustaining recovery. Instead, jobs growth in July was revised from 162,000, to a weak 104,000, and June was also revised downward. Taken together, this month's revisions means we've created 74,000 fewer jobs than previously believed. And the previous jobs report subtracted another 26,000 jobs through revisions. Moreover, for reasons that remain a mystery, revisions have tended to be pro-cyclical, meaning that the healthy recovery we thought we were having might have been expected to yield further upward revisions. All this means that analysts are hastily revising their views.

The other bad news comes from the household survey, where employment fell 115,000, leading the employment-to-population ratio to decline by 0.1 percentage points. So the decline in the unemployment rate isn't due to folks getting jobs; instead, it's due to people dropping out of the labor force.

I have two simple metrics I use to measure the "underlying" pace of jobs growth. The first puts 80% weight on the (more accurate) payrolls survey, and 20% weight on the noisier household survey. That measure suggests employment grew by only 112,000 in August. The alternative is to focus on the 3-month average of payrolls growth, which suggests we're creating slightly around 148,000 jobs per month.

Bottom line: This report says that we're barely creating enough jobs to keep the unemployment rate falling from its current high levels. Policymakers have been looking for a signal that the recovery has become self-sustaining. This report doesn't provide it. And until we're confident that the recovery will keep rolling on, we should delay either any monetary tightening, further fiscal cuts, and definitely postpone the legislative shenanigans that Congress is threatening.

Event Information

Forty years after its initial publication, Equality and Efficiency: The Big Tradeoff remains an influential work from one of the most important macroeconomists over the last century, Arthur M. Okun (1928-1980). Okun’s theory on market economies reminds readers of an engaging dual theme: the market needs a place, and the market needs to be kept in its place. Articulated in a way that remains relevant even during today’s discussions on broadening gaps in income inequality, Okun emphasized that institutions in a capitalist democracy prod us to get ahead of our neighbors economically after telling us to stay in line socially.

On May 4, The Brookings Institution Press re-released Okun’s classic work with a new foreword from Former Treasury Secretary Lawrence H. Summers, in addition to “Further Thoughts on Equality and Efficiency,” a paper published by Okun in 1977. The event included opening remarks from Brookings Senior Fellow George Perry, with a keynote address from Larry Summers. Following these remarks, David Wessel moderated a panel discussion with former Chair of the Council of Economic Advisers Greg Mankiw, Economic Studies’ Melissa Kearney and Justin Wolfers, and Washington Center for Equitable Growth's Heather Boushey regarding the history and impact of Okun’s work.

Download a copy of Lawrence Summers' opening remarks.

Ted Gayer, Vice President and Director of Economic Studies and Joseph Pechman Senior Fellow, reads Lawrence Summers's opening remarks.

David Wessel (right), Director of the Hutchins Center on Fiscal and Monetary Policy, moderates a panel discussion with N. Gregory Mankiw, Melissa Kearney, and Heather Boushey.

Janet Yellen, Chair of the Board of Governors of the Federal Reserve System, listens to the discussion from the audience. To Yellen's right is former Congressional Budget Office director, Doug Elmendorf.

Video

• 40 years later- The relevance of Okun’s "Equality and Efficiency: The Big Tradeoff"

Audio

• 40 years later- The relevance of Okun’s "Equality and Efficiency: The Big Tradeoff"

Transcript

• Uncorrected Transcript (.pdf)

Event Materials

• 20150504_okun_equality_efficiency_transcript
• 050415 Summers Okun Speech

The Brookings Institution today launched the Center for Universal Education, an initiative that will develop and disseminate effective solutions to the challenge of achieving universal quality education. The center becomes part of the Global Economy and Development program and will conduct research and analysis, convene meetings and host policy forums to enhance policy development and understanding on a range of issues relevant to the achievement of universal quality education for the world’s poorest children. Jacques van der Gaag, senior fellow, and Rebecca Winthrop and David Gartner, fellows, will serve as co-directors of the center.

Van der Gaag has been a distinguished visiting fellow in Global Economy and Development at Brookings since 2006 and researched the economics of poverty, the economic consequences of HIV/AIDS and international health care financing. He was most recently a professor of development economics at the Faculty of Economics and Business at the University of Amsterdam. Winthrop, an expert in the field of education in contexts of armed conflict, most recently has been the head of education for the International Rescue Committee and teaching at Columbia University. She will focus on education in contexts of mass displacement, state fragility, and armed conflict and the role of education in long-term solutions for peace and development. Gartner is an expert on global education, global health and international development who recently has been a visiting scholar at Harvard University. His research will focus on global education and the role of international institutions and foreign assistance in global development.

“We are very pleased to welcome these new scholars and the Center for Universal Education to Brookings,” Brookings President Strobe Talbott said. “The center will strengthen and complement our current efforts to contribute to global education and development.”

Established in 2002, the Center for Universal Education (CUE) was previously part of the Council on Foreign Relations and was directed by Gene Sperling. Sperling left the Council on Foreign Relations earlier this year to become senior counselor to U.S. Treasury Secretary Timothy Geithner.

“Jacques, Rebecca and David’s expertise will help CUE develop and disseminate effective solutions to the challenge of achieving universal quality education,” said Kemal Derviş, vice president and director of Global Economy and Development at Brookings. “The center will continue to be a leading forum for shared learning in the global education policy community and will seek to project its own ideas into broader public debates in ways that will strategically support its core mission.”

The new center will focus on the provision of universal quality education among the world's poorest countries. Its affiliated scholars will conduct research and produce policy proposals around the core objective that every child should receive a quality basic education. It will also analyze the challenges and opportunities for the sufficient and effective funding of and programming for universal quality education.

INTRODUCTION—

Achieving universal education is a twofold challenge: to get children and youth into school and then to teach them something meaningful while they are there. While important progress has been made on the first challenge, there is a crisis unfolding in relation to learning. Around the world, there have been major gains in primary school enrollment partly due to the United Nations’ Millennium Development Goals and the abolition of school fees by many national governments. However in many countries, students are spending years in school without learning core competencies, such as reading and writing. To address this learning crisis, the global community and national governments need to place a much greater focus on the ultimate objective of education—to acquire knowledge and develop skills.

This shift in focus away from just enrollment to enrollment plus quality learning requires measuring learning outcomes. However, the global education community is not yet systematically using effective instruments for measuring primary school learning in low- and middle-income countries. This policy brief reviews the global efforts among the primary donors to support the measurement of learning outcomes. It then suggests steps needed to transition global education policy into a new paradigm of enrollment plus quality learning, which includes: scaling up the implementation of national education accounts and national assessment systems; increasing attention to monitoring early learning during child development to improve readiness for school; and expanding the systematic use of simple assessments of basic cognitive functions in the early grades to help teachers improve their practice.

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• Read the full paper

Financial Data as Driving Force Behind Improved Learning

During the past decade, school enrollments have increased dramatically, mostly thanks to UNESCO’s Education for All (EFA) movement and the UN Millennium Development Goals. From 1999 to 2008, an additional 52 million children around the world enrolled in primary schools, and the number of out-of-school children fell by 39 million. In Sub-Saharan Africa alone, enrollment rates rose by one-third during that time, even with large population increases in school-age children.

Yet enrollment is not the only indicator of success in education, and does not necessarily translate into learning. Even with these impressive gains in enrollment, many parts of the world, and particularly the poorest areas, now face a severe learning crisis. The latest data in the EFA Global Monitoring Report 2011 reveal poor literacy and numeracy skills for millions of students around the world. In Malawi and Zambia, more than one-third of sixth-grade students had not achieved the most basic literacy skills. In El Salvador, just 13 percent of third-grade students passed an international mathematics exam. Even in middle-income countries such as South Africa and Morocco, the majority of students had not acquired basic reading skills after four years of primary education. Although the focus on children out of school is fully justified, given that they certainly lack learning opportunities, the failure to focus on learning also does a disservice to the more than 600 million children in the developing world who are already in school but fail to learn very basic skills.

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• Download the Full Paper

ABSTRACT

The AIDS pandemic in sub-Saharan Africa puts increasing pressure on the buffer capacity of low- and middle-income households without access to health insurance. This paper examines the relationship between health shocks, insurance status and health-seeking behaviour. It also investigates the possible mitigating effects of insurance on income loss and out-of-pocket health expenditure. The study uses a unique dataset based on a random sample of 1769 households and 7343 individuals living in the Greater Windhoek area in Namibia. The survey includes medical testing for HIV infection which allows for the explicit analysis of HIV-related health shocks. We find that the economic consequences of health shocks can be severe for uninsured households even in a country with a relatively well-developed public health care system such as Namibia. The uninsured resort to a variety of coping strategies to deal with the high medical expenses and reductions in income, such as selling assets, taking up credit or receiving financial support from relatives and friends. As HIV-infected individuals increasingly develop AIDS, this will put substantial pressure on the public health care system as well as social support networks. Evidence suggests that private insurance, currently unaffordable to the poor, protects households from the most severe consequences of health shocks.

Read the full article on Oxford Journals »

Event Information

On January 25, 2013, the Center for Universal Education at Brookings (CUE) and the UNESCO Institute for Statistics (UIS) hosted a technical workshop on national education accounts (NEAs). Participants discussed experiences and challenges related to developing various tools to track financial expenditures in education, with a focus on national education accounts. After discussing particular experiences with NEAs and the framework underlying them, participants worked to identify priorities for expanding their reach.

Jacques van der Gaag, from the Center for Universal Education opened the workshop by underlining its primary goals—to find out what different groups and individuals have been able to accomplish in relation to comprehensively tracking expenditures, connecting those expenditures with learning outcomes in education systems and collaborating where possible to advance the use of NEAs. Following this introduction, participants gave an overview of their experiences in using financial tracking tools and NEAs in particular. Igor Kheyfets of the World Bank presented BOOST, a tool that the World Bank has used over the past three years to bring together detailed data on public expenditures. Next, Jean Claude Ndabananiye, from UNESCO Pole de Dakar, discussed country status reports, which aggregate and analyze government data on expenditures. Afterward, Elise Legault of UIS described their collection of education statistics, which is completed through annual country questionnaires, of which one in particular has a finance focus. Quentin Wodon of the World Bank described other World Bank efforts aside from BOOST in capturing education finance data, including a cross-sector effort on public expenditure reviews (PERs).

Download the agenda »
Download the full summary »
Download USAID's National Education Accounts presentation »
Download the Estimation of Household Spending on Education Using Household Surveys presentation »
Download From Enrollment to Learning Outcomes: What Does the Shift in the Education Agenda Mean for NEAs? »
Download Thailand's National Education Accounts (NEA) »
Download the BOOST presentation »

Event Materials

• 0125_NEA_Agenda
• NEA_Event_Summary_Final
• BOOST presentation to NEA workshop at Brookings_final
• NEAs Presentation_van der Gaag
• Thai NEA
• USAID Creative_NEA_Presentation_25Jan13
• Pole de Dakar presentation Estimation of HH spending on education_2

Event Information

On December 4 to 6, the Center for Middle East Policy at Brookings hosted its 12th annual Saban Forum, titled “Israel and the United States: Yesterday, today, and tomorrow.” The 2015 Saban Forum included webcasts featuring remarks by Israel’s Minister of Defense Moshe Ya’alon, Chairman of the Yesh Atid Party Yair Lapid, National Security Adviser to President George W. Bush Stephen Hadley, Secretary of State John Kerry, Israeli Prime Minister Benjamin Netanyahu (via video), and former Secretary of State Hillary Rodham Clinton. The forum’s webcast sessions focused on the future for Israelis and Palestinians, Iran’s role in the Middle East, spillover from the war in Syria, and the global threat posed by the Islamic State and other violent jihadi groups.

Over the past twelve years, the Saban Forum has become the premier platform for frank dialogue between American and Israeli leaders from government, civil society, business, and the media. As a result, the Saban Forum is a seminal event, generating new ideas and helping shape the future of the U.S.-Israel relationship.

Join the conversation on Twitter using #Saban15

Video

• A conversation with Moshe Ya’alon, Israel’s minister of defense
• How to restore order in the Middle East
• Keynote address: U.S. Secretary of State John Kerry
• Address by Israeli Prime Minister Benjamin Netanyahu (via video)
• Keynote address: Former U.S. Secretary of State Hillary Rodham Clinton

Audio

• Saturday, December 5, 8:00pm - How to preserve Israel as a Jewish and Democratic state

Transcript

• Uncorrected Transcript--Keynote address: Former U.S. Secretary of State Hillary Rodham Clinton (.pdf)
• Uncorrected Transcript--Address by Israeli Prime Minister Benjamin Netanyahu (.pdf)
• Uncorrected Transcript--How to preserve Israel as a Jewish and Democratic state (.pdf)
• U.S. Department of State Release--Remarks by Secretary of State John Kerry (.pdf)
• Uncorrected Transcript--How to restore order in the Middle East (.pdf)
• Uncorrected Transcript--A conversation with Moshe Ya'alon, Israel's minister of defense (.pdf)

Event Materials

• Uncorrected TranscriptKeynote addressFormer Secretary of State Hillary Rodham Clinton
• Uncorrected TranscriptAddress by Israeli Prime Minister Benjamin Netanyahu
• Uncorrected TranscriptHow to preserve Israel as a Jewish and Democratic state
• US Department of State ReleaseRemarks by Secretary of State John Kerry
• Uncorrected TranscriptHow to restore order in the Middle East 2
• Uncorrected TranscriptA conversation with Moshe Yaalon Israels minister of defense

Event Information

A conversation with Deputy Secretary of State Antony Blinken

One year after the White House Summit on Countering Violent Extremism, the United States continues to adapt its efforts to blunt the appeal of violent extremism. As part of this effort, the State Department is launching a series of new initiatives to better coordinate the U.S. response to terrorist propaganda and recruitment.

On February 16, the Foreign Policy program at Brookings hosted The Honorable Antony J. Blinken, deputy secretary of state, for a discussion of the United States’ civilian-led initiatives to counter the spread of the Islamic State and other violent extremist groups. Blinken will chart the path forward, to include partnerships with industry and civil society, and outlined the challenges that lie ahead.

Brookings President Strobe Talbott offered welcoming remarks. General John Allen, senior fellow and co-director of the Center for 21st Century Security and Intelligence at Brookings, introduced Deputy Secretary Blinken, and Tamara Cofman Wittes, senior fellow and director of the Center for Middle East Policy at Brookings, joined Deputy Secretary Blinken in conversation following his remarks.

Join the conversation on Twitter using #CVE

Video

• New frameworks for countering terrorism and violent extremism
• American diplomacy best instrument against extremism
• Islamic State numbers lowest since 2014
• Common denominators of violent extremists
• Progress in Syria against Islamic State

Audio

• New frameworks for countering terrorism and violent extremism

Transcript

• Uncorrected Transcript (.pdf)

Event Materials

• 20160216_cve_blinken_transcript

Editors’ Note: In a recent interview with Foreign Policy Interrupted, Tamara Wittes was asked about how the situation in the Middle East has changed since she published her 2008 book Freedom’s Unsteady March. Five years after the Arab uprisings and the start of the Syrian civil war, and a year and a half after the Islamic State captured Mosul (along with the world’s attention), Tamara says that many of the same fundamental dynamics in the Middle East are still at work.

The situation in the region has changed so dramatically since then, but I think that the fundamental insights that informed that book remain true. The underlying drivers of change in the Middle East are still there in terms of the demographic drivers, the economic drivers, the technological drivers that I described in the book; they are all still present.

Although there’s a lot of disorder and a lot of violence, and that leads people on the ground to prioritize security and to search for security in different ways, that doesn’t mean that they’re going to be satisfied. It doesn’t mean that the, “well, at least it’s not ISIS” line is going to suffice for governments in the Middle East for very long.

The underlying drivers of change are still present, the pressure for change is still present, and a lot of those pressures are about the simple fact of individual empowerment. Expectations shifted, and people, individuals, have the ability to act in ways that they didn’t before. States and governments have to accommodate that. It’s affecting politics all over the world, and the Middle East is not immune.

So the question becomes: how are governments going to learn to accommodate that and turn it into a strength? I think that the United States does have a really important role to play there. There were mistakes that the Bush administration made—setting aside his vision of Iraq, which has of course been very thoroughly discussed and assessed. But even in terms of non-military intervention to try to advance reform, the critique I made in the book is that the Bush administration was overly focused on political process and elections in particular. I think that one of the other lessons that has come of recent years is that the United States and other Western countries get very focused on political institutions and think, well, if we set up a judicial system, and we set up a parliament, and a constitution, then the gears in the machine sort of start to turn, the states start to function. Look at the rebuilding efforts in Afghanistan, for example.

But what we see in the Middle East today is that formal institutions aren’t enough. People have to have trust in the institutions, and people and communities have to have sufficient agreement on the basic rules of the game to make those institutions legitimate and authoritative. And that’s what’s missing in a lot of places around the region right now, that there isn’t enough dialogue and debate and ultimately negotiated agreement on the basic rules of the game. So I think that the challenge for the United States and others who care about stability in the Middle East going forward is how to help cultivate platforms for that kind of dialogue, and how to help cultivate the skills and the mechanisms for resolving very fundamental questions about how government should be organized and what should be the role of religion and politics, and what’s the balance between individual rights and collective identity.

These are big, big, questions, and right now, in too many places, they are being fought over violently. But the questions still have to be answered, and so the challenge is helping develop ways to do that, to do it peacefully.

Editors’ Note: On March 23, the Working Group on Egypt sent a letter to President Obama urging him to publicly and privately object to Egyptian President Abdel Fattah el-Sissi’s accelerating crackdown on human rights and civil society organizations. Brookings senior fellow and director of the Center for Middle East Policy Tamara Wittes was among the letter’s signers, and she explains her decision to do so. The letter was originally published by the Project on Middle East Democracy (POMED).

Tamara Wittes: In a disordered Middle East, America needs anchors of stability and reliable partners to help it achieve its goals. Both are in sadly short supply. 

For more than thirty years, Egypt was an anchor of stability and a reliable American partner in regional security. From the time Sadat expelled Soviet advisers and broached peace with Israel, ties with Egypt have been a core pillar of American Middle East policy. But, as my colleague Steven Cook presciently noted way back in February 2012, Egypt’s revolution accelerated the launch of what he calls a “long goodbye” between these two formerly indispensable partners. He argued back then that shifting from a “special relationship” to something more transaction would have four concrete benefits for Washington:

First, Washington will no longer be in the unseemly position of providing taxpayer largesse—however small in the grand scheme of things—to a government that resents the United States and clearly does not share its values. Second, it will provide an opportunity for a much-needed change in military-to-military relations in which the United States merely pays for the services it needs like expedited transit through the Suez Canal. Third, it is consistent with this moment of empowerment and dignity for Egyptians many of whom do not want U.S. assistance either because they believe it actually stands in the way of a democratic transition or accept Aboul Naga’s argument along with those who couldn’t care less about U.S. assistance because it doesn’t touch their lives. Finally, it will free up funds for the United States to help others who actually might want Washington’s help, perhaps the Tunisians, Moroccans, or some sub-Saharan African countries would be grateful for development assistance.

Since that blog post went up, Egypt has had three different governments and lost its place as a diplomatic and security leader in the region; while the United States has withdrawn from Iraq and begun to do the same in Afghanistan, while emphasizing burden-sharing in its new fight against ISIS. All of these shifts strengthen the argument for a more distant and transactional U.S.-Egyptian relationship. 

Moreover, since his accession to power (first in a military coup in July 2013 and then in a highly constrained election in 2014), President Abdel Fattah el-Sisi has made decisions that are undermining both Egypt’s domestic stability and key American policy goals in the region. 

• Sisi’s failure to move forward on economic reforms (recommended by leading Egyptian voices, regional supporters, and international donors) has left his country in a spiral of shrinking cash reserves, capital flight and currency devaluation that together threaten the government’s ability to import needed food and medicine and to carry out core government functions. 
• Sisi’s counterterrorism campaign in the Sinai has succeeded in “making the sand jump,” as one regional security official told me, but it seems to have stoked more than tamped down the fire of violent extremism threatening both Egypt and Israel; meanwhile, its alleged military abuses have sparked a Senate request for investigation.
• The intense political polarization and relentless repression of post-coup Egypt are producing other destabilizing effects, which are detailed in the Egypt Working Group’s newest letter to President Obama posted below (I am a member of the Working Group). 

To top it all off, the Egyptian government continues to throw obstacles in the road of U.S.-Egyptian cooperation. Its military resists learning from the hard-won American experience in effective counterinsurgency. Its leadership has resolutely refused to allow core bilateral aid programs, like those supporting higher education, to move forward. And at the same time, the Egyptian government continues to promote conspiracy theories about the United States to its public through media smears and show trials, and now, apparently, to its newly elected parliamentarians. 

It’s long past time for the United States to undertake a strategic review of its approach to the Middle East, one focused on building anchors of stability and sustaining reliable partners in pursuit of American priorities. Egypt, as I told The New York Times, no longer qualifies as either one. That doesn’t mean the two countries can’t continue to work together in those narrow areas where they agree on interests, priorities, and approaches. 

But Secretary of State Kerry’s public embrace last week of Egyptian Foreign Minister Shoukry cannot hide the facts—there is no “back to business” option for the U.S.-Egyptian relationship, and it seems increasingly clear that even direct White House engagement would not shift Egypt’s leadership off of its self-destructive trajectory. Egypt's looming instability demands that the United States take steps now to safeguard itself from reliance on a country we cannot rescue, not least from its own leaders' worst impulses. 

March 23, 2016

Dear Mr. President,

We are writing to urge you to speak directly with Egyptian President Abdel Fattah el-Sissi and to express both publicly and privately your objection to his accelerating crackdown on human rights, including recent moves to prosecute civil society organizations. You were correct to declare in September 2014 that “America’s support for civil society is a matter of national security,” and nowhere is that more true than in Egypt today.

President el-Sissi’s campaign against civil society takes place against the backdrop of unprecedented abuses by Egyptian security forces, including extrajudicial killings, the detention of tens of thousands of political prisoners, the widespread documented use of torture, and the forced disappearances of hundreds of Egyptians. The killing of Italian student Giulio Regeni, whose tortured body appeared on a roadside near Cairo a week after his abduction in late January, has come to international attention, but many Egyptians have shared his fate since President el-Sissi came to power.

On March 24, an Egyptian court will hear a request to freeze the bank accounts and other assets of two internationally-respected human rights defenders, Hossam Bahgat and Gamal Eid, along with members of Eid’s family. Mr. Bahgat and Mr. Eid and other activists may soon be indicted and face trial for illegally accepting foreign funding—a criminal charge that violates their right to free association and could carry a sentence of up to 25 years in prison.

The imminent proceedings are a major step in Egyptian authorities’ campaign to crush the last remnants of Egypt’s independent civil society and human rights community. Egypt’s media has recently reported that dozens of organizations are under criminal investigation, essentially for their peaceful work to monitor abuses and to hold Egypt’s government accountable to its own constitution and international human rights commitments. In recent weeks, Egyptian authorities have ordered the closure of a prominent anti-torture organization, the Nadeem Center; summoned staff from several human rights organizations for interrogation; banned prominent rights activists and advocates from traveling outside Egypt in violation of the Egyptian constitution; and harassed and threatened human rights activists with arrest and violence. The media regularly propagate vitriol against human rights defenders, portraying them as traitors and security threats.

If this crackdown is allowed to reach its conclusion, it will silence an indigenous human rights community that has survived more than 30 years of authoritarian rule, leaving few if any Egyptians free to investigate mounting abuses by the state.

The current attacks on Egypt’s rights advocates are a continuation of the same criminal prosecution of American and German NGO workers in Egypt that began in 2011. That prosecution, driven by senior members of the Egyptian government still in high office today, resulted in the June 2013 criminal convictions, in a deeply flawed trial, of 43 Egyptian and international NGO staff, including 17 American citizens. President el-Sissi, who was the head of military intelligence in 2011 when Egypt’s military government launched the investigation, has refused repeated requests to overturn the convictions.

While the current crackdown is primarily targeting domestic organizations, there are indications that international NGOs may also face increased pressure, including some that currently do not even have offices or staff working in Egypt. On March 20, the newspaper Al Masry Al Youm published the names of more than 150 individuals and civil society organizations reportedly under investigation for receiving foreign funding, including prominent American and European organizations such as the Center for International Private Enterprise, the Solidarity Center, Transparency International, Save the Children, Catholic Relief Services, CARE, AMIDEAST, the National Democratic Institute, and the International Republican Institute.

Mr. President, in your September 2014 Presidential Memorandum on Civil Society, you pledged that the United States government—including you personally—would stand firmly with those in civil society facing pressure or harassment from their governments. While the past five years have been tumultuous and challenging for U.S. policy toward Egypt, this is another defining moment for the United States, a moment that tests your pledge to “stand with civil society.” Secretary Kerry’s March 18 statement of concern was welcome, but further action is urgently needed. Past practice demonstrates that when the United States government speaks clearly, in one voice, and consistently on NGO freedom and human rights in Egypt, the government in Cairo listens.

It is essential that you act to stand up for human rights, freedom of association, and the rights of both Egyptian and international civil society organizations to work together on behalf of common goals. You must make crystal clear to President el-Sissi that continued assaults on civil society, including harassment of U.S. organizations, will make it difficult for the administration to cooperate across a range of issues, including your administration’s efforts to promote American investment in Egypt and to provide financial assistance to the Egyptian government and military. If Egypt’s government continues down a path to destroy its own civil society, American support and assistance will become, in both principled and practical terms, impossible.

Sincerely,

The Working Group on Egypt

Event Information

The U.S.-led international order faces three simultaneous challenges—a rising power in East Asia, a declining but aggressive power in Eastern Europe and the unraveling of regional order in the Middle East. Left unchecked, events in Ukraine, the East China Sea and Iraq and Syria have the potential to seriously undermine an international system that has helped to guarantee peace and stability since the end of World War II.

On October 2, the Project on International Order and Strategy and the Center for 21st Century Security and Intelligence at Brookings co-hosted an event on these growing threats and the policies or strategy the United States needs to meet these challenges. The event brought together scholars from across the Brookings Foreign Policy Program with a range of regional and functional expertise.

The first panel focused on the range of threats the international order faces and whether (and how) the United States should prioritize these challenges and threats. The second panel asked whether the United States needs new regional strategies or a new grand strategy, how the United States can deter and rollback acts of revisionism and how the campaign against the Islamic State can fit into a broader Middle East strategy. Both panels sought to address the question of whether or not the United States can ultimately restore the international order to good health.

Join the conversation on Twitter using #InternationalOrder

Audio

• The International Order Under Siege

Transcript

• Uncorrected Transcript (.pdf)

Event Materials

• 20141002_international_order_transcript

Great power competition has returned. Or rather, it has reminded us that it was always lurking in the background. This is not a minor development in international affairs, but it need not mean the end of the world order as we know it.  

The real impact of the return of great power competition will depend on how the United States responds to these changes. America needs to recognize its central role in maintaining the present liberal international order and muster the will to use its still formidable power and influence to support that order against its inevitable challengers.

Competition in international affairs is natural. Great powers by their very nature seek regional dominance and spheres of influence. They do so in the first instance because influence over others is what defines a great power. They are, as a rule, countries imbued with national pride and imperial ambition. But, living in a Hobbesian world of other great powers, they are also nervous about their security and seek defense-in-depth through the establishment of buffer states on their periphery. 

Historically, great power wars often begin as arguments over buffer states where spheres of influence intersect—the Balkans before World War I, for instance, where the ambitions of Russia and Austria-Hungary clashed. But today’s great powers are rising in a very different international environment, largely because of the unique role the United States has played since the end of the Second World War. The United States has been not simply a regional power, but rather a regional power in every strategic region. It has served as the maintainer of regional balances in Europe, Asia, and the Middle East. The result has been that, in marked contrast to past eras, today’s great powers do not face fundamental threats to their physical security. 

So, for example, Russia objectively has never enjoyed greater security in its history than it has since 1989. In the 20^th century, Russia was invaded twice by Germany, and in the aftermath of the second war could plausibly claim to fear another invasion unless adequately protected. (France, after all, had the same fear.)  In the 19^th century, Russia was invaded by Napoleon, and before that Catherine the Great is supposed to have uttered that quintessentially Russian observation, “I have no way to defend my borders but to extend them.” Today that is not true. Russia faces no threat of invasion from the West.  Who would launch such an invasion? Germany, Estonia, Ukraine? If Russia faces threats, they are from the south, in the form of militant Islamists, or from the east, in the form of a billion Chinese standing across the border from an empty Siberia. But for the first time in Russia’s long history, it does not face a strategic threat on its western flank. 

Much the same can be said of China, which enjoys far greater security than it has at any time in the last three centuries. The American role in East Asia protects it from invasion by its historic adversary, Japan, while none of the other great powers around China’s periphery have the strength or desire now or in the foreseeable future to launch an attack on Chinese territory. 

Therefore, neither Chinese nor Russians can claim that a sphere of influence is necessary for their defense. They may feel it necessary for their sense of pride. They may feel it is necessary as a way of restoring their wounded honor. They may seek an expanded sphere of influence to fulfill their ambition to become more formidable powers on the international stage. And they may have concerns that free, nations on their periphery may pass the liberal infection onto their own populaces and thus undermine their autocratic power. 

The question for the United States, and its allies in Asia and Europe, is whether we should tolerate a return to sphere of influence behavior among regional powers that are not seeking security but are in search of status, powers that are acting less out of fear than out of ambition. This question, in the end, is not about idealism, our commitment to a “rules-based” international order, or our principled opposition to territorial aggression. Yes, there are important principles at stake: neighbors shouldn’t invade their neighbors to seize their territory. But before we get to issues of principle, we need to understand how such behavior affects the world in terms of basic stability 

On that score, the historical record is very clear. To return to a world of spheres of influence—the world that existed prior to the era of American predominance—is to return to the great power conflicts of past centuries. Revisionist great powers are never satisfied. Their sphere of influence is never quite large enough to satisfy their pride or their expanding need for security. The “satiated” power that Bismarck spoke of is rare—even his Germany, in the end, could not be satiated. Of course, rising great powers always express some historical grievance. Every people, except perhaps for the fortunate Americans, have reason for resentment at ancient injustices, nurse grudges against old adversaries, seek to return to a glorious past that was stolen from them by military or political defeat. The world’s supply of grievances is inexhaustible.

These grievances, however, are rarely solved by minor border changes. Japan, the aggrieved “have-not” nation of the 1930s, did not satisfy itself by swallowing Manchuria in 1931. Germany, the aggrieved victim of Versailles, did not satisfy itself by bringing the Germans of the Sudetenland back into the fold. And, of course, Russia’s historical sphere of influence does not end in Ukraine. It begins in Ukraine.  It extends to the Balts, to the Balkans, and to heart of Central Europe. 

The tragic irony is that, in the process of carving out these spheres of influence, the ambitious rising powers invariably create the very threats they use to justify their actions. Japan did exactly that in the 30s. In the 1920s, following the Washington Naval Treaty, Japan was a relatively secure country that through a combination of ambition and paranoia launched itself on a quest for an expanded sphere of influence, thus inspiring the great power enmity that the Japanese had originally feared. One sees a similar dynamic in Russia’s behavior today. No one in the West was thinking about containing Russia until Russia made itself into a power that needed to be contained.

If history is any lesson, such behavior only ends when other great powers decide they have had enough. We know those moments as major power wars. 

The best and easiest time to stop such a dynamic is at the beginning. If the United States wants to maintain a benevolent world order, it must not permit spheres of influence to serve as a pretext for aggression. The United States needs to make clear now—before things get out of hand—that this is not a world order that it will accept. 

And we need to be clear what that response entails. Great powers of course compete across multiple spheres—economic, ideological, and political, as well as military. Competition in most spheres is necessary and even healthy. Within the liberal order, China can compete economically and successfully with the United States; Russia can thrive in the international economic order uphold by the liberal powers, even if it is not itself liberal. 

But security competition is different. It is specifically because Russia could not compete with the West ideologically or economically that Putin resorted to military means. In so doing, he attacked the underlying security and stability at the core of the liberal order. The security situation undergirds everything—without it nothing else functions. Democracy and prosperity cannot flourish without security. 

It remains true today as it has since the Second World War that only the United States has the capacity and the unique geographical advantages to provide this security. There is no stable balance of power in Europe or Asia without the United States. And while we can talk about soft power and smart power, they have been and always will be of limited value when confronting raw military power. Despite all of the loose talk of American decline, it is in the military realm where U.S. advantages remain clearest. Even in other great power’s backyards, the United States retains the capacity, along with its powerful allies, to deter challenges to the security order. But without a U.S. willingness to use military power to establish balance in far-flung regions of the world, the system will buckle under the unrestrained military competition of regional powers. 

Event Information

A conversation with U.S. Secretary of Commerce Penny Pritzker

Video

• Economic opportunities and the liberal international order

When President Obama unveiled his budget allocation for high-speed rail, he said, “In France, high-speed rail has pulled regions from isolation, ignited growth [and], remade quiet towns into thriving tourist destinations.” His remarks emphasize how high-speed rail is increasing the accessibility of isolated places as an argument for similarly investments. So, what’s the source of this argument in the European context?

In November 2009, the European Union’s ESPON (the European Observation Network for Territorial Development and Cohesion) released a report called “Trends in Accessibility.” ESPON examined the extent to which accessibility has changed between 2001 and 2006. ESPON defines accessibility as how “easily people in one region can reach people in another region.” This measurement of accessibility helps determine the “potential for activities and enterprises in the region to reach markets and activities in other regions.”

ESPON’s research concluded that in this five-year period, rail accessibility grew an average of 13.1 percent. The report further concludes that high-speed rail lines have “influenced positively the potential accessibility of many European regions and cities.”

In particular, the research found that the core of Europe--Germany, France, Belgium, the Netherlands, and Switzerland--has the highest potential accessibility. Europe’s core produces the highest levels of economic output and has the highest population densities. ESPON argues that with such densities, the core has found reason to link their economic hubs (cities) with high-speed rail. These are the places in Europe where they have the greatest returns on investment.

But ESPON also found that high speed rail is starting to increase the accessibility of isolated places such as France’s Tours, Lyon, and Marseille. This is a very important finding for Europe. They have a long-standing policy of social cohesion and balance, striving to create economic sustainability and population stability across Europe. The objective is for areas well beyond core to thrive economically and to dissuade people from migrating in search of jobs. Fiscally, social cohesion translates into investing disproportionately more money into areas not producing sufficient levels of economic output. High-speed rail is but one of the many strategies intending to produce “economic and social cohesion,” states a European Commission report on high-speed rail.

But we are not Europe. While their thesis underpinning high-speed rail is social cohesion, what is our underlying thesis for high-speed rail? And what does this look like spatially? What was the logic behind the selection of Florida over other possible corridors? Is this line going to strengthen our national economy and GDP? Clarity on this score will help ensure the project is a success and offers a high return on investment. Lessons from this accessibility study say that places with high population levels and GDP output offer the greatest accessibility and therefore success.

It would be a pity if the U.S. finally jumped on the high-speed bandwagon but still missed the train.

Editor’s Note: During the Global Cities Initiative’s international forum in São Paulo, Bruce Katz delivered remarks on metropolitan areas and their potential to power national economies worldwide. The remarks were written by Katz and Julie Wagner.

The Metropolitan Future of Brazil and the United States
(This presentation is also available in Portuguese)

Good morning everyone.  It is a pleasure to be back in Sao Paulo with JP Morgan Chase, our partner in the Global Cities Initiative.  I am grateful for their support and leadership.

I first want to thank Governor Alckmin and Mayor-elect Haddad for their participation today and we fully welcome the opportunity to work with both of them and the city and state in the coming months and years.

This has been an extraordinary week for our delegation of mayors and business, civic, and university leaders from 10 major American cities and metropolitan areas.

We have seen firsthand the proud history and infectious energy and vibrancy of this great city and macro-metropolis.  We are grateful to Luiz Felipe D’Avila and the Centre for Public Leadership for co-sponsoring this forum today. We also owe a debt to others who have hosted and guided us this week—the State of Sao Paulo, particularly the State Secretariat for Metropolitan Development, Insper, the Commercial Association of Santos and the Port of Santos and the Brazil-U.S. Business Council, and the U.S. Embassy and Ambassador Shannon.

As Aod said at the outset, São Paulo is the first stop outside the United States in our five year Global Cities Initiative.  That is a deliberate choice.   The relationship between the United States and Brazil is a critical one.  Despite barriers, the economic and social ties between our two countries are strong and growing stronger.  Trade is booming.  Investment is up.  Tourism and business travel have never been higher.  And the recent state visits by presidents Obama and Rousseff send a clear signal that this is a partnership of the highest order. 

Yet there is hard work to do in both our countries. The U.S. and Brazil are undergoing major economic transitions. By global standards, both of us under-perform on exports, far trailing other countries.  The U.S. is shifting slowly back towards a more productive, sustainable economy after our worst downturn in 80 years; Brazil is moving forward towards a more open, outward looking economy.

Against this complex backdrop, our delegation comes bearing a simple proposition. The answers to national challenges lie, in great part, below the national level.

We live in a century where cities and metropolitan areas are driving national economies and the global economy. The U.S. and Brazil have 84 and 85 percent of our respective populations living in our cities and metropolitan areas … and these communities generate 91 percent of the GDP in the U.S. and 88 percent of the GDP in Brazil.  There is, in essence, no American or Brazilian—or German or Chinese—economy; rather our national economies represent networks of powerful city and metropolitan economies.

 Today, I will make three main points.

As the world urbanizes, cities and metropolitan areas have emerged as the engines of national economies.

As our economies globalize, cities and metropolitan areas act as the centers of international trade and investment.

To prosper today, cities and metropolitan areas need to drive their economic destiny.  In our federal republic, where power is shared across national, state and local governments, that requires new thinking about who does what. 

But, first things first; we cannot put forward a metropolitan playbook without first understanding what a metropolis is.  And the best way to do that is from the ground up.

On the right side of the screen you see the São Paulo metropolis, 20 million strong, 10^th most populous in the world.

On the left side of the screen you see Chicago, Mayor Daley’s hometown, with a population of 9.5 million, 26^th largest in the world.

Both of these metro areas cluster around core cities but cover large land masses and encompass multiple jurisdictions.

The São Paulo metro is more than 8,000 square kilometers in size, with more than half of your population living in the city proper and the remainder residing in 38 other municipalities.  

Chicago is close to 19,000 square kilometers in size with one third of the population living in the central city and the remainder spread across, incredibly, three states, 14 counties encompassing hundreds of separate municipalities and townships.

The assets São Paulo and Chicago need to compete nationally and globally are spread across their regions:

Clusters of workers;

Key colleges and universities;

Major hospitals and health care facilities;

A network of urban green space; and

The infrastructure—roads, rail and transit and airports—needed to move people, and freight

In other words, metro areas are the natural, organic geographies of the economy, clustered around central cities for sure, but also benefitting from the assets offered by satellite cities and suburban, exurban and rural areas.   

With that background, let me start with an irrefutable observation: cities and metropolitan areas are the 21^st century engines of national economies.

Since 1950, the world’s urban population has more than quadrupled in size.  Now sized at 3.6 billion people, it is expected to surpass 5 billion by 2030.

In 1950, 29 percent of the world’s population lived in cities and their metropolitan areas.  By 2009, the share surpassed 50 percent. By 2030, urban settlements will harbor more than 60 percent of the world’s population.

In many respects, the world is becoming more like us.  The United States and Brazil are two of the most highly urbanized countries with city and metro concentrations surpassing those of both mature economies in Germany, Britain, and Spain and emerging economies like China, India, and South Africa.  

Cities and metros do not just house people; they power economies.  Today Brookings released our annual Global Metro Monitor that tracks the economic performance of the world’s top 300 largest metropolitan economies.

Incredibly, we find that these metropolitan areas house a little under one fifth of global population but generate nearly half its total output.  Put simply: Metros around the world punch way above their weight.

Why are they so powerful? 

Because they cluster and connect firms, large and small, with ports and airports, transport and energy infrastructure, and a broad range of supportive institutions that supply skilled labor, advanced research and customized capital.    And when that happens, productivity improves, entrepreneurship rises, employment and wages increase.   

The dominance of metros holds true for both our countries, which house 13 and 76 of the top 300 global metros, respectively.

Your thirteen top metropolitan areas are home to one third of Brazil’s population, concentrate half of Brazil’s manufacturing output and your population with college education and account for 56 percent of national GDP and 63 percent of financial services output.

These metros range from Sao Paulo, 11^th largest economy in the world, to Baixada Santista, 295^th largest.    

Eleven of your metro areas are state or national capitals; this state is home to three of the 13 large metro areas.

Metro São Paulo takes its place among the world’s most populous and economically powerful metros.

You are home to one tenth of Brazil’s population, account for one-fifth of Brazil’s GDP and generate 57 percent of the GDP of this state.

For America’s part, our top 76 metros form the real heart of the U.S. economy. 

Housing 61 percent of our population, they concentrate a majority of our manufacturing output, gather our most educated people, and generate more than 68 percent of our national GDP.

They also make an outsized contribution on financial services and the production of patents. 

In the U.S., the top 76 metros range from New York, L.A., and Chicago to less well known communities like Allentown, Little Rock, and Harrisburg.

This leads to my second point: as economies globalize, cities and metropolitan areas act as the centers of international trade and investment.

Metros and trade are inextricably linked, and have been for millennia.   The Silk Road that connected Asia, Europe, the Middle East, and Northern Africa.   The Hanseatic League that grew from Hamburg and Lubeck to include 170 cities that monopolized trade in Northern Europe between the 13^th and 15^th centuries.  The great Italian city-states of Venice, Pisa, Genoa, and Amalfi.   

These historic networks offer essential lessons:

As a recent Brookings report concluded:

“Trade is essential to metros—it is how they grow their economies. And metros are essential to trade—they provide the specialization and market access that facilitates exchange among producers and consumers.” 

The top Brazilian and U.S. metros are our nations’ logistical hubs, concentrating the movement of goods and people by sea and by air.  In Brazil, 61 percent of foreign waterborne trade, measured by tonnage, passes through the seaports of the top metros; in the United States the equivalent share is over 66 percent. Passenger travel is even more concentrated; in both countries, close to 82 percent of international air travel passes through the airports of the top metropolitan areas.

Significantly, the top cities and metros in both our countries are magnets for foreign direct investment, particularly “greenfield FDI” where foreign entities invest in new facilities or expansions of existing facilities rather than just purchase domestic companies. 

From 2003 through September 2012, Brazil’s 13 accounted for 77 percent of greenfield FDI projects in Brazil and 59 percent of the jobs created through this key growth vehicle.  The top 76 U.S. metros also accounted for 77 percent of Greenfield FDI projects and 70 percent of the jobs created.

Brazil’s 13 are responsible for a third of all national goods exports; the share is substantially higher for the top U.S. metros.  Brookings research on U.S. exports shows that our top U.S. metros dominate the trade in manufacturing and services … and, given their edge in sectors like chemicals, consulting and computers, are on the front lines of commerce with China, Brazil, and India. 

In sum, our research has shown the collective centrality of our top cities and metros to the trading position of our nations. 

Yet metro economies do not exist in the aggregate; they have distinctive starting points and vary considerably in their trading prowess and intensity.  What makes São Paulo special on the global stage—your distinctive offer, your special investment potential—is different from what defines and drives Rio or Curitiba or Salvador.

São Paulo is Brazil’s premier global metropolis and the numbers reflect that.  Your metro houses 10 percent of Brazil’s population but:

• Your airports handle 26 percent of all passenger traffic in Brazil and 33 percent of all air cargo.
• Your macro metro neighbor, Santos, which we visited yesterday, is the busiest container port in South America and 43rd in the world.
• You are Brazil’s largest metropolitan exporter, producing 27 percent of all metropolitan exports of goods

• And from 2003-2011 you received 19 percent of all greenfield FDI in Brazil … in fact, more FDI than New York, LA, Chicago, Houston and San Francisco combined.

You trade with the world’s most prosperous cities, in the United States and elsewhere, but in particular ways given your distinctive industry clusters and sectors.

Given your substantial concentration in financial services (with 19 of the 25 top international banks present and the world’s third largest financial exchange), you interact naturally with New York and Miami in the U.S., London, Madrid, and Frankfurt in Europe and Shanghai, Tokyo and Hong Kong in Asia.

Despite the outward movement of industry, you still serve as Brazil’s main global platform for advanced manufacturing sectors like automotive, linking you closely with Detroit in the U.S., Milan and Stuttgart in Europe, and Nagoya in Japan.

The shape and structure of your economy puts São Paulo in an exclusive club of “global cities,” a definition drawn in the 1990s when the process of trade, investment, and globalization was seen as empowering a few command and control finance metros of the world.

But today, our notions of “globalizing cities” are more expansive, recognizing that all cities are fueled, to different degrees, by global investment and connected, in distinctive ways, via global commerce and exchange, global product and labor supply chains. 

The energy cluster in Rio finds common interest with the energy cluster in Houston through investments by Exxon Mobil, Chevron and Petrobras … and then further with energy firms in Amsterdam, Dar es Salaam, and Bogota.

Campinas’ hi-tech sector naturally links with the hi-tech cluster in San Jose’s Silicon Valley via elite universities, advanced R&D institutions, and global tech giants like IBM, Hewlett-Packard and Dell … and then further with tech clusters in Tokyo, Bangalore and Dublin.

As headquarters of Embraer, São Jose  dos Campos links via supply chains to Palm Bay, Florida, Harbin, China and Lisbon, Portugal.

In short, a new global map is being drawn in the world, not of nation to nation trade but of metro to metro exchange.

That leads to my final point: To prosper in the global economy today, metros need to drive their global economic destiny.

We have a three part playbook:

The playbook starts at home, with cities innovating locally to exploit their distinctive competitive advantages in the global economy.

In the U.S., cities and metropolitan areas are acting with intentionality in the aftermath of the Great Recession to devise and implement what we call “metropolitan business plans.”  The purpose: build on their distinctive competitive advantages in the traded sectors of the economy, given the crippling effect on housing and consumption.

The elements of business planning are fairly simple and straightforward

Each metropolis does a market assessment of their unique economic profile and potential … what goods and services they trade, which nations they trade with, where trade trends are likely to head given market dynamics here and abroad. 

Armed with this information, metros then set goals and objectives that build on their distinct advantages, devise strategies to meet those goals and establish metrics to gauge progress.

All these efforts are undertaken by a consortium of corporate, government, university and civic institutions that cut across jurisdictions, sectors, and disciplines and “collaborate to compete” globally.

Let me give you an example of how these business plans are helping cities and their metros grow jobs and restructure their economies.

Los Angeles, represented here by Mayor Antonio Villaragoisa, has devised an ambitious plan to grow exports by identifying and proactively supporting export ready firms in leading trade sectors like aerospace, computers, professional services, and film and television.  The L.A. system of trade is moving from a story of fragmentation, where no clear institution defines or drives decision-making, to a reality of coordination and collaboration, responsiveness and flexibility under one Los Angeles Regional Export Council.  The result: More firms will export more goods and services to more places producing more and better jobs.

We believe business planning holds great potential for São Paulo and other Brazilian metros.   Obviously, fixing the basics is a critical first step for economic growth: safe streets, quality schools, efficient transport and sound governance.  But a business plan might focus on increasing foreign direct investment in infrastructure necessary to reduce congestion, improve mobility, and enhance accessibility to jobs. 

The key is not what you focus on … but to decide your focus based on evidence and in a collaborative manner and then to hold yourself accountable through continuous assessment and measurement. 

Having innovated locally, cities must network globally—creating and stewarding close relationships with trading partners in both mature economies and rising nations.

The new global reality is leading to intricate networks of trading cities which grow together by linking together and learning together.

These networks obviously start with firms and ports that do business with each other.  

But, over time, networks extend to supporting institutions—governments, universities, business associations—that provide support for companies at the leading edge of metropolitan economies.

The city of Houston and the city of São Paulo, for example, executed a formal agreement earlier this year that commits each city to increase commercial relations, intensify scientific and technological connections, and facilitate information to tackle shared challenges.

Enterprise Florida, the principal export and investment organization in that state, opened an office in São Paulo in 2011 to help Florida companies expand trade.  APEX-Brasil, Enterprise Florida’s Brazilian counterpart, has its only U.S. location in Miami’s free trade zone.  There it executes projects like providing clean and renewable fuels to IndyCar, the American based auto racing body. 

The Ohio State University and the University of São Paulo have partnered to support the exchange of students and collaborative research.  Areas of recent focus: natural and mathematical sciences, medicine, and teacher training.  In 2014 Ohio State anticipates opening its third “Global Gateways” office in the world in São Paulo to further capitalize on these linkages.

Here is the simple message: We can see a network of trading cities emerging right here in São Paulo and it is a future characterized by multi-layered relationships across multiple dimensions and disciplines, interests and institutions. 

Finally, having innovated at home and networked globally, cities and metros must advocate nationally for federal and state policies and practices that will support metro growth.

Metros are engines, but they do NOT act alone.

Only national governments can set the rules of the road: enhancing access to foreign markets, enforcing trade agreements, opening up borders to immigrants and protecting intellectual property.  They can also help match domestic firms with potential global customers, provide export promotion support, and commit resources to modernizing logistics hubs.

As the world evolves as a network of trading cities, it is only natural that cities become more articulate and aggressive about the support they need from higher levels of government. 

In the United States, cities have found a receptive partner in the Obama Administration.  Key federal agencies—the International Trade Administration, the Ex-Im Bank, the Small Business Administration—have been central partners in guiding business plans with a particular focus on boosting exports.

Similar alliances could be built here.  As part of the Global Cities Initiative, the ESADE Business School mapped the trading system in São Paulo.  Their research clearly shows the central role of your federal and state governments in advancing the internationalization of your economy.  True success will come when these higher level entities align closely with your distinct assets and advantages.

Going forward, the advocacy of cities must extend beyond accessing the export promotion and finance programs of federal and state governments.  They must get to the heart of the matter.

The United States has had a North American Free Trade Agreement in place for 20 years with our partners, Mexico and Canada.

We have recently concluded important Free Trade Agreements with Colombia, Panama, and Korea.

President Obama was in Southeast Asia this month discussing the possibilities of a Trans-Pacific Partnership.

The 2011 Agreement on Trade and Economic Cooperation signed by President Obama and President Rousseff provides a platform to build on.

As they have expressed, we need a new vision for our Hemisphere … and for our two countries.

We are both growing with healthy demographics.

We both have an enormous pool of natural assets.

We both have a shared imperative to reorient our economies.

Empowered with the right policies, enabled with the right frameworks, we have the potential to grow together this century, powered by our major population and economic centers.

So that’s our playbook:

Innovate locally.  Network globally. Advocate nationally.

Let me end where I began. 

From the beginning of time, cities have been centers of commerce, formed along the roads and routes of trade. 

And so it is today.

The cities of our nations are powering our nations.

They are giving physical shape to the globalizing economy, seamlessly integrating the exchange of people, goods, services, energy, capital, ideas, and culture.

The promise of the Global Cities Initiative broadly is to capture and channel this energy into lasting, sustained networks and partnerships.

Our pledge as we leave here today is to work with you, partner with you, and ensure that the United States and Brazil bind together not just as two nations but as living, vibrant, powerful networks of trading cities and metropolitan areas.

The pace of employment gains slowed in January from the torrid pace of the previous three months. The latest BLS jobs report shows that employers added 151,000 to their payrolls in January, well below monthly gains in October through December. In that quarter payrolls climbed almost 280,000 a month. For two reasons, the deceleration in employment gains was not a complete surprise. First, the rapid growth payrolls in the last quarter did not seem consistent with other indicators of growth in the quarter. Preliminary GDP estimates suggest that output growth slowed sharply in the fourth quarter compared with the previous two. Second, I see few indicators suggesting the pace of economic growth has picked up so far this year.

It’s worth noting that employment gains in January were far faster than needed to keep the unemployment rate from increasing. In fact, if payrolls continue to grow at January’s pace throughout the year, we should expect the unemployment rate to continue falling. As usual in the current expansion, private employers accounted for all of January’s employment gains. Government payrolls shrank slightly. The number of public employees is about the same as it was last July. Over the same period, private employers added about 213,000 workers a month to their payrolls. In January employment gains slowed in construction and in business and professional industries. Payrolls shrank in mining. Since mining payrolls reached a peak in September 2014, they have fallen 16 percent. Manufacturing payrolls rose slightly in January, but payroll gains have been very slow over the past year. Employment in the temporary help industry contracted in January. The industry has seen no net change in payrolls since October.

Average hourly pay in private companies edged up in January. The average nominal wage was 2.5 percent higher than its level 12 months earlier. This is a faster rate of improvement compared with what we saw earlier in the recovery, when annual pay gains averaged about 2.0 percent a year. The modest acceleration in nominal pay gains has occurred against the backdrop of slowing consumer price inflation. The combination has given workers real wage gains approaching 2.0 percent over the past year.

The BLS household survey showed a small drop in unemployment. The jobless rate fell to 4.9 percent, just 0.3 points above its average level in 2007, the last year before the Great Recession. The drop in unemployment was the result of a rise in the number of survey respondents who were employed. The labor force participation rate increased in January, and it has increased 0.3 points since October.

This rebound in labor force participation is modest compared with the drop that occurred between 2008 and 2015. From 2007 to January 2016 the adult participation rate fell 3.4 percentage points. Roughly half the drop is traceable to population aging, but the other half is due to factors related to the deep slump or to long-term factors that have affected Americans’ willingness to enter or remain in the workforce. If we assume all of the drop was due to factors that have temporarily discouraged jobless adults from seeking work, then we can recalculate the unemployment rate to reflect the rate we would see if all of these discouraged workers were reclassified as unemployed. That calculation suggests the current unemployment rate would be about 7.4 percent rather than 4.9 percent.

It is of course unlikely all the adults who’ve dropped out the labor force would stream back in if job finding got easier and real wages continued to rise. It is encouraging to see, however, that participation is now climbing after a long period of decline. Over the past four months, the labor force participation rate of 25-54 year-olds increased 0.5 percentage points.

The latest BLS jobs report shows little sign employers are worried about the future strength of the recovery. Both the employer and household surveys suggest U.S. employers have an undiminished appetite for new hires. Nonfarm payrolls surged 242,000 in February, and upward revisions BLS employment estimates for January added almost 21,000 to estimated payroll gains in that month.

The household survey shows even bigger job gains in recent months. An additional 530,000 respondents said they were employed in February compared with January. This follows reported employment gains of 485,000 and 615,000 in December and January. Over the past year the household survey showed employment gains that averaged 237,000 per month. In comparison, the employer survey reported payroll gains averaging 223,000 a month.

These monthly gains are about three times faster than the job growth needed to keep the unemployment rate from climbing. As a result, the unemployment rate has fallen over the past year, reaching 4.9 percent in January. The jobless rate remained unchanged in February because of a continued influx of adults into the workforce. An additional 555,000 people entered the labor force, capping a three-month period which saw the labor force grow by over 500,000 a month. The labor force participation rate continued to inch up, rising 0.2 percentage points in February compared with the previous month. Since reaching a 38-year low in September 2015, the labor force participation rate has risen 0.5 points.

More than half the decline in the participation rate between the onset of the Great Recession and today is traceable to the aging of the adult population. A growing share of Americans are in late middle age or past 65, ages when we anticipate participation rates will decline. If we focus on the population between 25 and 54, the participation rate stopped declining in 2013 and has edged up 0.6 percentage points since hitting its low point. The employment-to-population rate of 25-54 year-olds has increased 3.0 percentage points since reaching a low in 2009 and 2010. Using the employment rate of 25-54 year-olds as an indicator of labor market tightness, we have recovered about 60 percent of the employment-rate drop that occurred in the Great Recession. Eliminating the rest of the decline will require a further increase in prime-age labor force participation.

Two other indicators suggest the job market remains some distance from a full recovery. More than a quarter of the 7.8 million unemployed have been jobless 6 months or longer. The number of long-term unemployed is about 70 percent higher than was the case just before the Great Recession. Nearly 6 million Americans who hold part-time jobs indicate they want to work on full-time schedules. They cannot do so because they have been assigned part-time hours or can only find a part-time job. The number of workers in this position is more than one-third higher than the comparable number back in 2007. Nonetheless, nearly all indicators of labor market tightness have displayed continued improvement in recent months.

February’s surge in employment growth and labor force participation was accompanied by an unexpected drop in nominal wages. Average hourly pay fell from $25.38 to $25.35 per hour. Compared with average earnings 12 months ago, workers saw a 2.2 percent rise in nominal hourly earnings. Because inflation is low, this probably translates into a real wage gain of about 1 percent. While employers may have an undiminished appetite for new hires, they show little inclination to boost the pace of wage increases.

Washington is again paralyzed and pulling back on clean energy economic development. Deficit politics and partisanship are firmly entrenched and the raft of federal financial supports made available through the 2009 stimulus law and elsewhere is starting to expire.

No wonder it’s hard to imagine—especially if you’re sitting in the nation’s capital—how the next phase of American clean energy industry growth will be financed or its next generation of technologies and firms supported.

And yet, one source of action lies hidden in plain sight. With federal clean energy activities largely on hold, a new paper we are releasing today as part of the Brookings-Rockefeller Project on State and Metropolitan Innovation argues that U.S. states hold out tremendous promise for the continued design and implementation of smart clean energy finance solutions and economic development.

Specifically, we contend that the nearly two dozen clean energy funds (CEFs) now running in a variety of mostly northern states stand as one of the most important clean energy forces at work in the nation and offer at least one partial response to the failure of Washington to deliver a sensible clean energy development approach.

To date, over 20 states have created a varied array of these public investment vehicles to invest in clean energy pursuits with revenues often derived from small public-benefit surcharges on electric utility bills. Over the last decade, state CEFs have invested over $2.7 billion in state dollars to support renewable energy markets, counting very conservatively.  Meanwhile, they have leveraged another $9.7 billion in additional federal and private sector investment, with the resulting $12 billion flowing to the deployment of over 72,000 projects in the United States ranging from solar installations on homes and businesses to wind turbines in communities to large wind farms, hydrokinetic projects in rivers, and biomass generation plants on farms. 

In so doing, the funds stand well positioned—along with state economic development and other officials—to build on a pragmatic success and take up the challenge left by the current federal abdication of a role on clean energy economic development.

Yet here is the rub: For all the good the funds have achieved, project-only financing—as needed as it is—will not be sufficient to drive the growth of large and innovative new companies or to create the broader economic development taxpayers demand from public investments.  Also needed will be a greater focus on the deeper-going economic development work that can help spawn whole new industries. 

All of which points to the new brand of fund activity that our paper celebrates and calls for more of. 

In recent years, increasingly ambitious efforts in a number of states have featured engagement on at least three major fronts somewhat different from the initial fund focus: (1) cleantech innovation support through research, development, and demonstration (RD&D) funding; (2) financial support for early-stage cleantech companies and emerging technologies, including working capital for companies; and (3) industry development support through business incubator programs, regional cluster promotion, manufacturing and export promotion, supply chain analysis and enhancement, and workforce training programs.

These new economic development efforts—on display in California, Massachusetts, New York, and elsewhere—show the next era of state clean energy fund leadership coming into focus. States are now poised to jumpstart a new, creative period of expanded clean energy economic development and industry creation, to complement and build upon individualistic project financing. 

Such work could not be more timely at this moment of federal gridlock and market uncertainty.

Along these lines, then, our paper advances several recommendations for moving states more aggressively into this new period of clean energy economic development. We suggest that:

• States should reorient a significant portion (at least 10 percent of the total portfolio) of state CEF money to clean energy-related economic development

• States, as they reorient portions of their CEFS to economic development, should better understand the market dynamics in their metropolitan regions.  They need to lead by making available quality data on the number of jobs in their regions, the fastest-growing companies, the critical industry clusters, gaps in the supply chain for those industries, their export potential, and a whole range of economic development and market indicators

• States also should better link their clean energy funds with economic development entities, community development finance institutions (CDFIs), development finance organizations and other stakeholders who could be ideal partners to develop decentralized funding and effective economic development programs

In addition, we think that Washington needs to recognize the strength and utility of the CEFs and actively partner with them:

• The federal government should consider redirecting a portion of federal funds (for instance, from federal technology support programs administered by the Department of Energy and other programs meant for federal-state cooperation) to provide joint funding of cluster development, export programs, workforce training, and other economic development programs  through matching dollars to state funds that now have active economic development programs, and to provide incentives to states without such programs to create them

• The federal government should create joint technology partnerships with states to advance each state’s targeted clean energy technology industries, by matching federal deployment funding with state funding.

• The states and the federal government, more generally, should look to “decentralize” financing decisions to local entities with street knowledge of their industries, relying on more “development finance” authorities that have financed traditional infrastructure and now could finance new clean energy projects and programs

In sum, our new paper proposes a much greater focus in U.S. clean energy finance on “bottom up,” decentralized clean initiatives that rely on the states to catalyze regional economic development in regions. Such an approach—which reflects the emergence of an emerging “pragmatic caucus” in U.S. economic life—is currently demanded by federal inaction. However, it might also be the smartest, most durable way to develop the clean energy industries of the future without the partisan rancor and obtuseness that has stymied federal energy policy. State clean energy funds—having funded thousands of individual projects—bring significant knowledge to bear as they focus now on building whole industries. For that reason, the funds’ transition from project development to industry creation should be nurtured and supported.

State clean energy funds (CEFs) have emerged as effective tools that states can use to accelerate the development of energy efficiency and renewable energy projects. These clean energy funds, which exist in over 20 states, generate about $500 million per year in dedicated support from utility surcharges and other sources, making them significant public investors in thousands of clean energy projects.

However, state clean energy funds’ emphasis on a project finance model—which directly promotes clean energy project installation by providing production incentives and grants/rebates—is by itself not enough to build a statewide clean energy industry. State clean energy funds also need to pay attention to other critical aspects of building a robust clean energy industry, including cleantech innovation support through research and development funding, financial support for early-stage cleantech companies and emerging technologies, and various other industry development efforts.

As it happens, some of these state clean energy funds are already supporting a broader range of clean energy-related economic development activities within their states. As more and more states reorient their clean energy funds from a project finance-only model in order to encompass broader economic development activities, clean energy funds can collectively become an important national driver for economic growth.

To become true economic development engines in clean energy state clean energy funds should:

• Reorient a significant portion of their funding toward clean energy-related economic development
• Develop detailed state-specific clean energy market data
• Link clean energy funds with economic development entitites and other stakeholders in the emerging industry
• Collaborate with other state, regional, and federal efforts to best leverage public and private dollars and learn from each other's experiences

Downloads

• Download the Full Paper

Community banks play a key role in their local communities by offering traditional banking services to households and lending to nearby small businesses in the commercial, agriculture, and real estate sectors. Because of their close relationship with small businesses, they drive an important segment of economic growth. In fact, compared to all other banks (and to credit unions), small banks devote the greatest share of their assets to small business loans.

In this paper, titled "The community banks: The evolution of the financial sector, Part III," (PDF) Baily and Montalbano examine the evolution of community banks before, through, and after the financial crisis to assess their recovery.

The authors find that despite concerns about the long-term survival of community banks due a decline in the number of banks and increased Dodd-Frank regulations, they continue to recover from the financial crisis and are in fact out-performing the Big Four banks in several key measures.

Although the number of community banks has been steadily declining since before 2003, most of the decline has come from the steep drop in the smallest banking organizations—those with total consolidated assets of less than $100 million. Community banks with total consolidated assets that exceed $300 million have in fact increased in number. Most of the decline in community banks can be attributed to the lack of entry into commercial banking.

In a previous paper, Baily and Montalbano showed that the gap in loans and leases among the Big Four has widened since the financial crisis, but the new research finds that community banks seem to be returning to their pre-crisis pattern, although slowly, with the gap between deposits and loans shrinking since 2011. While total deposits grew gradually after 2011, though at a pace slower than their pre-crisis rate, loans and leases bottomed out in 2011 at $1.219 trillion.

The authors also examine community banks' return on assets (ROA), finding it was lower overall than for the Big Four or for the regionals, and has come back to a level closer to the pre-crisis level than was the case for the larger banks. The level of profitability was slightly lower for community banks in 2003 than it was for the larger banks—about 1.1 percent compared to 1.7 percent for the regional banks—but it did not dip as low, reaching a bottom of about -0.1 percent compared to -0.8 percent for the regional banks.

Baily and Montalbano also find that total assets of the community banks increased 22.5 percent (adjusted for inflation, the increase was 7 percent); the average size of community banks has increased substantially; total bank liabilities grew steadily from 2003-2014; the composition of liabilities in post-crisis years looked largely similar to the composition in the pre-crisis years; and securitization—which plays a relatively small role in the community banking model—has been steadily increasing in the time period both before and after the crisis. 

To read more, download the full paper here.

The paper is the third in a series that examines how the financial sector has evolved over the periods both before and after the financial crisis of 2007-2008. The first paper examines the Big Four banks, and the second takes a closer look at regional banks.

Downloads

• Download "The community banks: The evolution of the financial sector, Part III"

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The White House Council of Economic Advisers (CEA) was created by Congress in 1946 to advise the president on ways “to foster and promote free competitive enterprise” and “to promote maximum employment, production and purchasing power.” President Truman, who signed the Employment Act of 1946 into law, was unenthusiastic about the Council and didn’t nominate members for nearly six months. Yet the CEA, comprised of three individuals whom Congress says are to be “exceptionally qualified,” has not only survived but also prospered for 70 years and remains an important part of the president’s economic policy decisionmaking.

On February 11, the Hutchins Center on Fiscal and Monetary Policy at Brookings marked this anniversary by examining the ways the CEA and other economists succeed and fail when they set out to advise elected politicians and tap the expertise of some of the “exceptionally qualified” economists who have chaired the Council over the past four decades.

You can join the conversation and tweet questions for the panelists at #CEAat70.

Video

• Panel 1: The CEA in Moments of Crisis
• Panel 2: The CEA and Policymaking
• Panel 3: Current Economic Policy Issues

Audio

• The Council of Economic Advisers: 70 years of advising the president

Transcript

• Uncorrected Transcript (.pdf)

Event Materials

• 20160211_economic_advisers_transcript

Event Information

The financial crisis is now eight years behind us, but its legacy lingers on. Many Americans are concerned about their financial security and are particularly worried about whether they will have enough for retirement. Guaranteed benefit pensions are gradually disappearing, leaving households to save and invest for themselves. What role could equities play for retail investors?

Another concern about the lingering impact of the crisis is that business investment and overall economic growth remains weak compared to expectations. Large companies are able to borrow at low interest rates, yet many of them have large cash holdings. However, many small and medium sized enterprises face difficulty funding their growth, paying high risk premiums on their borrowing and, in some cases, being unable to fund investments they would like to make. Equity funding can be an important source of growth financing.

On Friday, April 15, the Initiative on Business and Public Policy at Brookings examined what role equity markets can play for individual retirement security, small business investment and whether they can help jumpstart American innovation culture by fostering the transition from startups to billion dollar companies.

You can join the conversation and tweet questions for the panelists at #EquityMarkets.

Video

• Keynote address by Richard G. Ketchum
• Panel Discussion
• Keynote address by Roger Ferguson

Audio

• Not just for the professionals? Understanding equity markets for retail and small business investors

Transcript

• Uncorrected Transcript (.pdf)

Event Materials

• Equity Markets Retirement Security 2016 Apr 15 (2)
• 20160415_equity_markets_transcript