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This week, the richest business leaders and investors from around the world will gather in Davos, Switzerland, for the annual meeting of the World Economic Forum. In keeping with tradition, a small portion of the agenda will be devoted to global development and the plight of people living at the other end of the global income distribution.

Philanthropy is one way of linking the fortunes of these disparate communities. What if some of the mega-rich could be persuaded to redistribute their wealth to the extreme poor?

This question may feel hackneyed, but it deserves a fresh hearing in light of a dramatic reduction in the global poverty gap over the past several years (Figure 1). The theoretical cost of transfers required to lift all poor people’s income up to the global poverty line of $1.90 a day stood at approximately $80 billion [1] in 2015, down from over $300 billion in 1980. (Values expressed here are in 2015 market dollars.)

Source: Authors’ calculations based on OECD, World Bank

This reduction can be unpacked into two parts. The first is a steep decline in the number of people living below the global poverty line. This is increasingly recognized as one of the defining features of the era. A U.N. goal to halve the poverty rate in the developing world between 1990 and 2015 was nearly achieved twice over. The second and lesser-known factor is the shrinking average distance of the world’s poor from the poverty line. In 1980, the mean daily income of those living below $1.90 was $1.09. In 2012 it was 25 cents higher at $1.34. (Values expressed here in 2011 purchasing power parity dollars.)   

Despite this good news, global poverty still demands attention. Hundreds of millions of people continue to suffer this most acute form of deprivation. In several countries, the prospects for ending poverty over the next generation, in line with a recently endorsed successor U.N. goal, appear challenging at best.

Figure 1 illustrates that in 2006, global aid flows exceeded the cost of the global poverty gap for the first time. This suggests that the elimination of extreme poverty should be possible simply through a more efficient allocation of aid. However, this confuses foreign aid’s goals and functions. The bulk of official foreign aid is used in the provision of public goods, such as physical infrastructure and strengthening institutions. Only 2 percent is directed to social payments and their administration. If the elimination of extreme poverty is to be achieved through targeted transfers, it depends on sources other than foreign aid.

The main source of transfers to the poor is welfare programs run and financed by developing countries themselves. These social safety nets have emerged as an increasingly prominent instrument in the toolkit of developing economy governments. Eighty-three percent of developing economies employ unconditional cash transfer programs, although many are small in scale. Several countries are in the process of building the apparatus for more accurate targeting and authentication through the assembly of beneficiary registries and the rolling out of identity programs. In at least 10 developing countries, social safety nets have succeeded in establishing a social floor by lifting all those people under the poverty line up above the threshold. In the vast majority, however, safety nets are insufficiently targeted or generous for that purpose, reflecting not only resource constraints, but also political choices that can be resistant to change.

A complementary approach is to consider the role of private mechanisms and wealth. NGOs were among the original pioneers of cash transfers in the developing world. More recently, the NGO GiveDirectly has designed a compelling new method of charitable giving that sends money directly to the poor using digital monitoring and payment technology. Its approach has received strong endorsements from independent charity assessors and has been validated by impact evaluations. Yet the scale of its existing donations remains tiny relative to the global poverty gap.

This is where Davos’s global elite could come into play: What difference could a philanthropic donation from the world’s richest people make?

To explore this question, we begin by identifying those developing countries that are home to a least one billionaire. (Our analysis is restricted to billionaires by data, not by the potential largesse of the world’s multi-millionaires. We focus our attention on billionaires in the developing world given the traditional focus of philanthropy on domestic causes.) Let’s assume that the richest billionaire in each country agrees to give away half of his or her current wealth among his or her fellow citizens, disbursed evenly over the next 15 years, roughly in accordance with the Giving Pledge promoted by Bill Gates. That money would be used exclusively to finance transfers to poor people based on their current distance from the poverty line. Transfers would be sustained at the same level for the full 15-year period with the aim of providing a modicum of income security that might allow beneficiaries to sustainably escape from poverty by 2030.

Table 1 summarizes the key results. In each of three countries—Colombia, Georgia, and Swaziland—a single individual's act of philanthropy could be sufficient to end extreme poverty with immediate effect. Swaziland is an especially striking case as it is among the world’s poorest countries with 41 percent of its population living under the poverty line. In Brazil, Peru, and the Philippines, poverty could be more than halved, or eliminated altogether if the billionaires could be convinced to match Mark Zuckerberg’s example and increase their donation to 99 percent of their wealth.

Source: Authors’ calculations based on Forbes, International Monetary Fund, PovcalNet, and the World Bank. Poverty rates post-transfer calculated based on average distance of the poor from the poverty line.  

In other countries—Nigeria, Tanzania, Uganda, and Angola—the potential impact on poverty is only modest. A number of factors account for differences between countries, but two factors that penalize African countries are especially noteworthy. First, the depth of poverty in Africa remains high, with 15 percent of the population living on less than $1.00 a day; and second, Africa has relatively high prices compared to other poor regions, which means more dollars are required to deliver the same amount of welfare.  

For those nations that have more than one billionaire, an alternative scenario is that the country’s club of billionaires makes the pledge together and combines resources to tackle domestic poverty. This would end poverty in China, India, and Indonesia—countries that rank first, second, and fifth globally in terms of the absolute size of their poor populations. The last two columns of Table 2 describe the results.

Table 2. The potential impact on poverty of collective billionaire giving pledges

Source: Authors’ calculations based on Forbes, IMF, PovcalNet, and the World Bank. Poverty rates post-transfer calculated based on average distance of the poor from the poverty line.

This exercise is of course laden with simplifying assumptions. [2] It is intended to provoke discussion, not to provide definitive figures. Moreover, it is open to debate whether transfers represent the most cost-effective way of sustainably ending poverty, the extent to which transfers ought to be targeted, the efficacy of building private transfer programs alongside public safety nets, and whether cash transfers represent the most appropriate use of billionaires’ philanthropy.  

What is less contestable is that a falling global poverty gap presents an opportunity for more systematic efforts for poverty reduction. This raises the question: How low does the poverty gap have to fall before we explicitly design programs to bring the remaining poor above the poverty line? We would argue that we are already beyond this point, not least in countries that remain a long way from ending poverty. Were a billionaire at Davos to commit to using his or her wealth in this fashion, it could trigger a powerful demonstration effect of innovative solutions—not just for other billionaires, but for countries that are currently at risk of being left behind.

[1] The cost of the global poverty gap in 2015 is an overestimate compared with the World Bank’s tentative poverty estimate for the same year. This is due to a different treatment of Nigeria. For this exercise, we rely on data from the 2009/10 Harmonized Nigeria Living Standards Survey reported in PovcalNet, despite its well-documented problems, whereas the Bank draws on the 2010/11 General Household Survey.

[2] Simplifying assumptions include: zero administrative costs in identifying the poor, assessing their income, and administering payments with no leakages, or no portion of those costs being borne by billionaires; the efficacy of administering miniscule transfers to those who stand on the margin of the poverty line; and no change in the cost of closing the poverty gap in a country over time, whether due to population growth, an increase or decrease in poverty, or a change in prices relative to the dollar.   

Introduction

Ohio has already taken important steps to address the state’s ongoing foreclosure crisis, yet the crisis continues, causing distress for thousands of families and individuals, and destabilizing cities, towns and neighborhoods across the state. Therefore, the state, its local governments and private stakeholders need to do still more to deal more effectively with the crisis and its impacts on the state’s housing stock, cities and neighborhoods.

What is often termed the “foreclosure crisis” is actually a multi-dimensional crisis, in which the collapse of the housing bubble, the devastation caused by the lax and often irresponsible credit practices that accompanied and perpetuated that bubble, the resulting freeze on commercial and consumer credit, and the worldwide recession are interwoven, and can only with great difficulty be untangled. In Ohio, those forces are further exacerbated by profound changes to the state’s historical economic underpinnings. Ohio cannot solve the crisis by itself, but it can significantly mitigate its impact on people, neighborhoods, and towns and cities. These mitigating efforts will also help preserve the value of homes and neighborhoods in the state, and place Ohio in a stronger position to benefit from the future economic recovery.

The paper begins with a short summary of current conditions and the actions the state has already taken to address the wave of foreclosures, followed by a discussion of areas for future action. This discussion will address mitigating both the individual and community impacts of foreclosure, but will give particular emphasis to the critical issue of softening the blow of foreclosure on communities, which up to now has been less of a focus for state action.

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In recent months, we’ve heard a lot about the tech industry's gender gap. According to the Bureau of Labor Statistics, women represent just 19.7 percent of software developers, an occupation with a median salary of over $92,000 a year.

Women’s underrepresentation in these and other well-paying tech jobs is a major concern given that women still earn only 78 cents for every dollar earned by men. Meanwhile, labor shortages in software development and other high-skill occupations have tech companies worried about whether they’ll be able to grow as fast as they’d like.

Seattle’s Ada Developers Academy takes aim at both challenges. This highly selective, tuition-free program prepares women students to be full-stack software developers, meaning that they can do both front-end—what the user sees—and back-end—what’s behind the scenes that makes everything work properly. Prior experience in tech isn’t necessary to earn a spot at Ada: The main prerequisite is a strong desire to pursue a career in software development.

Ada combines six months of intensive classroom instruction with a six-month internship at a sponsoring company so that students have the opportunity to apply what they’ve learned in real-world situations. Sponsoring companies—which currently include Nordstrom, Redfin, Zillow and Expedia, among others—also benefit from the internships, which provide direct access to prospective employees at a time when proficient software developers can be hard to find.

If Ada’s first cohort is any indication, the academy’s combination of rigorous in-class training and hands-on work experience has tremendous value on the job market. All 15 members of the inaugural class got job offers for software developer positions before they graduated from the program.

The campaign for the 2016 Presidential nominations has shaken the political kaleidoscope, and the pieces are still moving. The populist surge of both Donald Trump and Bernie Sanders has torn the carefully crafted campaign strategies of other candidates into tatters. Populism is trumping realism. Political nostrums – like how Evangelical Christians or women will vote – are being challenged almost daily. The political establishment looks like the Wizard of Oz, with feeble powers inside giant machines.

There are, then, many losers in 2016. But perhaps the biggest loser of all is public policy. Policy used to matter quite a lot; the very term “policy platform” implied a solid structure, on which candidates would stand. Today, the strength of a candidate’s policy prescriptions and the strength of their political support seem unrelated. Or if there is a relationship, it is an inverse one. Trump provides the most vivid example of the sundering of policy from politics. But the policies of Sanders don’t come close to adding up either. Trump’s ideas are wacky – but Sanders’ are weak.

Trump’s proposals (when clear enough to be assessed) have been judged to be wholly impractical by every expert who is not certifiable. You cannot, in fact, force a sovereign nation to pay for a 2,000-mile, $20-billion wall you are building to keep their people out. You cannot enact a “total and complete shutdown of Muslims entering the U.S.” You cannot impose a 45 percent tariff on Chinese goods. You cannot cut taxes, ignore entitlements and wipe out the national debt. You cannot deport 11 million people. To be clear, I mean “cannot” here in the narrow, policy sense, rather than in legal or moral terms.

But cries of foul from the policy analysts have fallen on deaf ears. Each time Trump makes a ludicrous suggestion, these experts fill the airwaves with their reasoned arguments against it, Trump ignores them, and his poll ratings go up. Every time an establishment expert attacks one of his proposals, his anti-establishment credentials are burnished.

Meanwhile, the uber-wonk of the Republican field, Jeb Bush, became a piece of political marginalia. He produced some thoughtful and sensible policy ideas, on student financing, economic growth, health care, energy, school reform, and so on. Look where that got him.

Trump has grasped an important truth about politics in the digital age. Policy statements do not need to be serious proposals. They are merely ways to signal to the electorate what your instincts are, and what kinds of things you care about. It doesn’t matter if they don’t pass muster in the DC think-tank community. They are essentially a long list of the candidate’s likes and dislikes – politics in primary colors.

At his rallies, Trump announces his plan to build a wall on the southern border of the U.S., and asks: “And who’s gonna pay for it?” Then he holds out the mike to the crowd. They dutifully shout back: “Mexico!” It’s not true, and it can’t be true, but it doesn’t seem to matter. If Trump wins and appoints Ben Carson, the U.S. will have a Secretary for Education who has wondered aloud if Joseph built the pyramids.

Over on the Democrat side, Hillary Clinton, a wonk to match Bush, continues to fight a nervously close battle against a man who seems to design his policies on a blank sheet of paper, never allowing the facts on the ground to dilute the purity of his vision.

To be clear: I’m not saying that Sanders and Trump are equivalent. Trump plays on fear and loathing; Sanders indulges utopian idealism. But like Trump, the main purpose of Sanders’ policies is to signal a broad set of values, rather than chart a realistic way forward. Even the most progressive analysts of health care policy, like my Brookings colleague Henry Aaron, consider the Sanders plan for a single-payer health care system to be a pipe dream. As Aaron writes: “We know that single-payer mechanisms work in some countries. But those systems evolved over decades, based on gradual and incremental change from what existed before. That is the way that public policy is made in democracies.” Indeed. But not the way public policy is being made on the campaign trail.

Likewise, Sanders’ fiscal policies simply do not stack up, even if he can make the economy grow like it’s the ‘60s (the 1860s, that is). But don’t take my word for it: ask ultra-liberal economist Paul Krugman. Or indeed the four Democrat former chairs of the president’s Council of Economic Advisers who jointly wrote to warn of the fuzzy math at the heart of Sanders’ tax and spending plans. Sanders is playing fantasy fiscal policy.

But just as the unhinged ideas from Trump are doing nothing to dampen his fans, so the unrealistic ones from Sanders are not putting off his core supporters. And just as the scorn of the establishment helps Trump, so the attacks from experts on the mainstream left on Sanders’ ideas bolster his image as a revolutionary idealist, refusing to accept the status quo.

We should be honest: it is only in exceptional circumstances that policy is likely to be the central ingredient of politics. The personality, vision and message of the candidate, and the efficiency of a political operation, are typically more important. We should also be honest that the aspirational nature of campaign pledges very often puts them well beyond reasonable reach. Remember Hoover’s “chicken in every pot and a car in every garage?” Presidents can’t make that kind of change happen.

But even if policies declared on the campaign trail have often been a stretch, they have at least been a stretch in the right direction. Even if they were aspirational, they were not bonkers. The capacity to propose sensible policy has historically been a necessary test of political candidates, with scholars and serious journalists acting as examiners. Good policy may not often win you an election, but really bad policy could lose one. Now, in a fragmented media market, this basic test of policy seriousness may no longer disqualify a candidate.

Most successful Presidential candidates have, once in office, attempted to follow through on most (75% according to one study) of their campaign promises. Obama tried for 80%, according to Politifact. But many of those being made this year cannot be taken seriously, even perhaps by the candidates themselves. They are positioning devices, rather than proposals.

For a scholar working in a public policy think-tank, these are of course disheartening trends. What use is there for policy analysis when it seems as if politicians barely need policies at all? But there are deeper dangers here. If policy and politics separate entirely, the people who end up in office are likely to have little regard for policies, or even the skills required to make them. This will reduce the chances that policies will be implemented successfully, or that they will be effective, and therefore make them even less relevant to an electorate already concerned that our governance system is broken. Worse, the careless disregard for facts, laws, costs, and even basic math is corrosive to the democratic process. It is too much, perhaps, to expect politicians to seek to make voters better informed about the key issues. But I think it is reasonable to hope they will not misinform them.

I hope that I am wrong. I hope that policy will make a political comeback. But I’m not holding my breath.

Editor's note: This piece originally appeared in Bloomberg Government.

On Tuesday, May 24, Nigerian Central Bank Governor Godwin Emefiele announced that the country will adopt a more flexible foreign exchange rate system in the near future. This move signals a major policy shift by Emefiele and President Muhammadu Buhari, who had until this point opposed calls to let the naira weaken. Many international oil-related currencies have depreciated against the dollar as oil prices began their decline in 2014. Nigeria, however, has held the naira at a peg of 197-199 per U.S. dollar since March 2015, depleting foreign reserves and deterring investors, who remain concerned about the repercussions of a potential naira devaluation. Following the announcement, Nigerian stocks jumped to a five-month high and bond prices rose in anticipation that a new flexible exchange rate regime would increase the supply of dollars and help attract foreign investors.

For now it remains unclear exactly what a more flexible system will entail for Nigeria, however, some experts suggest that the Central Bank may introduce a dual-rate system, which allows select importers in strategic industries to access foreign currency at the current fixed rate, while more generally foreign currency will be available at a weaker, market-related level. This new regime raises a number of questions, including how it will be governed and who will have access to foreign currency (and at what rate). On Wednesday, Nigeria’s parliament requested a briefing soon from Emefiele and Finance Minister Kemi Adeosun to provide additional clarity on the new system, although the date for such a meeting has not yet been set.

Earlier this month, Kenya announced plans to close the Dadaab refugee camp, located in northeast Kenya, amid security concerns. The move to close the camp has been widely criticized by international actors. United States State Department Press Relations Director Elizabeth Trudeau urged Kenya to “uphold its international obligations and not forcibly repatriate refugees.” The United Nations High Commissioner for Refugees stated that the closure of the refugee camp would have “devastating consequences.” Despite these concerns, this week, at the World Humanitarian Summit, Kenya stated that it will not go back on its decision and confirmed the closure of the refugee camps within a six-month period.

The camp houses 330,000 refugees, a majority of whom fled from conflict in their home country of Somalia. Kenya insists that the camp poses a threat to its national security, as it believes the camp is used to host and train extremists from Somalia’s Islamist group al-Shabab. Kenya also argued that the developed world, notably the United Kingdom, should host its fair share of African refugees. This is not the first time Kenya has threatened to close the refugee camp. After the Garissa University attacks last April, Kenya voiced its decision to close the refugee camps, although it did not follow through with the plan.

From May 23-27, Lusaka, Zambia hosted 5,000 delegates and participants for the 2016 Annual Meetings of the African Development Bank (AfDB), with the theme, “Energy and Climate Change.” Held in the wake of December’s COP21 climate agreement and in line with Sustainable Development Goals 7 (ensure access to affordable, reliable, sustainable and modern energy for all) and 13 (take urgent action to combat climate change and its impacts), the theme was timely and, as many speakers emphasized, urgent. Around 645 million people in Africa have no access to electricity, and only 16 percent are connected to an energy source. To that end, AfDB President Akinwumi Adesina outlined the bank’s ambitious aim: “Our goal is clear: universal access to energy for Africa within 10 years; Expand grid power by 160 gigawatts; Connect 130 million persons to grid power; Connect 75 million persons to off grid systems; And provide access to 150 million households to clean cooking energy."

As part of a push to transform Africa’s energy needs and uses, Rwandan President Paul Kagame joined Kenyan President Uhuru Kenyatta on a panel to support the AfDB’s “New Deal on Energy” that aims to deliver electricity to all Africans by 2025. Kenyatta specifically touted the potential of geothermal energy sources. Now, 40 percent of Kenya's power needs come from geothermal energy sources, he said, but there is still room for improvement—private businesses, which make up 30 percent of Kenya’s on-grid energy needs, have not made the switch yet.

As part of the meetings, the AfDB, the Organization for Economic Cooperation and Development (OECD), and United Nations Development Program (UNDP) also launched their annual African Economic Outlook, with the theme “Sustainable Cities and Structural Transformation.” In general, the report’s authors predict that the continent will maintain an average growth of 3.7 percent in 2016 before increasing to 4.5 percent in 2017, assuming commodity prices recover and the global economy improves.  However, the focus was on this year’s theme: urbanization. The authors provide an overview of urbanization trends and highlight that successful urban planning can discourage pollution and waste, slow climate change, support better social safety nets, enhance service delivery, and attract investment, among other benefits.

For more on urbanization in sub-Saharan Africa, see Chapter 4 of Foresight Africa 2016: Capitalizing on Urbanization: The Importance of Planning, Infrastructure, and Finance for Africa’s Growing Cities.

Introduction

Ohio has already taken important steps to address the state’s ongoing foreclosure crisis, yet the crisis continues, causing distress for thousands of families and individuals, and destabilizing cities, towns and neighborhoods across the state. Therefore, the state, its local governments and private stakeholders need to do still more to deal more effectively with the crisis and its impacts on the state’s housing stock, cities and neighborhoods.

What is often termed the “foreclosure crisis” is actually a multi-dimensional crisis, in which the collapse of the housing bubble, the devastation caused by the lax and often irresponsible credit practices that accompanied and perpetuated that bubble, the resulting freeze on commercial and consumer credit, and the worldwide recession are interwoven, and can only with great difficulty be untangled. In Ohio, those forces are further exacerbated by profound changes to the state’s historical economic underpinnings. Ohio cannot solve the crisis by itself, but it can significantly mitigate its impact on people, neighborhoods, and towns and cities. These mitigating efforts will also help preserve the value of homes and neighborhoods in the state, and place Ohio in a stronger position to benefit from the future economic recovery.

The paper begins with a short summary of current conditions and the actions the state has already taken to address the wave of foreclosures, followed by a discussion of areas for future action. This discussion will address mitigating both the individual and community impacts of foreclosure, but will give particular emphasis to the critical issue of softening the blow of foreclosure on communities, which up to now has been less of a focus for state action.

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The final months of Obama’s historic terms of office as America’s first black president are taking place against the backdrop of an ugly Republican nominating race, and to the sound of ugly language on race from Donald Trump. Progress towards racial equality is indeed proceeding in faltering steps, as the president himself made clear in a commencement speech, one of his last as president, to the graduating class of Howard University.

“America is a better place today than it was when I graduated from college,” the president said. But on the question of progress on closing the race gap, he provided some mixed messages. Much done; more to do. The president picked out some specific areas on both sides of the ledger, many of which we have looked at on these pages.

1."Americans with college degrees, that rate is up.”

The share of Americans who have completed a bachelor’s degree or higher is now at 34 percent, up from 23 percent in 1990. That’s good news in itself. But it is particularly good news for social mobility, since people born at the bottom of the income distribution who get at BA experience much more upward mobility than those who do not:

2. "We've cut teen pregnancy in half."

The teen birthrate recently hit an all-time low, with a reduction in births by 35 percent for whites, 44 percent for blacks, and 51 percent for Hispanics:

This is a real cause for celebration, as the cost of unplanned births is extremely high. Increased awareness of highly effective methods of contraception, like Long Acting Reversible Contraception (LARCs), has certainly helped with this decline. More use of LARCs will help still further.

3. "In 1983, I was part of fewer than 10 percent of African Americans who graduated with a bachelor's degree. Today, you're part of the more than 20 percent who will."

Yes, black Americans are more likely to be graduating college. And contrary to some rhetoric, black students who get into selective colleges do very well, according to work from Jonathan Rothwell:

Three worries on race gaps

But of course it’s far from all good news, as the president also made clear. 

1. "We've still got an achievement gap when black boys and girls graduate high school and college at lower rates than white boys and white girls."

The white-black gap in school readiness, measured by both reading and math scores, has not closed at the same rate as white-Hispanic gaps. And while there has been an increase in black college-going, most of this rise has been in lower-quality institutions, at least in terms of alumni earnings (one likely reason for race gaps in college debt):

2. "There are folks of all races who are still hurting—who still can’t find work that pays enough to keep the lights on, who still can’t save for retirement."

Almost a third of the population has no retirement savings. Many more have saved much less than they will need, especially lower-income households. Wealth gaps by race are extremely large, too. The median wealth of white households is now 13 times greater than for black households:

3. "Black men are about six times likelier to be in prison right now than white men."

About one-third of all black male Americans will spend part of their life in prison. Although whites and blacks use and/or sell drugs at similar rates, blacks are 3 to 4 times more likely to be arrested for doing so, and 9 times more likely to be admitted to state prisons for a drug offense. The failed war on drugs and the trend towards incarceration have been bad news for black Americans in particular:

Especially right now, it is inspiring to see a black president giving the commencement address at a historically black college. But as President Obama knows all too well, there is a very long way to go.

Event Information

Last month, Russian President Vladimir Putin made his fourth visit to China since President Xi Jinping became top party leader in 2012. During this latest meeting, the two countries inked more than 30 deals, including an oil supply contract, and issued numerous joint statements, one of which criticized the United States for its plans to deploy missile defense systems on the Korean Peninsula and in the Balkans. Chinese state media speculate that this year’s China-Russia joint naval exercises, held annually since 2005, will likely be led by the South China Sea Fleet, reinforcing a general perception in China and elsewhere that U.S. policies are pushing Chinese leaders to consolidate ties with Russia.

On July 26, the John L. Thornton China Center at Brookings hosted a discussion on the U.S.-China-Russia trilateral relationship, the shape and scope of which carries far-reaching consequences for international order and global economic growth. Brookings President Strobe Talbott, who served as deputy secretary of state and ambassador-at-large on the new independent states following the Soviet breakup, provided an introduction. A panel of experts—J. Stapleton Roy, Fiona Hill, Yun Sun, and Cheng Li—discussed the current and historical dynamics at play, including expectations and recommendations for the future.

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• Is the United States losing China to Russia?

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• Is the United States losing China to Russia?

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• Uncorrected Transcript (.pdf)

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Leaders will head to the G-20 Summit in Los Cabos, Mexico, among renewed serious concern about the world economy. The turmoil that started with the U.S. subprime mortgage crisis has resulted in now almost five years of ongoing instability. The emerging market economies fared much better than the advanced economies and pulled out of the crisis already in 2009, but the slowdown we are now facing in 2012 is again global, demonstrating the interdependence in the world economy. The emerging market economies have stronger underlying trend growth rates, but they remain vulnerable to a downturn in the advanced economies. The center of concern is now squarely on Europe, with a recession threatening most European countries, even those that had reasonably good performances so far. After an encouraging start in 2012, the U.S. economy, while not close to a recession, is also showing signs of a slowdown rather than the hoped for steady acceleration of growth. And the slowdown is spreading across the globe.

At a time like this it would be desirable and necessary that the G-20 show real initiative and cohesion. The essays in this collection look at the challenge from various angles. There is concern that the G-20 is losing its sense of purpose, that cohesion is decreasing rather than increasing, and that policy initiatives are reactive to events rather than proactive. Let us hope that at this moment of great difficulty, the G-20 will succeed in giving the world economy a new sense of direction and confidence. It is much needed.

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When Franklin Roosevelt delivered his second inaugural address on January 20, 1936 he lamented the “one-third of a nation ill-housed, ill-clad, ill-nourished.” He challenged Americans to measure their collective progress not by “whether we add more to the abundance of those who have much; [but rather] whether we provide enough for those who have too little.” In our new paper, One third of a nation: Strategies for helping working families, we ask a simple question: How are we doing?

In brief, we find that:

• The gulf in labor market income between the haves and have-nots remains wide. The median income of households in the bottom third in 2014 was $24,000, just a little more than a quarter of the median of $90,000 for the top two-thirds.
• The bottom-third households are disproportionately made up of minority adults, adults with limited educational attainment, and single parents.  
• The most important reason for the low incomes of the bottom third is a “work gap”: the fact that many are not employed at all, or work limited hours. 

The work gap

The decline in labor force participation rates has been widely documented, but the growing gulf in the work gap between the bottom third and the rest of the population is truly striking:

While the share of men who are employed in the top two-thirds has been quite stable since 1980, lower-income men’s work rates have declined by 11 percentage points. What about women?

Middle- and upper-income women have increased their work rates by 13 percentage points. This has helped maintain or even increase their family’s income. But employment rates among lower-income women have been flat, despite reforms of the welfare system and safety net designed to encourage work.

Many on the left point to problems like low pay and lack of access to affordable childcare, and so favor a higher minimum wage and more subsidies for daycare. For many conservatives, the problem is rooted in family breakdown and a dependency-inducing safety net. They therefore champion proposals like marriage promotion programs and strict work requirements for public benefits. Most agree about the importance of education.

Time to debate some more radical solutions 

It may be that the standard solutions to the problems of the bottom third, while helpful, are no longer sufficient. A debate about whether to make safety net programs such as Food Stamps and housing assistance conditional on work or training is underway. So are other solutions such as subsidized jobs (created by some states during the Great Recession as a natural complement to a work-conditioned safety net), more work sharing (used in Germany during the recession), or even a universal basic income (being considered by Swiss voters in June).