In an increasingly international and interconnected economy, Seattle was global before global was cool.

The region’s competitive global assets include internationally competitive firms, strategically important ports and one of the nation’s largest foreign-born populations.

Still, today’s unique economic moment demands an extra measure of purposeful global engagement.

As cities and metropolitan areas begin to emerge from the Great Recession, leaders are realizing the need to restructure the economy — to move from one based on debt and consumption to one powered by production and innovation.

At the same time, most economic growth over the next decade will occur outside of America’s borders. As of 2009, the combined economies of Brazil, India and China eclipsed that of the United States and now account for more than one-fifth of the global economy. By 2018, their share is expected to surpass one-quarter.

The developing world, with a rapidly rising middle class, represents a huge market opportunity for American firms. China and India alone are expected to increase their urban populations by more than 500 million over the next 20 years, which naturally leads to a rise in their consumer classes. By 2050, Chinese and Indian consumers will account for more than half of all middle-class consumption worldwide, up from just 2 percent in 2000.

These growing metropolises will also require massive investments in infrastructure and face huge challenges as they expand, challenges that U.S. firms have the expertise to solve — in transportation and mobility, in sustainability and clean energy, in information technology and software.

America’s metropolitan areas are uniquely positioned to take advantage of this dual challenge through increased trade and investment. The top 100 metro areas not only produce three-quarters of our gross domestic product, they also concentrate our most innovative firms, our research institutions and universities, and the majority of our skilled workers.

So how does the central Puget Sound region stack up? Recently, I came to Seattle as part of the Global Cities Initiative, a joint project of the Brookings Institution and JPMorgan Chase. This initiative aims to catalyze a shift in economic development priorities and practices that would result in more globally connected metropolitan areas and more sustainable economic growth.

The metro area has a strong platform for trade: firms such as Boeing, Microsoft, and Amazon; world-class research assets including the University of Washington and the Fred Hutchinson Cancer Research Center; and a strong legacy of globally oriented leadership, with a wide coalition, including public, private and civic leaders, actively promoting a regional strategy for global engagement.

The data bear this out: While Seattle is the 15th largest metro area in the United States, it has the sixth highest export total, sending more than $47 billion in goods and services abroad in 2012. These exports are overwhelmingly driven by globally competitive clusters in aerospace and information technology.

Partly due to this industry specialty, Seattle’s economy is also highly innovative and uniquely oriented toward science, technology, engineering and math: More than one-quarter of jobs in the metro are in STEM occupations, the fourth highest share of any metropolitan area in the country.

Still, in such a competitive and dynamic global economy, no metro area can afford complacency. In order to maintain its position in the global economy, Seattle needs to get serious about global engagement.

First, focus on global trade and investment. Continue the collaborative efforts of your public, private and civic leaders to focus economic development strategies on growth abroad. In Seattle earlier this month, regional leaders committed to expanding these efforts, joining the Global Cities Initiative’s Exchange, through which the metro area will develop a strategy to increase foreign direct investment in key industries.

Second, invest in what matters. To compete globally, metro areas must be strong at home. In Seattle, this means shoring up your workforce-development pipeline so that local residents have a path to good jobs in advanced industries. It also calls for a regional approach to financing and delivering transportation solutions that not only reduce congestion at home, but also improve your connections abroad.

Finally, metropolitan leaders must look beyond their own borders, identify their trading partners, and build relationships to increase both trade and investment. For example, as part of the Global Cities Initiative, Chicago and Mexico City entered into a first-of-its-kind economic partnership that builds on the extensive economic, social, cultural linkages between the two metros to make both more prosperous.

There are promising efforts under way in the region, as the King County Aerospace Alliance has started collaborating with Aéro Montréal so that the two aerospace clusters can be more competitive.

Simply put, in today’s economic landscape, every city is a global city. The success of regional economies hinges on their engagement throughout the global economy. Seattle has an enviable hand to play; but success is not inevitable.

This opinion piece originally appeared in the Seattle Times.

This is the first in a series of reports on the demographic and political dynamics under way in 10 “battleground” states, deemed to be crucial in deciding the 2008 election. As part of the Metropolitan Policy Program’s Blueprint for American Prosperity, this series will provide an electoral component to the initiative’s analysis of and prescriptions for bolstering the health and vitality of America’s metropolitan areas, the engines of the U.S economy. This report focuses on Pennsylvania. Among its specific findings are:

• Pennsylvania is becoming a demographic “bridge” between Midwestern states like Ohio and other Northeastern states like New Jersey, as its new growth is tied to urban coastal regions. While often classed as a so-called “Rust Belt” state, its eastern and south central regions are increasingly becoming part of the nation’s Northeast Corridor, with new growth and demographic profiles that warrant attention in upcoming elections.
• Eligible voter populations indicate a state in transition, where minorities, especially Hispanics, and white college graduates are increasingly important, but where white working class voters continue to play a central role. While white working class voters continue to decline as a share of voters and are less likely to work in manufacturing and goods production, they are still a critical segment of voters, including in the fast-growing Harrisburg and Allentown regions where their absolute numbers are actually increasing.
• Recent Democratic victories in Pennsylvania have featured strong support from groups like minorities, single women, and the young but have also benefited from relatively strong support among the white working class, especially among its upwardly mobile segment that has some college education. Compared to 1988, both the latter group and white college graduates have increased their support for Democrats. And both groups have increased their share of voters over the time period.
• Political shifts in Pennsylvania since 1988 have seen the growing eastern part of the state swing toward the Democrats, producing four straight presidential victories for that party. The swing has been sharpest in the Philadelphia suburbs, but has also been strong in the Allentown region and even affected the pro-Republican Harrisburg region. Countering this swing, the declining western part of the state has been moving toward the GOP.
• Key trends and groups to watch in 2008 include the white working class, especially whites with some college, who, unlike the rest of this group, are growing; white college graduates; and Hispanics, who have been driving the growth of the minority vote.

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Last week, we showed how the share of the nation’s venture capital going to the Bay Area has actually increased over the last decade and posed the question: Are San Francisco and Silicon Valley good models for most cities to imitate? And with the answer being “no,” what strategies should cities employ to bolster local capital networks?

The answer depends upon regions’ technical strengths—different technologies imply different venture capital strategies. A common assumption is that most cities look like Silicon Valley with software monopolizing venture funding, but in many places a mix of different technologies are far more important. Metropolitan level venture capital data from 2005 to 2015 from Pitchbook illustrates how different cities require different strategies.

In Cleveland, for example, more than three-quarters of deals are in clinical care services and medical devices driven by Cleveland Clinic’s world-renowned success in identifying and funding companies creating novel health care technologies. However, software and medical technologies require very different venture capital strategies. Software companies need upfront funding but can scale quickly with few additional funding rounds. Medical technologies require FDA approval and clinical trials, costly and lengthy processes, implying the need to consider whether regional venture capital efforts can provide not only seed funding but multiple rounds. If not, promising health care companies may flame out or relocated elsewhere.

Pittsburgh, on the other hand, has a far more mixed portfolio than either Cleveland or the Bay Area, one of the most diverse in the country. Pittsburgh’s top 10 technologies funded over the last decade include laboratory services, energy exploration, battery storage, medical devices, software, and electronic equipment—with none making up more than one-fifth the metro area’s portfolio. Pittsburgh’s mix of educational and non-profit institutions like Carnegie Mellon University, University of Pittsburgh and UPMC support research in engineering, software, medical technologies, and therapeutics. In addition private companies like Google, Alcoa, and the shale gas boom have provided the region with a blend of market opportunities that are extremely different than that of the Bay Area.

Equally important to the type of technologies funded is how venture capital deals are funded. In the Bay Area private venture capital firms represent the vast majority of funding both in terms of numbers of deals and overall value. Deals from accelerators and universities together equal less than one-tenth of what is invested by private venture capital firms. Given the many private investment firms in the Bay Area, universities and accelerators are better at creating and incubating technologies instead of funding them. Unfortunately, other markets lack such private sector assets and try to jumpstart investments through other methods.

Over the last decade, Pittsburgh made just 3 percent as many total venture deals as the Bay Area, but breaking that figure down by the funding source, universities outperformed in Pittsburgh. There they funded nearly 30 percent as many deals as universities did in San Francisco and Silicon Valley, a rate 10 times as high as would be expected based the Bay Area “norm.” One reason for this is Pittsburgh is relatively new to venture funding and may have more research assets than private venture capital firms. Therefore, university funds could fill an important capital gap.

A common worry is these non-private sector deals are poor investments that private firms, with superior market intelligence, simply refused to make. This argument is most persuasive in regions like the Bay Area where there is no shortage of private capital to fund good ideas. However in other regions these investments can prove to be smart precursors to private funding. Also, rarely do public institutions make investment decisions. Instead, public dollars are funneled through private investment firms to kick start regional activity. For example, Philadelphia’s new StartUp PHL fund is paid for by taxpayer dollars but investment decisions are made by First Capital, the city’s largest private venture capital fund. The fund requires recipients to stay in the city for at least six months after funding, with the hope to increase the number of growing technology companies in Philadelphia.

Cleveland and Pittsburgh are specific examples of a general point. Cities have unique technology competencies and pathways to venture capital. Economic strategies to attract outside, and bolster local capital, should reflect those attributes and not simply default to what seems to have worked in the Bay Area. 

Last week, we showed how the share of the nation’s venture capital going to the Bay Area has actually increased over the last decade and posed the question: Are San Francisco and Silicon Valley good models for most cities to imitate? And with the answer being “no,” what strategies should cities employ to bolster local capital networks?

The answer depends upon regions’ technical strengths—different technologies imply different venture capital strategies. A common assumption is that most cities look like Silicon Valley with software monopolizing venture funding, but in many places a mix of different technologies are far more important. Metropolitan level venture capital data from 2005 to 2015 from Pitchbook illustrates how different cities require different strategies.

In Cleveland, for example, more than three-quarters of deals are in clinical care services and medical devices driven by Cleveland Clinic’s world-renowned success in identifying and funding companies creating novel health care technologies. However, software and medical technologies require very different venture capital strategies. Software companies need upfront funding but can scale quickly with few additional funding rounds. Medical technologies require FDA approval and clinical trials, costly and lengthy processes, implying the need to consider whether regional venture capital efforts can provide not only seed funding but multiple rounds. If not, promising health care companies may flame out or relocated elsewhere.

Pittsburgh, on the other hand, has a far more mixed portfolio than either Cleveland or the Bay Area, one of the most diverse in the country. Pittsburgh’s top 10 technologies funded over the last decade include laboratory services, energy exploration, battery storage, medical devices, software, and electronic equipment—with none making up more than one-fifth the metro area’s portfolio. Pittsburgh’s mix of educational and non-profit institutions like Carnegie Mellon University, University of Pittsburgh and UPMC support research in engineering, software, medical technologies, and therapeutics. In addition private companies like Google, Alcoa, and the shale gas boom have provided the region with a blend of market opportunities that are extremely different than that of the Bay Area.

Equally important to the type of technologies funded is how venture capital deals are funded. In the Bay Area private venture capital firms represent the vast majority of funding both in terms of numbers of deals and overall value. Deals from accelerators and universities together equal less than one-tenth of what is invested by private venture capital firms. Given the many private investment firms in the Bay Area, universities and accelerators are better at creating and incubating technologies instead of funding them. Unfortunately, other markets lack such private sector assets and try to jumpstart investments through other methods.

Over the last decade, Pittsburgh made just 3 percent as many total venture deals as the Bay Area, but breaking that figure down by the funding source, universities outperformed in Pittsburgh. There they funded nearly 30 percent as many deals as universities did in San Francisco and Silicon Valley, a rate 10 times as high as would be expected based the Bay Area “norm.” One reason for this is Pittsburgh is relatively new to venture funding and may have more research assets than private venture capital firms. Therefore, university funds could fill an important capital gap.

A common worry is these non-private sector deals are poor investments that private firms, with superior market intelligence, simply refused to make. This argument is most persuasive in regions like the Bay Area where there is no shortage of private capital to fund good ideas. However in other regions these investments can prove to be smart precursors to private funding. Also, rarely do public institutions make investment decisions. Instead, public dollars are funneled through private investment firms to kick start regional activity. For example, Philadelphia’s new StartUp PHL fund is paid for by taxpayer dollars but investment decisions are made by First Capital, the city’s largest private venture capital fund. The fund requires recipients to stay in the city for at least six months after funding, with the hope to increase the number of growing technology companies in Philadelphia.

Cleveland and Pittsburgh are specific examples of a general point. Cities have unique technology competencies and pathways to venture capital. Economic strategies to attract outside, and bolster local capital, should reflect those attributes and not simply default to what seems to have worked in the Bay Area. 

Last week, we showed how the share of the nation’s venture capital going to the Bay Area has actually increased over the last decade and posed the question: Are San Francisco and Silicon Valley good models for most cities to imitate? And with the answer being “no,” what strategies should cities employ to bolster local capital networks?

The answer depends upon regions’ technical strengths—different technologies imply different venture capital strategies. A common assumption is that most cities look like Silicon Valley with software monopolizing venture funding, but in many places a mix of different technologies are far more important. Metropolitan level venture capital data from 2005 to 2015 from Pitchbook illustrates how different cities require different strategies.

In Cleveland, for example, more than three-quarters of deals are in clinical care services and medical devices driven by Cleveland Clinic’s world-renowned success in identifying and funding companies creating novel health care technologies. However, software and medical technologies require very different venture capital strategies. Software companies need upfront funding but can scale quickly with few additional funding rounds. Medical technologies require FDA approval and clinical trials, costly and lengthy processes, implying the need to consider whether regional venture capital efforts can provide not only seed funding but multiple rounds. If not, promising health care companies may flame out or relocated elsewhere.

Pittsburgh, on the other hand, has a far more mixed portfolio than either Cleveland or the Bay Area, one of the most diverse in the country. Pittsburgh’s top 10 technologies funded over the last decade include laboratory services, energy exploration, battery storage, medical devices, software, and electronic equipment—with none making up more than one-fifth the metro area’s portfolio. Pittsburgh’s mix of educational and non-profit institutions like Carnegie Mellon University, University of Pittsburgh and UPMC support research in engineering, software, medical technologies, and therapeutics. In addition private companies like Google, Alcoa, and the shale gas boom have provided the region with a blend of market opportunities that are extremely different than that of the Bay Area.

Equally important to the type of technologies funded is how venture capital deals are funded. In the Bay Area private venture capital firms represent the vast majority of funding both in terms of numbers of deals and overall value. Deals from accelerators and universities together equal less than one-tenth of what is invested by private venture capital firms. Given the many private investment firms in the Bay Area, universities and accelerators are better at creating and incubating technologies instead of funding them. Unfortunately, other markets lack such private sector assets and try to jumpstart investments through other methods.

Over the last decade, Pittsburgh made just 3 percent as many total venture deals as the Bay Area, but breaking that figure down by the funding source, universities outperformed in Pittsburgh. There they funded nearly 30 percent as many deals as universities did in San Francisco and Silicon Valley, a rate 10 times as high as would be expected based the Bay Area “norm.” One reason for this is Pittsburgh is relatively new to venture funding and may have more research assets than private venture capital firms. Therefore, university funds could fill an important capital gap.

A common worry is these non-private sector deals are poor investments that private firms, with superior market intelligence, simply refused to make. This argument is most persuasive in regions like the Bay Area where there is no shortage of private capital to fund good ideas. However in other regions these investments can prove to be smart precursors to private funding. Also, rarely do public institutions make investment decisions. Instead, public dollars are funneled through private investment firms to kick start regional activity. For example, Philadelphia’s new StartUp PHL fund is paid for by taxpayer dollars but investment decisions are made by First Capital, the city’s largest private venture capital fund. The fund requires recipients to stay in the city for at least six months after funding, with the hope to increase the number of growing technology companies in Philadelphia.

Cleveland and Pittsburgh are specific examples of a general point. Cities have unique technology competencies and pathways to venture capital. Economic strategies to attract outside, and bolster local capital, should reflect those attributes and not simply default to what seems to have worked in the Bay Area. 

Last week, we showed how the share of the nation’s venture capital going to the Bay Area has actually increased over the last decade and posed the question: Are San Francisco and Silicon Valley good models for most cities to imitate? And with the answer being “no,” what strategies should cities employ to bolster local capital networks?

The answer depends upon regions’ technical strengths—different technologies imply different venture capital strategies. A common assumption is that most cities look like Silicon Valley with software monopolizing venture funding, but in many places a mix of different technologies are far more important. Metropolitan level venture capital data from 2005 to 2015 from Pitchbook illustrates how different cities require different strategies.

In Cleveland, for example, more than three-quarters of deals are in clinical care services and medical devices driven by Cleveland Clinic’s world-renowned success in identifying and funding companies creating novel health care technologies. However, software and medical technologies require very different venture capital strategies. Software companies need upfront funding but can scale quickly with few additional funding rounds. Medical technologies require FDA approval and clinical trials, costly and lengthy processes, implying the need to consider whether regional venture capital efforts can provide not only seed funding but multiple rounds. If not, promising health care companies may flame out or relocated elsewhere.

Pittsburgh, on the other hand, has a far more mixed portfolio than either Cleveland or the Bay Area, one of the most diverse in the country. Pittsburgh’s top 10 technologies funded over the last decade include laboratory services, energy exploration, battery storage, medical devices, software, and electronic equipment—with none making up more than one-fifth the metro area’s portfolio. Pittsburgh’s mix of educational and non-profit institutions like Carnegie Mellon University, University of Pittsburgh and UPMC support research in engineering, software, medical technologies, and therapeutics. In addition private companies like Google, Alcoa, and the shale gas boom have provided the region with a blend of market opportunities that are extremely different than that of the Bay Area.

Equally important to the type of technologies funded is how venture capital deals are funded. In the Bay Area private venture capital firms represent the vast majority of funding both in terms of numbers of deals and overall value. Deals from accelerators and universities together equal less than one-tenth of what is invested by private venture capital firms. Given the many private investment firms in the Bay Area, universities and accelerators are better at creating and incubating technologies instead of funding them. Unfortunately, other markets lack such private sector assets and try to jumpstart investments through other methods.

Over the last decade, Pittsburgh made just 3 percent as many total venture deals as the Bay Area, but breaking that figure down by the funding source, universities outperformed in Pittsburgh. There they funded nearly 30 percent as many deals as universities did in San Francisco and Silicon Valley, a rate 10 times as high as would be expected based the Bay Area “norm.” One reason for this is Pittsburgh is relatively new to venture funding and may have more research assets than private venture capital firms. Therefore, university funds could fill an important capital gap.

A common worry is these non-private sector deals are poor investments that private firms, with superior market intelligence, simply refused to make. This argument is most persuasive in regions like the Bay Area where there is no shortage of private capital to fund good ideas. However in other regions these investments can prove to be smart precursors to private funding. Also, rarely do public institutions make investment decisions. Instead, public dollars are funneled through private investment firms to kick start regional activity. For example, Philadelphia’s new StartUp PHL fund is paid for by taxpayer dollars but investment decisions are made by First Capital, the city’s largest private venture capital fund. The fund requires recipients to stay in the city for at least six months after funding, with the hope to increase the number of growing technology companies in Philadelphia.

Cleveland and Pittsburgh are specific examples of a general point. Cities have unique technology competencies and pathways to venture capital. Economic strategies to attract outside, and bolster local capital, should reflect those attributes and not simply default to what seems to have worked in the Bay Area. 

As expected, on August 10, Prime Minister Recep Tayyip Erdoğan from the Justice and Development Party (AKP) decisively won Turkey’s first directly-elected presidential election. He received just about 52 percent of the votes, falling somewhat short of the 55 percent that the polls were predicting.

At a time when Turkey’s neighborhood is in a state of chaos and the country is deeply polarized, what will his next steps as president be? Will he transform Turkey’s political system from a parliamentary to a presidential one? Will he be able to simultaneously run his party, control the prime minister and be the president of Turkey? Will he be able to overcome the authoritarian and abrasive politics of the last two years and replace it with politics reminiscent of the mid-2000s characterized by consensus building and liberal reforms? Or will it be a case of more of the same?

Traditionally, presidents were elected by members of the Turkish Parliament, and had limited powers. However, Erdoğan has been aspiring for a strong presidency since AKP won close to half of the votes at the national elections in June 2011. While serving as prime minister, Erdoğan attempted to write a new constitution, but resistance from opposition parties together with the May 2013 Gezi Park protests and the December 2013 corruption scandal prevented him from achieving his goal. Consequently, his fallback plan has been to emerge triumphant from the 2014 presidential elections,use the presidential powers in the current constitution to its full extent and aim to get AKP to emerge from the parliamentary elections scheduled for June 2015 with enough seats, enabling him to see to the adoption of a new constitution. This new constitution would transform Turkey’s parliamentary system into a presidential one and give Erdoğan the possibility to run the country until 2023, the Republic’s centenary.

Erdoğan’s Opponents: İhsanoğlu and Demirtaş

Ekmeleddin İhsanoğlu and Selahattin Demirtaş were Erdoğan’s main opponents. Although neither constituted major challenges for Erdoğan, each represent something significant for Turkey. The left-leaning secularist Republican People’s Party (CHP) and right-wing Nationalist Movement Party (MHP) joined forces to support İhsanoğlu’s candidacy. İhsanoğlu, born and raised in Cairo, a prominent religious scholar, and a secretary-general of the Organization of Islamic Cooperation from 2004 to 2010, was seen as the best candidate to attract former AKP members, and votes from the wider conservative electorate. Though he lacked political experience and visibility in Turkey, he managed to receive more than 38 percent of the votes. This performance falls short of the 44 percent that CHP and MHP garnered at the local elections in March this year, but would still be considered as a respectable performance.

Demirtaş, a prominent figure amongst Turkey’s Kurdish minority population and a keen partner in government efforts to find a political solution to the Kurdish problem in Turkey, ran for presidency on a secular and somewhat leftist agenda, sensitive to the interests of especially minorities and women. He received almost 10 percent of the votes, one point short of most poll predictions, but almost twice the amount that his party, Peace and Democracy Party (BDP), received in March local elections. This suggests that Demirtaş received support not just from Kurdish, but also Turkish voters, a very significant development in terms of politics in Turkey.

How Has the Turkish Political System Worked in the Past?

With Erdoğan’s victory, Turkey is now at an important crossroad. Since World War II, Turkey has been a parliamentary system. The prime minister was the head of the executive branch of government and the president, elected by the parliament, held a ceremonial role. This changed after General Kenan Evren led the 1980 military coup d’état. In 1982, Evren introduced a new constitution that empowered the president with some executive powers intended to exert some control over civilian politicians. However, with the exception of Evren and his successor, Turgut Özal, subsequent presidents, Süleyman Demirel and Ahmet Necdet Sezer, refrained from using these constitutional powers in any conspicuous manner. So where did the notion of a directly-elected president come from?

The idea of a president elected directly by the electorate, rather than by the parliament, is an outcome of the military’s interference in politics in 2007. As the end of the staunchly secular and politically shy Sezer’s term approached, the military in a rather undemocratic manner, tried to prevent the then-Minister of Foreign Affairs, Abdullah Gül, from becoming president. The military and the judicial establishment deeply distrusted Gül’s, as well as the AKP’s, commitment to secularism. The government overcame the challenge by calling for an early snap election that AKP won handsomely, opening the way for Gül’s election as the new president. Furthermore, the electoral victory encouraged Erdoğan to hit back at the military by calling for a referendum on whether future presidents should be directly elected by the people or by the parliament. Erdoğan’s initiative received support from 58 percent of the electorate, thereby quite decisively demonstrating to his opponents the very extent of his popularity while allowing him to emphasize the “will of the people” as the basis of his understanding of democracy.

The Campaigns: Two Approaches to Turkey’s Future

The 2014 presidential campaign unfolded as a competition between two political approaches to the future of governance in Turkey. The first approach, represented by Erdoğan, calls for a narrow and majoritarian understanding of democracy based on the notion of the “will of the people” (milli irade) at the expense of constitutional checks and balances and separation of powers. In return for such an authoritarian form of governance, Erdoğan promises a prosperous Turkey that will grow to be the 10th largest economy by 2023 and become a major regional, if not global power. It is with this in mind that Erdoğan aspires for a powerful presidential system dominated by him alone. The second approach, especially pushed for by İhsanoğlu, advocates the maintenance of the existing parliamentary system and warns that a hybrid system where both the prime minister and the president is elected directly by the people, risks creating instability, tension and polarization within the country. He advocated for a president who would be above party politics and who would focus on protecting freedoms and the rule of law.

Does Erdoğan Have a Mandate?

What will Erdoğan do now? He is confident that he enjoys wide-spread popularity among the masses. However, it is difficult to conclude if the electorate went to the polls on Sunday with a referendum to change the political system in mind. If they did, then they did so with a rather slim margin. Nevertheless, it is likely that Erdoğan will interpret the results of the elections as an explicit approval of his political agenda, and will thus proceed to transform Turkey towards a presidential system. However, a number of challenges will be awaiting his project. The first and immediate challenge will emerge with respect to the next prime minister. As a prominent Turkish columnist put it, Erdoğan will want a prime minister who will always be “one step behind”. But will politics allow for this to occur? Can Erdoğan find a loyal and unquestioning prime minister? The current constitution requires the president to resign his/her political party affiliations. Once he takes up his position as president at the end of August, will he be able to continue to enjoy control over AKP from a distance? This is not a challenge to be taken lightly considering that there will be parliamentary elections in 2015 and the ranks of AKP will be quite restless both in terms of the selection of candidates, as well as the prospects of ensuring a victory at the polls. Lastly, with ISIS’s growing power, political instability in many neighboring countries, a troubled relationship with the European Union and the United States and continued bloodbath in Syria, keeping the Turkish economy on course may turn out to be Erdogan’s greatest challenge. The coming months are going to be critical in terms of whether Erdoğan will overcome these challenges and succeed in transforming Turkey’s political system. The outcome will illustrate if Erdoğan is actually bigger than Turkey or vice versa. However, whatever happens in the next few months, it will largely determine if in 2023, Turkey will celebrate its centenary as a liberal or illiberal democracy. In the meantime, the fact that Erdoğan plans to use a constitution that was drawn up under military tutelage to achieve his presidential ambitions is both ironic, but also not very promising in terms of Turkey’s democracy turning liberal.

Editor's Note: Ranu Nath, the Turkey Project intern in the Foreign Policy Program at Brookings, contributed to this piece.

After decades of neglect, Latin American governments are increasingly focusing on urban slums. What often spurs their policy interventions is a desire to counter violent criminality leaking out from the poor marginalized slums controlled by gangs into the city centers the better-off residents want to keep safe. But tackling the socioeconomic dynamics of slums -- the trap of poverty, discrimination, lack of public goods and social services, and rule by nonstate actors -- is not only complex, but also costly. Governments, elites, and middle classes tend not to want to spend resources on slums. Effective policies have to be sustained for decades, and political will and tax revenues for such complex state-building are frequently scarce.

Focusing on a discreet intervention – providing low-cost housing – becomes tempting. Rarely is it sufficient. The condition of the buildings alone is not what makes a slum a slum. Moving residents from slums to better low-cost housing has encountered systematic challenges not just in Latin America, but also in other places where it has been tried, such as Kenya. Instead, policies need to focus on broader community dynamics, including public safety, legal job creation with sufficient income, human capital development, and robust connectivity of slums to economically-thriving areas, something residents of the latter often don’t want.

Paradoxically, real estate dynamics can have pernicious effects. If broader pacification does take hold and public safety in slums increases, some slum areas can become desirable real estate with vast development possibilities. Developers may well seek to buy the land by offering “better” low-cost housing to slum residents to get them to move. Since many slum residents do not have title to their residences, forced displacement also occurs, albeit under the cloak of being nice to the poor.

Instead of being limited to the provision of alternative residences, policies to address slums need to be about inclusion, economic growth, safety, and connectivity of slums with the thriving city parts, and accountability of city-governance authorities.

This commentary was originally published by the Inter-American Dialogue’s Latin America Advisor. 

Let’s take a moment for a thought experiment. I do this days after more Palestinian attacks on Israelis, including the horrific murder of a mother of six children; soon after Israel announced the expropriation of another 370 acres of land near Jericho; and after Majed Faraj, the Palestinian security chief, announced that Palestinian security forces had intercepted 200 potential terrorist attacks against Israel. The thought experiment focuses on whether the “Plan B” for the Israel-Palestine dispute should be Israel’s annexation of the territories it occupied in 1967 and the extension of full citizenship rights to the Palestinians in those areas.

To be sure, I still count myself among the dying breed of those who believe fervently in the two-state solution—two states living side by side in peace and security, each enjoying sovereignty and political independence in part of the land that both claim as their exclusive national homes. This is still the best, by far, of all possible outcomes of the dispute. This is not to say that the two-state solution is without faults. Thus far, the two sides have not been able to agree on critical details, and there is no guarantee that achieving two states would assure peaceful relations. But the two-state solution, based on partition of the land, appears to offer the best chance for long term peace. I would dump all Plan B’s and C’s in a heartbeat if leadership emerged in Israel and Palestine—and in the United States—that proved willing to move toward a two-state outcome. 

I still count myself among the dying breed of those who believe fervently in the two-state solution.

But hoping for better, stronger, more farsighted leadership is not a substitute for policy. The fact is that both Israel and the Palestine Liberation Organization (PLO) are further today from bringing forth such leaders than at any time before. Even if Benjamin Netanyahu yields the prime minister’s office to another contender, no one in Israel is proposing the kind of far-reaching accommodation toward which Ehud Olmert was heading in 2008. None of Mahmoud Abbas’s likely successors has even articulated a reasonable peace plan. And none of the candidates for U.S. president is likely to be as committed to the search for peace as Barack Obama has been, and even his commitment has fallen far short of what is needed to move the recalcitrant parties toward peace. The sad reality is that politics—not policy, per se—is what blocks progress toward a two-state solution.

The sad reality is that politics—not policy, per se—is what blocks progress toward a two-state solution.

Regional solution?

In the absence of progress toward two states, are there better alternatives than throwing in the towel and looking at annexation as Plan B? The search for alternative Plan B’s is a fool’s errand. Some of those ideas are creative, but none of them will be accepted by both sides. For example, one Plan B variant du jour rests on the premise of a “regional solution”—that is, having Israel and the Arab world reach a comprehensive peace agreement that includes a resolution of the Palestinian issue. Sounds good, except it makes no sense. 

First, Israel has not accepted the Arab Peace Initiative (API) of 2002, the closest the Arab world has come to accepting Israel within the borders of the 1949 armistice line and agreeing to normalize relations with Israel once peace has been achieved. But no Israeli government has liked its terms, especially the paragraph on Palestinian refugees, the notion of a Palestinian capital in Jerusalem, and the API’s insistence on full Israeli withdrawal. Thus, the question to those who propose a regional solution today is whether there is a coalition in Israel ready to use the API as the basis for negotiating a comprehensive peace. I think not.

Second, the Arab world is in no position to deliver on what the API promises. The Arabs have never followed up the API by engaging Israel. And the premise of the API has been that the Arabs will recognize Israel and agree to normalize only after peace is concluded with the Palestinians (and the Syrians and Lebanese)– not a very attractive incentive for Israelis to enter a risky peace process.

[T]he Arab world of 2002, however dysfunctional, was far more stable than the Arab world of 2016.

And third, the Arab world of 2002, however dysfunctional, was far more stable than the Arab world of 2016. The opponents of the two-state solution in Israel point to this when describing the security dangers that Israel would face were it to concede anything now to the Palestinians. Even if a comprehensive solution were to rest on the shoulders of Egypt and Jordan, Israel’s peace treaty partners, would Israeli skeptics truly be assuaged that these countries could assure Israel’s security in the face of continued instability (Egypt) or the impact of refugees and economic distress (Jordan)? Indeed, the idea of a regional or comprehensive solution based on Arab stability today is chimerical. 

Status quo?

The alternatives to the regional idea are equally unrealistic. The idea of confederation rests on the agreement of Jordan (and potentially Egypt) to join a political entity with the Palestinians. However, neither state has indicated any interest in doing so. 

“Maintaining the status quo” is a non-starter, because status quos are never static—as the events of recent years prove, they tend to get worse. How many Intifadas or stabbings will it take for the people of Israel to believe their own security chiefs, who recognize that these actions are born of frustration over the occupation and related grievances? Why should Israelis believe that the majority of Palestinians are interested in peace when Hamas—opposed to Israel’s very existence—still rules Gaza and commands significant popular support, and while the Palestinian Authority is crumbling and hardly represents anyone anymore? And how long will it take Palestinian supporters of armed and violent resistance to recognize that their abortive efforts to destroy Israel and indiscriminate attacks on Israeli civilians are repugnant: targeting civilians is a morally unacceptable tactic for any resistance movement. 

Thus, the idea of “conflict management” or even “conflict mitigation”—staple products of those who support maintaining the status quo until somehow things change—is pernicious, for it rests on an assumption that the rest of us simply don’t understand the conflict.

[T]he idea of a regional or comprehensive solution based on Arab stability today is chimerical.

A futile search for alternatives

And so it is for all other Plan B’s. Several years ago, my Princeton graduate students embarked on an effort to find a viable alternative to the two-state solution; and they told me at the outset that they intended to prove that such an alternative existed. In the end, they failed and returned to the idea that the only viable solution was to partition the land into two states. Others, too, have tried to find alternatives, and some retain the hope that their policy proposal might win the day. I wish them well—for I really do believe in peace, whether it’s via two states or otherwise. But I have no confidence they will succeed.

[T]he idea of “conflict management” or even “conflict mitigation”—staple products of those who support maintaining the status quo until somehow things change—is pernicious, for it rests on an assumption that the rest of us simply don’t understand the conflict.

And so we are back to the thought experiment. This would take as a starting point what Israeli Minister Uri Ariel told my students several years ago: we (Israel) have won, and the land of Israel is ours. Under this scenario, Israel would:

• Formally annex the territories it occupied in 1967, basing its legal argument on its belief that these are “disputed” rather than “occupied” territories. 
• In connection with this act of annexation, Israel would offer full citizenship rights to all the Palestinians living in the territories. While Israel would probably want to include only the West Bank in this arrangement, excluding Gaza would make it impossible to secure any support internationally, in that Gaza is as much a part of Resolution 242 as is the West Bank.
• Those Palestinians who accept citizenship would then enjoy equal rights with all other Israelis; those Palestinians who reject citizenship would be offered permanent residency, a status that would include certain rights and privileges but not full citizenship rights (for example, voting in national elections). 
• Israel would then approach the United Nations Security Council to argue that these measures constituted an act of self-determination, and that the outcome represented an end of the conflict in accordance with Resolution 242. I am not a lawyer and I assume that many—including Palestinians and Arabs—would dispute this Israeli argument. But the process would change the status quo fundamentally and offer a real alternative to the two-state solution.

Could this work, and is it a real Plan B for the conflict? This is but a thought experiment. I suppose most Israelis will hate this idea for it exposes the most significant weakness of the Israeli right wing and the settlements movement, namely that it undercuts fundamentally the idea of a permanent Jewish majority state. Similarly, most Palestinians will also hate this idea because it forecloses the possibility of a real act of self-determination culminating in an independent state and forces Palestinians to confront the emptiness of the slogans that their leaders have employed over the years in the context of the Arab-Israeli dispute. 

The thought experiment is thus not very sound. Perhaps, then, it will scare everyone enough for leaders to get serious about peace.

President Paul Kagame of Rwanda has been a very effective leader for his small Central African nation. First, he led the Rwandan Patriotic Front when it ended the 1994 genocide and brought a measure of stability to a land that had just suffered a terrible holocaust. Then as vice president until 2000, and president since then (being formally elected under the current constitution twice, in 2003 and 2010), he has helped usher in remarkable economic growth and human development. Many Western leaders have personally offered high praise for Kagame—calling him a “visionary” and among “the greatest leaders of our time”—and have marshalled considerable resources to aid in Rwanda’s post-genocide development.

But his leadership has not been without controversy. There have been some excesses and allegations of abuses of political opponents during the Kagame years. And his abuses of power have arguably increased in recent years—suggesting that, whatever his past accomplishments, his real motives for wanting to stay in office may have less to do with a call to service and more with his increasingly autocratic tendencies.

On balance, though, he has been an effective leader who has saved countless lives. Does that legacy justify his seeking what would be a third seven-year term in the nation’s 2017 presidential elections? Rwandan voters choose today whether to approve a constitutional amendment—already passed by the Senate—that would allow President Kagame another stint in power.

Murky waters 

Kagame has been for his nation arguably what Franklin D. Roosevelt was for our own, given the nature of the emergencies facing Rwanda that led to his ascent to power. And we elected FDR four times. To be sure, after the fact, we thought better of it and decided never to allow that again. But we did it. George Washington chose not to run for a third term, but he was blessed with a legion of founding fathers of remarkable ability all around him, and was succeeded by Adams and Jefferson. Lincoln never had the chance to consider a third term—and maybe we would have been better off in the day if he could have served for many years. 

I am not comparing Kagame with Washington, Lincoln and Roosevelt to assert that he belongs in their league. But to dramatize the issue, suppose that he is just as important to his nation as those three gentlemen have been to ours. Would that justify another term? Putting the question this way muddies the waters, but I think it is the only fair way to address the issue. 

More often than not, of course, two terms is more than a given leader deserves. Witness President Hamid Karzai in Afghanistan, or Pierre Nkurunziza in Burundi who just garnered a third term amidst much violence, or Joseph Kabila next door in the Democratic Republic of Congo who is due to step down next year. Indeed, Kabila may or may not do so—and it would be unambiguously bad for his country and American interests if he stayed past that date. All the more reason that, for consistency, we should want Kagame to step down—otherwise leaders like Kabila could use his behavior to excuse and justify their own attempts to hold onto power indefinitely. 

But is it really so simple in his case, and is it really such an easy call? Another tough case is President Yoweri Museveni of Uganda, who has brought a degree of peace and development to his nation after the Amin and Obote periods—but who is now in his sixth term. Perhaps once in a blue moon, a nation can benefit from multiple terms in office for a particularly gifted leader at a particularly fraught and important period in a country’s history.

Mr. Kagame: Prove us wrong 

Ultimately, institution building and the establishment of solid democratic procedures are the only sure guarantor of long-term national stability. Kagame is only 58, but he will not live forever. At some point, Rwanda really will need a succession strategy. 

So I hope Kagame chooses not to run again. But if he does run, we need to pressure him to justify it in terms of the legacy he is helping to create so that Rwanda will have future leaders and institutions that can keep the country moving forward.

Ultimately, institution building and the establishment of solid democratic procedures are the only sure guarantor of long-term national stability.

Thus, if Kagame does persuade the public to change the constitution and does win a third elected term, we should cut aid (though not impose stronger measures like trade sanctions) to show our disapproval. That is, we should cut aid unless he uses the third term—which must certainly be his last—to show his countrymen and the world that in fact his rule is about improving his country, not turning it into another fiefdom run by an African strongman. 

For us, taking this approach will necessitate creating a method for evaluating whether Rwanda’s institutions gradually move closer to true democracy in the years ahead so that, whatever might happen with a third term, a fourth term becomes entirely unjustifiable. Presidents for life are bad for their countries while they are alive, and they are dangerous for their countries when they die. Kagame needs to understand this basic fact before he becomes the next world leader who starts out a noble man and then allows power to corrupt him.

More than two decades after the genocide, Rwanda is ready for a more vigorous democratic process—and any responsible leader should be building up the institutions to prepare for that eventuality. Stronger political parties that do not have exclusive ties to just one ethnic group, clear laws constraining and regulating the nature of political competition so that it is inclusive and nonviolent, strong courts—these are the essence of an established democracy, and Rwanda needs them.

On Friday, June 3, S&P Global Ratings announced that it would not downgrade South Africa’s credit rating to junk, letting South Africa breathe a sigh of relief. The outlook, however, remained negative. While some experts were confident that the rating would not be cut, most continued to warn that future economic or political turmoil could spark a downgrade later this year. The South African Treasury agreed, but remained positive releasing a statement saying:

Government is aware that the next six months are critical and there is a need to step up the implementation [of measures to boost the economy] … The benefit of this decision is that South Africa is given more time to demonstrate further concrete implementation of reforms that are underway.

South Africa, whose current rating stands at BBB- (one level above junk), has been facing weak economic growth—at 1 percent—over past months. The International Monetary Fund has given a 2016 growth forecast of 0.6 percent. Many feared that a downgrade could have pushed the country into a recession. Borrowing by the government would have also become more expensive, especially as it tackles a 3.2 percent of GDP budget deficit for the 2016-2017 fiscal year.

Other credit ratings agencies also are concerned with South Africa’s economic performance. Last month, Moody’s Investors Service ranked the country two levels above junk but on review for a potential downgrade, while Fitch Ratings is reviewing its current stable outlook and BBB- rating.

For South African Finance Minister Pravin Gordhan’s thoughts on the South African economy, see the April 14 Africa Growth Initiative event, “Building social cohesion and an inclusive economy: A conversation with South African Finance Minister Pravin Gordhan.”

This week, the Extraordinary African Chambers—located in Dakar and established in collaboration with the African Union—sentenced former Chadian President Hissène Habré to life in prison. Habré seized power in 1982, overthrowing then President Goukouni Oueddei. He fled to Senegal in 1990 after being ousted by current Chadian President Idriss Deby. After he fled to Senegal, the African Union called on Senegal to prosecute Habré. In 2013, the Extraordinary African Chamber was created with the sole aim to prosecute Habré. The Habré trial is the first trial of a former African head of state in another African country.

Habré faced a long list of charges including crimes against humanity, rape, sexual slavery, and ordering killings while in power. According to Chad’s Truth Commission,  Habré’s government murdered 40,000 people during his eight-year reign. At the trial, 102 witnesses, victims, and experts testified to the horrifying nature of Habré’s rule. His reign of terror was largely enabled by Western countries, notably France and the United States. In fact, on Sunday, U.S. Secretary of State John Kerry admitted to his country’s involvement in enabling of Habré’s crimes. He was provided with weapons and money in order to assist in the fight against former Libyan leader Moammar Gadhafi. Said resources were then used against Chadian citizens.

Also this week, Simone Gbagbo, former Ivorian first lady, is being tried in Côte d’Ivoire’s highest court— la Cour d’Assises—for crimes against humanity. She also faces similar charges at the International Criminal Court though the Ivoirian authorities have not reacted to the arrest warrant issued in 2012. In March 2015, Simone Gbabgo was sentenced to 20 years in jail for undermining state security as she was found guilty of distributing arms to pro-Laurent Gbagbo militia during the 2010 post-electoral violence that left 3000 dead. Her husband is currently on trial in The Hague for the atrocities committed in the 2010 post-election period.

On Monday, May 30, South African chemical and energy company Sasol Ltd announced that Mozambique’s ongoing debt crisis and continuing low global gas prices would not slow down its Mozambican gas project. The company expressed confidence in a $1.4 billion processing facility upgrade stating that the costs will be made up through future gas revenues. In explaining Sasol’s decision to increase the capacity of its facility by 8 percent, John Sichinga, senior vice president of Sasol’s exploration and production unit, stated, “There is no shortage of demand … There’s a power pool and all the countries of the region are short of power.” In addition, last week, Sasol began drilling the first of 12 new planned wells in the country.

On the other hand, on Monday The Wall Street Journal published an article examining how these low gas prices are stagnating much-hoped-for growth in East African countries like Tanzania and Mozambique as low prices prevent oil companies from truly getting started. Now, firms that flocked to promising areas of growth around these industries are downsizing or moving out, rents are dropping, and layoffs are frequent. Sasol’s Sichinga remains positive, though, emphasizing, "We are in Mozambique for the long haul. We will ride the waves, the downturns, and the upturns."

I appreciate this opportunity to share my thoughts about ways that retirement plans can provide clear, concise and objective information to participants that enables them to make appropriate decisions.  However, I would go beyond that to provide information that also motivates employees towards actions that will prove to be in their long-term best interest.

The shift from traditional pensions to the current defined contribution system places most of the responsibility for making decisions on the participant.  Automatic enrollment and similar features assist them by combining several formerly potentially complex decisions about whether to participate, how much to save and what investment vehicle to use into one question that the employee can effectively answer by doing nothing.  While the result may not be optimal in all situations, it is certainly better for the saver than not saving at all or waiting until he or she has all of the answers – a day that for many may never come.  For these reasons, automatic enrollment and escalation are extremely popular with both those who accept the automatic choices and those who opt out.

Unfortunately, at this time, automatic mechanisms are not available for every decision that an employee might need to make between starting to save and retirement.  Over time, additional mechanisms that are in development will further simplify these plans, but they are not available yet.  Today’s automatic mechanisms also do not necessarily affect the attitudes that participants may have about their saving balances and how they might be used.  To assist in these areas, effective participant communication is needed.

In order to be effective, communications and notices to employees must have a consistent message that regularly appears throughout an employee’s career.  No single notice, no matter how effectively worded or how timely it is provided, will be as effective as a regular series of messages.  And in order to be effective, notices and statements need to be geared to the needs of the participant rather than to provide legal cover to the plan sponsor for any unanticipated situation.  This requires that they be short, clear, simple and to the point. 

This need for regular communication as opposed to a single notice or series of notices is especially true for withdrawal options.  Whether the participant is leaving the employer or retiring, they need to have key information well in advance of when it is needed.  Otherwise, the saver may be influenced by others who are not acting in their best interests or make a decision based on advice from well-meaning, but poorly informed family friends.

An effective participant education plan for lifetime plan participation and effective withdrawal options should have at least three separate parts, which are detailed below.  These include effective information contained in the quarterly statement; notices at the time an employee leaves the plan due to a job change, and a pre-retirement education campaign. 

While all three must have consistent messages, they should also be tailored for specific circumstances.  What follows is a general discussion, as effective model forms require field-testing in focus groups and similar settings.  Unfortunately, forms developed by financial professionals with a deep understanding of key issues often gloss over important background information or have technical wording that confuses non-professionals. 

Another problem with many individual statements and notices is that they contain too much information.  The professionals who developed them recognize the limitations of projection models and seek to compensate by providing a range of results using differing assumptions.  Unfortunately, this either further confuses the reader or appears as a dense block of type that is usually completely skipped.  It is far better to provide a simple illustration with clear warnings of its limitations than to flood the employee with complex information that will be ignored.

The most important participant education tool is the quarterly statement they receive.  Properly structured, these statements can set the stage for more specific notices before an employee leaves the employer due to either a new job or retirement.  Today’s statements are often too long and inadvertently cause the employee to focus on account balances rather than seeing the retirement plan as a source of future income.  In many cases, they also fail to note that income from the plan should be added to Social Security for a better estimate of total retirement income.  Two major innovations would be to add both income illustrations and to combine 401k statements with the existing Social Security statement.

Income illustrations: Most of today’s quarterly statements focus almost exclusively on the amount that an individual has saved and how much he or she has gained or lost in the previous quarter.  This focus damages the ability of a participant to see the plan as anything other than a savings account.  Faced with a lump sum of retirement savings that may be a much higher amount than an individual has ever had and little or no practical experience about how to translate that amount into an income stream, it would be very easy for a worker to assume that he or she is much better prepared for retirement than is actually the case.  An income illustration would help savers to make earlier and better decisions about how much they may need to save and how best to manage their retirement assets.

The illustrations should also encourage participation both by including both current and projected balances and by showing the additional income that could be expected if the saver slightly increased his or her contributions. 

Including income illustrations for both current and projected retirement savings balances would have a greater incentive effect than just including current balances.  For younger employees, the very small amount of income that would be produced from their current retirement savings balances may discourage them from further savings and thus have the opposite effect of what is in their long-term best interest and the objective of this disclosure.  Including an income illustration for projected balances that assumes continued participation provides a clearer picture of the extent to which the amount that the individual is saving will meet his or her retirement income needs.

Studies show that an illustration of the additional income that can be derived from a higher level of saving is likely to stimulate the participant to increase his or her savings rate.  Plan sponsors should be encouraged to also include balance projections and income illustrations that show how much retirement income an individual would have if they modestly increased the proportion of their income that they contributed to their retirement savings plan.  For instance, in addition to the income illustrations based on their current balances and projected balances assuming their current savings rate, there might be an illustration based on saving an additional one percent of income and another three percent of income. 

Combining Social Security Statements with Quarterly Statements: As a further way of moving the focus of quarterly statements away from lump sums and investment returns and towards retirement income, an accurate estimate of projected Social Security benefits could be added to at least one annual quarterly statement containing an income illustration.  Some 401(k) providers already simulate Social Security benefits and provide this information to account owners, but these providers lack the income and work history data to make a truly accurate projection.  Collaboration between SSA and 401(k) plan administrators could result in adding information from the once annual Social Security statement to at least one 401(k) quarterly report each year.

Two sets of concerns about using Social Security information would need to be addressed: concerns about privacy and concerns about accuracy. Previous discussions of similar proposals failed because of privacy concerns, as many individuals do not want employers to have access to their Social Security information. Account holders’ privacy is a concern for 401(k) providers too, and providers go to great lengths to protect the confidential data in the quarterly statements. To assuage concerns about the data from SSA, Social Security data could be provided directly to 401(k) administrators rather than employers and included on an annual 401(k) statement only if the administrators meet certain SSA-developed privacy standards. Individuals could have control over this decision through the ability to opt in to the service or to opt out, if the service were automatic. This should preserve individual choice and satisfy persons especially concerned about privacy.

To ensure accuracy and consistency, income illustrations of balances in the 401(k) and SSA projections would need to be produced using compatible methodologies that allow the projected monthly income estimates to be combined for a complete picture of estimated retirement income. This is not a terribly difficult problem.  This reform will give people important information about how to plan their futures. They desperately need this information, and providing it should be fairly simple and cost-effective.

Using an Enhanced Statement as a Base for Additional Guidance and Education

An enhanced quarterly statement with a consistent message that retirement plan participation is intended as retirement income will set the stage for more effective education when the participant leaves the employer.  The current statement format that focuses on aggregate savings amount and the performance of investments sends the message that the balances could be used for other purposes.  This encourage leakage when employees change jobs and may leave the impression that the savers has sufficient resources to use part or all of that money for other purposes.

While the information on investment returns is important and should remain on the statement, it should be de-emphasized, with the focus moving to retirement income that it can provide.  As an aside, let me be clear that I do not favor eliminating the ability to withdraw savings before retirement in the event of an emergency.  For one thing, doing so would reduce participation, and could hurt vulnerable populations that have no other major source of savings.  However, the purpose of the quarterly statement should be to inform savers of their future retirement income, and its orientation should be towards that goal.

Several studies show that the biggest source of leakage occurs when employees change jobs.  Part of the reason for this loss of savings may be the way that employers handle the discussion about retirement assets upon separation.  A discussion that is centered on the open question of what should we do with your money may encourage savers to simply ask for their money as a lump sum.  This is especially true if the participant is not informed of the tax consequences of an early withdrawal and the potential effect on future retirement income.

On the other hand, if the participant has received a consistent message that the account is for retirement income, and is informed of the potential consequences of withdrawing the money, they would be less likely to take the funds and more likely to leave the money in the current employer’s plan or to roll it into a plan offered by the new employer or an IRA.  Of course, part of this decision would be determined by whether the current employer is willing to allow the money to remain in their plan or if they would prefer it to be moved to another location.

As a side note, the process of combining retirement savings from one employer to another would be much easier if there is a simple mechanism that can be used to make such transfers.  As I can testify from personal experience, it can be extremely complex to roll retirement money from one employers’ plan to another’s even for those of us who work in this field.  Plan administrators from both the sending and receiving plans make this process overly difficult in part because one party needs to know if it is a legitimate transfer as opposed to a withdrawal, and the other needs to know that the money it is receiving has the proper tax status.  While it is beyond the scope of today’s hearing, it is definitely worth the effort for regulators and if necessary legislators to simplify the process and encourage automatic rollovers between employers.

Contents of Model Notices for Participants Changing Employers:

Given this background, a disclosure notice provided to employees who are moving to another employer should include specific information about several topics.  However, a one-shot notice will be far less effective than an educational campaign that includes information about how poor decisions when changing jobs can adversely affect retirement security.  This information should not be limited to when an employee departs; it should also be included in regular communications.

When an employee moves to another employer, he or she needs to know:

• Ability to retain fund in the account or roll them into another account: The employee should be informed that moving the money to another retirement account, ideally that of the new employer, is the best option.  He or she should also be informed if the current plan is willing to continue to hold the money.  Information about how to effect the rollover and/or a third party willing to assist with the transaction can be provided on a separate sheet.
• Tax consequences of withdrawing the money: An early withdrawal from a traditional account is usually subject to both income taxes and a penalty.  The employer should be informed of both the combined marginal rate and the total amount of retirement money that will be lost by taking the money out of the system.
• Effect on retirement security of withdrawing the money: Using an income projection, the participant should be shown that a withdrawal will potentially reduce their income at retirement by a certain dollar amount.  They should also be shown how long it will take to replace that amount of saving.
• Potential costs of moving to the wrong IRA provider: Moving from a relatively low administrative cost employer plan into an IRA with higher fees could have a major effect on the eventual retirement income.  Participants should be informed of this and offered a separate sheet discussing how to tell if an IRA provider has appropriate fee levels.  This can ge general information rather than tailored to the specific employee.
• Continuing to save at the same rate in the new employer’s plan: Finally, the employee should be encourage to start saving in the new employer’s plan at least at the same level that they have been contributing to the plan of the current employer.

These disclosures do not need to be extremely detailed or presented in legal terms.  If the participant cannot immediately understand what is being said, the information is essentially useless.  To relieve employers’ worry about legal liability, a model form that protects them from liability would be worth creating.  However, this information is important, and could have a major effect on whether the money leaks out of the retirement system or remains in it.

Finally, the term “model form” does not need to mean a single form.  In cases where a great deal of information needs to be available, one form could summarize the situation, while others provide more detailed information about certain subjects.  However, this does not mean that these other forms should be written in long, legalistic language.  Both the summary form and others should be in clear, concise language with appropriate graphics.

Decisions about how to translate retirement savings into an appropriate income strategy can be among the most complex that an individual faces.  Even those of us who work in the field can find the decision about whether to use an annuity or longevity insurance to supplement other strategies daunting.  This confusion is only made worse by the focus of today’s quarterly statements on lump sums and investment performance.

Ideally, retirement income disclosures would be combined with an automatic enrollment-like withdrawal strategy that the employee could adopt simply by not opting out.  Unfortunately, while this is the subject of much research by both many groups and companies, it is not currently available.

To be most effective, education on retirement income strategies should not be delayed until the participant reaches a specific age.  Rather, it should begin with the design of the quarterly statement and continue with regular discussions of how to create a retirement strategy throughout an employee’s career.  Even if the participant does not pay much attention for many years, the information will form a backdrop that will be recalled when he or she starts to think about retirement.

Because retirement income strategies are complex, the notices should include both a short summary sheet and individual longer notices on specific topics.  Covered information should include:

• An overview sheet with general information: A general discussion of how to think of retirement income as well as the general elements that can be combined to provide an appropriate amount of secure income.
• The role of Social Security: Social Security pays an inflation-indexed annuity that serves as the basis for retirement income strategies.  Employees should be given information about how much they can expect, how to apply for benefits, and the value of delaying their benefits. 
• What income options are in the employer plan: If the employer plan offers any income options, they should be disclosed and explained.  If not, the employee should be informed that they would need to go outside the plan and given advice on how to select a provider (see below).  This would include the potential problems of turning the money over to a broker to manage.
• How long an individual is likely to live: Most people have no idea how long they could live in retirement.  A brief discussion of the average longevity for their specific gender and birth cohort along with a notation that average longevity means that half of them will live longer would be helpful.
• Longevity insurance and how to use it:  Longevity insurance can be a valuable part of a retirement income plan.  How to think about it and choose a policy would be valuable.
• Using immediate annuities and how to buy one: This is a separate discussion from longevity insurance.  While few of today’s retirees may be interested in immediate annuities, information on how to select one should be included.
• Positives and negatives of a phased-withdrawal system: Most retirees will use a phased-withdrawal system for at least some of their retirement income.  This would briefly explain the value of one, the drawbacks of withdrawing a set percentage of savings each year, and how to choose a plan.
• How to choose a financial advisor: Hopefully, may employees will seek the advice of a professional.  If the employer does not provide access to an adviser, tips on how to select one and what questions to ask would be useful.

Again, this is complex information, and employers should also be encouraged to sponsor seminars and counseling sessions for retiring employees.  As mentioned repeatedly, the value of this information and the employee’s receptivity to it would be much greater if it has been part of a regular communications strategy that is simple and accessible.

The contents of individual notices are important, but they will be much more effective if they are placed in the context of a communications strategy with a consistent message.  Making the focus of participant education the fact that the purpose of saving in the plan is to produce retirement income rather than lump sums will help participants understand the importance of rolling over their money when changing employers and of developing a sound income strategy when they retire.

The Brexit vote has stunned us. It has shaken us. It has forced upon us a set of dreadful questions none of us ever wished answers were required for:

• How do you disarticulate deeply integrated economies? How do you prevent the rancor of the U.K.'s divorce from the EU wreaking more havoc, not only in Europe but in the rest of the world? The divorce metaphor is apt here as it signals the treacherous waters ahead when the feeling of betrayal and the temptation of revenge may result in a misguided punitive approach to separation. Let's not forget that almost half of U.K.'s referendum voters chose "remain." Let's not forget that the youth in the U.K. overwhelmingly chose the EU for their future. EU leaders therefore face the ultimate test of leadership. In negotiating exit terms they must strengthen this constituency for internationalism. The U.K. needs committed internationalists. We all need them.
• How do you prevent rising nationalism from dialing back globalization? Is the "Great Convergence" at risk? In the past few decades, developing countries have emerged into the international trading system, and in opening their economies they have lifted millions from abject poverty. Will this future be off-limits to the next round of poor nations seeking to avail themselves of the opportunities of the international marketplace? Has globalization already peaked and are we to be the unlucky generation that lives through the tumultuous process of retrenchment? Are we to feel firsthand the dread that the generation of a century ago experienced when they all suffered from beggar-thy-neighbor policies?
• Are we next? Are the forces of economic nationalism and nativism that drove the referendum outcome in the U.K. unstoppable elsewhere? Will they decide the outcome of the American presidential election this fall? And if so, what happens to the international economic order?

These are still imponderable questions, but I would venture two answers: Brexit is not the final indictment of globalization, and our futures are not yet destined to be ruled by the politics of grievance.

The United States need not become the next domino to succumb to the harmful influence of populism. The parallels in the anti-globalization campaign on both sides of the Atlantic are of course unnerving:

• Anti-elitism: Fueled by the sense of economic disenfranchisement of older white voters who feel that a future of "splendid isolation" is possible.
• Nationalism: Driven by a desire to "take back" our country.
• Nativism: Spurred by strong anti-immigration feelings and rejection of a multicultural polity.

But the differences are also striking, especially when it comes to the issue of trade which commanded so much attention during both the Brexit campaign and the American presidential nomination debates. In reading the "Leave" campaign's statement on trade policy, you will not find:

• The rejection of trade deals for "killing jobs" with special blame placed on developing countries (aka China) for inflicting a mortal wound on manufacturing prowess;
• The promise to impose punitive tariffs on major trading partners even at the risk of initiating a trade war;
• The call for a boycott of firms that relocate part of their production overseas.

Brexit then is not an endorsement of the Trump brand of predatory protectionism.

Instead, what the Leave campaign offered on trade policy are heaps of wishful thinking and hidden truths. It sought to downplay the importance of the EU market to U.K. producers in order to justify setting its sights on other horizons. It promised to open up trade opportunities and job growth by negotiating trade deals with emerging economies such as China and India. And it confidently stated that trade links with the EU could be restored through a U.K.-EU trade deal that would mirror what countries like Norway have done. But this optimistic prognosis left out a lot. For starters, a future U.K.-EU free trade agreement will most likely yield pared-down benefits. Norway gained access to the single market by agreeing to free movement of labor that Brexiters vehemently reject. Moreover, the U.K. cannot chart its own course on trade policy until its separation from the EU is complete. Restructuring U.K.'s trading relations will take years and the results are hard to predict. But the costs of uncertainty are immediate as companies and investors will recalibrate their strategies without waiting for a protracted process of trade negotiations.

Brexiters struck a xenophobic note, but did not produce an overtly protectionist manifesto. Yet, their success at the ballot did deliver a major blow to economic internationalism. Trumpism is both xenophobic and protectionist, and were it to prevail in the November election, its negative impact on globalization will be vastly more profound. But the die has not been cast, and there are sound reasons to doubt a Trump victory.

If we are to prevail in overcoming the politics of grievance, we must first reckon that populism did not materialize from thin air. It is based on a fact: As globalization intensified during the past two decades, the middle classes in the industrialized world experienced stagnant incomes. The inward push is enabled by the manipulation of this fact: Offering trade as an easy scapegoat for a vastly more complex set of factors producing economic disparities (such as technological change and political decisions on taxation, education, and safety nets). And this populism is based on a false promise—that "taking control," i.e., taking our countries out of the existing trading regime will make those left behind better off. Its one unmistakable deliverable will be to make all of us worse off.