Iraq has been rekindled. Whether it will merely be singed or immolated entirely remains to be seen, but the fire is burning again.

Most Americans stopped caring about Iraq long ago. That’s an inescapable reality but also an unfortunate mistake. Iraq is not just a painful and divisive memory or a cudgel to take up against one’s political rival, it is a very real interest. Today, Iraq has surpassed Iran to claim the spot as the second largest oil exporter in OPEC, behind only Saudi Arabia. Iraq’s steadily climbing oil production has been critical to reducing oil prices, and its collapse into renewed civil war would endanger our fragile economic recovery.

Moreover, just as spillover from the Syrian civil war is helping to re-ignite the Iraqi civil war, so renewed chaos and strife in Iraq could once again threaten other important oil producers like Kuwait, Iran and even Saudi Arabia. As it has in the past, Iraq is again becoming a hub for al-Qa’ida’s regional presence.

Just as unfortunately, the problems of Iraq will not be easily healed. They are not the product of ancient hatreds, a canard that resurfaces with the outbreak of each such civil war. Instead they are principally the products of our own mistakes. We caused the Iraqi civil war, we healed it briefly, and then we left it to fester all over again. It is not that Iraqis had no say in the matter, no free will. Only that they were acting within circumstances that we created and those circumstances have driven their actions.

Thus, understanding where the Iraqis may end up requires understanding how we brought them to where they are. And here again, America’s determination to turn its back on the experience of Iraq is a dangerous hindrance. The problems sucking Iraq back into the vortex of civil war are merely the latest manifestation of the powerful forces that the United States unleashed as a result of our botched occupation from 2003 to 2006. Minor adjustments and small fixes are highly unlikely to be able to cope with them. Averting a relapse of the civil war may require a combination of moves akin to those that the United States and Iraqis engineered between 2007 and 2009, and that is exceptionally unlikely.

This essay traces the course of Iraq’s fortunes from the American invasion in 2003 through the civil war of 2005-2008 and the endangered effort at reconstruction that followed. Only by seeing the full course of Iraq’s narrative arc during this period is it possible to understand both Iraq’s present, and its likely future—as well as what would probably be needed to produce a better outcome than those that currently seem most plausible.

It is not a hopeful story, but it is an important one. It is the critical piece to understanding the possibilities for Iraq as we fret over its renewed downward course. And it is a warning about what would likely be required to address the analogous Syrian civil war raging next door, as well as the dangers of allowing that war to rage unchecked.

Downloads

• The Fall and Rise and Fall of Iraq

No. We should exempt workers earning the lowest wages.

Social Security faces a serious funding problem. The program takes in too little money to pay all that has been promised to future beneficiaries. Government forecasters predict Social Security’s reserve fund will be depleted between 2030 and 2034. There are two basic ways we can eliminate the funding gap: cut benefits or increase contributions. A common proposal is to increase the age at which workers can claim full retirement benefits. For people nearing retirement today, the full retirement age is 66. As a result of a 1983 law, that age will rise to 67 for workers born after 1959.

When policymakers urge us to raise the retirement age, they are proposing to increase the full retirement age beyond 67, possibly to 70, for workers now in their 30s or 40s. This saves money, but it also cuts monthly retirement benefits by the same percentage for every worker, unless workers delay claiming benefits. The policy might seem fair if workers in future generations could all expect to share in gains in life expectancy. However, new research shows that gains in life expectancy have been very unequal, with the biggest improvements among workers who earn top incomes. Life expectancy gains for workers with the lowest incomes have been small or negligible.

If the full retirement age were raised, future retirees with high lifetime earnings can expect to receive some compensation when their monthly benefits are cut. Because they can expect to live longer than today’s retirees, they will receive benefits for a longer span of years after 65. For low-wage workers, there is no compensation. Since they are not living longer, their lifetime benefits will fall by the same proportion as their monthly benefits. Thus, “raising the retirement age” is a policy that cuts the lifetime benefits of future low-wage workers by a bigger percentage than it does of future high-wage workers.

The fact that low-wage workers have seen small or negligible gains in life expectancy signals that their health when they are past 60 is no better than that of low-wage workers born 20 or 30 years ago. This suggests their capacity to work past 60 is no better than it was for past generations. A sensible policy for cutting future benefits should therefore preserve current benefit levels for workers who have contributed to Social Security for many years but have earned low wages.

Editor's note: This piece originally appeared in CQ Researcher.

The Center for Medicare and Medicaid Innovation (CMMI, or “the Innovation Center”) recently announced an initiative called Comprehensive Primary Care Plus (CPC+). It evolved from the Comprehensive Primary Care (CPC) initiative, which began in 2012 and runs through the end of this year. Both initiatives are designed to promote and support primary care physicians in organizing their practices to deliver comprehensive primary care services. Comprehensive Primary Care Plus has some very promising components, but also misses some compelling opportunities to further advance payment for primary care services.

The earlier initiative, CPC, paid qualified primary care practices a monthly fee per Medicare beneficiary to support practices in making changes in the way they deliver care, centered on five comprehensive primary care functions: (1) access and continuity; (2) care management; (3) comprehensiveness and coordination; (4) patient and caregiver engagement; and, (5) planned care and population health. For all other care, regular fee-for-service (FFS) payment continued. The initiative was limited to seven regions where CMMI could reach agreements with key private insurers and the Medicaid program to pursue a parallel approach. The evaluation funded by CMMI found quality improvements and expenditure reductions, but savings did not cover the extra payments to practices.

Comprehensive Primary Care Plus uses the same strategy of conducting the experiment in regions where key payers are pursuing parallel efforts. In these regions, qualifying primary care practices can choose one of two tracks. Track 1 is very similar to CPC. The monthly care management fee per beneficiary remains the same, but an extra $2.50 is paid in advance, subject to refund to the government if a practice does not meet quality and utilization performance thresholds.

The Promise Of CPC+

Track 2, the more interesting part of the initiative, is for practices that are already capable of carrying out the primary care functions and are ready to increase their comprehensiveness. In addition to a higher monthly care management fee ($28), practices receive Comprehensive Primary Care Payments. These include a portion of the expected reimbursements for Evaluation and Management services, paid in advance, and reduced regular fee-for-service payments. Track 2 also includes larger rewards than does Track 1 for meeting performance thresholds.

The combination of larger per beneficiary monthly payments and lower payments for services is the most important part of the initiative. By blending capitation (monthly payments not tied to service volume) and FFS, this approach might achieve the best of both worlds.

Even when FFS payment rates are calibrated correctly (discussed below), the rates are pegged to the average costs across practices. But since a large part of practice cost is fixed, it means that the marginal cost of providing additional services is lower than the average cost, leading to incentives to increase volume under FFS. The lower payments reduce or eliminate these incentives. Fixed costs, which must also be covered, are addressed through the Comprehensive Primary Care Payments. By involving multiple payers, practices are put in a better position to pursue these changes.

An advantage of any program that increases payments to primary care practices is that it can partially compensate for a flaw in the relative value scale behind the Medicare physician fee schedule. This flaw leads to underpayment for primary care services. Although the initial relative value scale implemented in 1992 led to substantial redistribution in favor of evaluation and management services and to physicians who provide the bulk of them, a flawed update process has eroded these gains over the years to a substantial degree.

In response to legislation, the Centers for Medicare and Medicaid Services are working correct these problems, but progress is likely to come slowly. Higher payments for primary care practices through the CPC+ can help slow the degree to which physicians are leaving primary care until more fundamental fixes are made to the fee schedule. Indeed, years of interviews with private insurance executives have convinced us that concern about loss of the primary care physician workforce has been a key motivation for offering higher payment to primary care physicians in practices certified as patient centered medical homes.

Two Downsides

But there are two downsides to the CPC+.

One concerns the lack of incentives for primary care physicians to take steps to reduce costs for services beyond those delivered by their practices. These include referring their patients to efficient specialists and hospitals, as well as limiting hospital admissions. There are rewards in CPC+ for lower overall utilization by attributed beneficiaries and higher quality, but they are very small.

We had hoped that CMMI might have been inspired by the promising initiatives of CareFirst Blue Cross Blue Shield and the Arkansas Health Care Improvement initiative, which includes the Arkansas Medicaid program and Arkansas Blue Cross Blue Shield. Under those programs, primary care physicians are offered substantial bonuses for keeping spending for all services under trend for their panel of patients; there is no downside risk, which is understandable given the small percentage of spending accounted for by primary care. The private and public payers also support the primary care practices with care managers and with data on all of the services used by their patients and on the efficiency of providers they might refer to. These programs appear to be popular with physicians and have had promising early results.

The second downside concerns the inability of physicians participating in CPC+ to participate in accountable care organizations (ACOs). One of CMMI’s challenges in pursuing a wide variety of payment innovations is apportioning responsibility across the programs for beneficiaries who are attributed to multiple payment reforms. As an example, if a beneficiary attributed to an ACO has a knee replacement under one of Medicare’s a bundled payment initiatives, to avoid overpayment of shared savings, gains or losses are credited to the providers involved in the bundled payment and not to the ACO. As a result, ACOs are no longer rewarded for using certain tools to address overall spending, such as steering attributed beneficiaries to efficient providers for an episode of care or encouraging primary care physicians to increase the comprehensiveness of the care they deliver.

Keeping the physician participants in CPC+ out of ACOs altogether seems to be another step to undermine the potential of ACOs in favor of other payment approaches. This is not wise. The Innovation Center has appropriately not established a priority ranking for its various initiatives, but some of its actions have implicitly put ACOs at the bottom of the rankings. Recently, Mostashari, Kocher, and McClellan proposed addressing this issue by adding a CPC+ACO option to this initiative.

In an update to its FAQ published May 27, 2016 (after out blog was put into final form), CMMI eased its restriction somewhat by allowing up to 1,500 of the 5000 practices expected to participate in CPC+ to also participate in Medicare Shared Savings Program (MSSP) ACOs. But the prohibition continues to apply to Next Gen ACOs, the model that has created the most enthusiasm in the field. If demand for these positions in MSSP ACOs exceeds 1,500, a lottery will be held. This change is welcome but does not really address the issue of disadvantaging ACOs in situations where a beneficiary is attributed to two or more payment reform models. CMMI is sending a signal that CPC+, notwithstanding its lack of incentives concerning spending outside of primary care, is a powerful enough reform that diverting practices away from ACOs is not a problem. ACOs are completely dependent on primary care physician membership to function, meaning that any physician practices beyond 1,500 that enroll in CPC+ will reduce the size and the impact of the ACO program. CMMI has never published a priority ranking of reform models, but its actions keep indicating that ACOs are at the bottom.

The Innovation Center should be lauded for continuing to support improved payment models for primary care. Its blending of substantial monthly payments with lower payments per service is promising. But the highest potential rewards come from broadening primary care physicians’ incentives to include the cost and quality of services by other providers. CMMI should pursue this approach.

Editor's note: This piece originally appeared in Health Affairs Blog.

In 2015 the international community agreed on a set of ambitious sustainable development goals (SDGs) for the global society, to be achieved by 2030. One of the lessons that the implementation of the Millennium Development Goals (MDG s) has highlighted is the importance of a systematic approach to identify and sequence development interventions—policies, programs, and projects—to achieve such goals at a meaningful scale. The Chinese approach to development, which consists of identifying a problem and long-term goal, testing alternative solutions, and then implementing those that are promising in a sustained manner, learning and adapting as one proceeds—Deng Xiaoping’s “crossing the river by feeling the stones”—is an approach that holds promise for successful achievement of the SDGs.

Having observed the Chinese way, then World Bank Group President James Wolfensohn in 2004, together with the Chinese government, convened a major international conference in Shanghai on scaling up successful development interventions, and in 2005 the World Bank Group (WBG ) published the results of the conference, including an assessment of the Chinese approach. (Moreno-Dodson 2005). Some ten years later, the WBG once again is addressing the question of how to support scaling up of successful development interventions, at a time when the challenge and opportunity of scaling up have become a widely recognized issue for many development institutions and experts.

Since traditional private and public service providers frequently do not reach the poorest people in developing countries, social enterprises can play an important role in providing key services to those at the “base of the pyramid.”

In parallel with the recognition that scaling up matters, the development community is now also focusing on social enterprises (SEs), a new set of actors falling between the traditionally recognized public and private sectors. We adopt here the World Bank’s definition of “social enterprises” as a social-mission-led organization that provides sustainable services to Base of the Pyramid (BoP) populations. This is broadly in line with other existing definitions for the sector and reflects the World Bank’s primary interest in social enterprises as a mechanism for supporting service delivery for the poor. Although social enterprises can adopt various organizational forms—business, nongovernmental organizations (NGOs), and community-based organizations are all forms commonly adopted by social enterprises—they differ from private providers principally by combining three features: operating with a social purpose, adhering to business principles, and aiming for financial sustainability. Since traditional private and public service providers frequently do not reach the poorest people in developing countries, social enterprises can play an important role in providing key services to those at the “base of the pyramid.” (Figure 1)

Figure 1. Role of SE sector in public service provision

Social enterprises often start at the initiative of a visionary entrepreneur who sees a significant social need, whether in education, health, sanitation, or microfinance, and who responds by developing an innovative way to address the perceived need, usually by setting up an NGO, or a for-profit enterprise. Social enterprises and their innovations generally start small. When successful, they face an important challenge: how to expand their operations and innovations to meet the social need at a larger scale. 

Development partner organizations—donors, for short—have recognized the contribution that social enterprises can make to find and implement innovative ways to meet the social service needs of people at the base of the pyramid, and they have started to explore how they can support social enterprises in responding to these needs at a meaningful scale. 

The purpose of this paper is to present a menu of approaches for addressing the challenge of scaling up social enterprise innovations, based on a review of the literature on scaling up and on social enterprises. The paper does not aim to offer specific recommendations for entrepreneurs or blueprints and guidelines for the development agencies. The range of settings, problems, and solutions is too wide to permit that. Rather, the paper provides an overview of ways to think about and approach the scaling up of social enterprise innovations. Where possible, the paper also refers to specific tools that can be helpful in implementing the proposed approaches. 

Note that we talk about scaling up social enterprise innovations, not about social enterprises. This is because it is the innovations and how they are scaled up that matter. An innovation may be scaled up by the social enterprise where it originated, by handoff to a public agency for implementation at a larger scale, or by other private enterprises, small or large. 

This paper is structured in three parts: Part I presents a general approach to scaling up development interventions. This helps establish basic definitions and concepts. Part II considers approaches for the scaling up of social enterprise innovations. Part III provides a summary of the main conclusions and lessons from experience. A postscript draws out implications for external aid donors. Examples from actual practice are used to exemplify the approaches and are summarized in Annex boxes.

Downloads

• Download the full paper (PDF)

Spring has sprung and once again Publish What You Fund has issued its Aid Transparency Index (ATI). Once again most of the multilateral development banks (MDBs) receive high grades rated as very good. And once again I ask whether those grades are well deserved? At the heart of my question is whether aid agencies are disclosing sufficient information during the critical implementation stage of a project.

Last year we reviewed the practices of 8 aid agencies, 7 of which consistently receive the highest accolades in the ATI. What was evident from our review was the serious asymmetry of the type of aid data released to the public. A major target at Busan in 2011 when donors made commitments to aid transparency and in the establishment of the ATI has been the reporting of aid flows and the projects approved by each agency. There has been growing emphasis since then on reporting information on the results of those projects. But there has been very limited progress in the release of information during project implementation.

The importance of such information should be obvious. It is during project implementation that the various stakeholders need to monitor project progress, report on issues requiring attention, and make changes to ensure achievement of the desired results. It is insufficient to only disclose who wins a contract; consideration should be given to publishing the contracts, reporting on its execution, and disclosing amendments to the contracts. And it is not enough to simply publish the resettlement action plan for a project; how that plan is being implemented must be reported. Real time reporting is the key to being able to adapt and make changes as projects evolve.

It is very evident that the International Aid Transparency Initiative (IATI) and the ATI have had a major positive impact on raising the level of transparency of aid agencies. Discussions with various agencies illustrate how they are keen to getting higher scores each year, carefully analyzing the indicators to guide their actions. However, with only a limited focus and weighting of reporting on project implementation in the ATI, there is no incentive to fill this important gap. 

In its 2016 report, Publish What You Fund has indicated that it will be reviewing its indicators later this year and intends to raise the bar. It would be timely to include information on project implementation in those revisions. One challenge is how to develop indicators that are similarly relevant across a wide variety of aid agencies. Implementation information is most critical for agencies that finance longer-term projects, especially infrastructure, such as the MDBs.  One option is to consider a set of indicators to better “incentivize” the relevant agencies and refer to these as ATI+.

The MDB’s, in their major disclosure reforms since 2010, adopted a principle that “deliberative” information would not be disclosed in order to foster candid and open dialogue within the organization and between the organization and the client country. As per the World Bank’s policy, “The Bank, like any institution or group, needs space to consider and debate, away from public scrutiny.” This excludes emails, notes, and other exchanges either internally or with member countries.

As a result, the project supervision reports, which managements use to monitor projects under execution and are generally published twice a year, were divided between disclosed versus undisclosed sections. The undisclosed sections would offer space for reporting on confidential project concerns including potential corruption. Our review of the disclosed reports suggests that most aid agencies’ task managers tend to take a cautious approach, placing most information in the undisclosed sections. Stakeholders outside the MDB, such as local civil society groups, then, often only see truncated information.

While the adoption of the “deliberative” principle is understandable, its application places a serious responsibility on management to ensure that this is applied with considerable restraint. The MDBs should review the application of this principle and assess the type of information released during implementation.

It is indeed time to raise the bar on transparency and to focus on the most critical information required to ensure results. This is not the moment for complacency with high grades.

At a news conference in Seoul today, the United States and the Republic of Korea jointly announced the decision to deploy a Terminal High Altitude Area Defense (THAAD) missile defense system on the Korean Peninsula, with operational deployment planned by the end of 2017. Though many details are still pending, the decision is not a surprise, and the purposes of the deployment are wholly transparent.

As elaborated in the official announcement, the THAAD deployments are intended to defend the infrastructure and citizens of South Korea, and to protect core military capabilities underpinning the U.S.-Korea alliance. It is not a panacea for South Korea’s potential vulnerabilities to North Korean missile attack, but it will appreciably buttress Seoul’s still-limited air and missile defense capabilities, and explicitly link them to the far greater assets of the United States. 

Seoul did not undertake this commitment lightly. In recent years, South Korean strategic analysts have hotly debated the missile defense issue, but the political-military leadership has proceeded very deliberately. It was only in the aftermath of North Korea’s fourth nuclear test in early January and a long-range rocket test that soon followed that President Park Geun-hye’s administration agreed to initiate consultations on the “earliest possible” deployment of a THAAD missile battery. The North’s accelerated missile testing program, evident since April, reinforced the need for a meaningful response to Pyongyang’s actions.

Neither China nor Russia seems mollified by today’s announcement. Beijing and Moscow both perceive a malign U.S. strategic design, purportedly intended to detect and intercept Chinese and Russian strategic missiles, thereby invalidating their respective deterrence capabilities. But these worst-case estimates attribute technical reach and refinement to the Raytheon radar system likely to accompany the THAAD deployment that substantially exceeds even the manufacturer’s claims. 

China and Russia also contend that the THAAD deployment will further complicate the larger goal of denuclearization and threat reduction on the Korean Peninsula. But this places the cart before the horse. Pyongyang’s determination to expand and diversify its nuclear and missile programs has triggered the THAAD decision. Without the North’s accelerated military efforts, it is very doubtful that sentiment in Seoul would favor deployment of THAAD. Beijing and Moscow assuredly know how to connect the dots, but they seem unwilling to do so. 

At a time of increased Chinese wariness about U.S. military strategy along China’s periphery, it is not a surprise that Beijing has paid little heed to American and South Korean assurances.

Beijing also calculates that warning South Korea of unspecified consequences will convince Seoul to forego the THAAD decision. But this underestimates the South’s determination to proceed with missile defense, which will tie Seoul even more integrally to longer-term cooperation with the United States. This decision is unwelcome in China, but it is wholly within Seoul’s sovereign right to defend its vital interests by all appropriate means; China routinely does the same.

In meetings with Chinese counterparts, senior Korean officials have repeatedly stated that the THAAD deployment serves one irreducible purpose: the protection of South Korean vital national security interests. Seoul is keenly aware of Chinese strategic equities, and will remain very mindful of Beijing’s concerns as it moves ahead with this program. 

At the same time, Seoul and Washington have repeatedly conveyed their willingness to impart to officials in Beijing the limited purpose of the THAAD deployment. It will be directed entirely towards the North’s threats against the South; it will be exclusively bilateral in design; and it will not be targeted against the capabilities of any other party. 

At a time of increased Chinese wariness about U.S. military strategy along China’s periphery, it is not a surprise that Beijing has paid little heed to American and South Korean assurances, at least publicly. But officials and analysts in China must quietly grasp the reasons for the THAAD decision. The North’s nuclear and missile programs worry China deeply, as well. 

The need for a quiet, private conversation about the risks to stability on the peninsula has never been greater. The United States and South Korea are surely ready for this conversation. Whether China is ready remains to be seen.

In “Water Crimes: a Global Crisis on the Rise,” a lecture given on February 20, 2015 at Brookings Mountain West Lecture Series, Vanda Felbab-Brown explains that urbanization, population growth, environmental degradation, water pollution, climate change, and increased living standards are some of the main reasons for intense competition for water. As surface water depletes, there is increased pressure for ground water usage, which is more difficult to regulate for use, abuse, and theft. Water theft and smuggling are perpetrated by both the wealthy and those who are chronically deprived of water, says Felbab-Brown, as she provides examples from California, southern Europe, Nigeria, Kenya, the Middle East, and South Asia. In many parts of world, elaborate smuggling of water with complex network chains and water mafias has emerged. Smuggling modes vary and among others include the development of illegal pipelines, illegal truck deliveries as well as the cooptation of water regulators complicit in licensing fraud and broader government acquiescence to illegal water delivery. Illegally sourced and smuggled water is used for personal consumption, agriculture, industry, and sometimes for other other illegal activities, such as the production of illegal narcotics.

For many reasons, the illegal use and delivery of water is difficult to address, says Felbab-Brown. Large-scale agriculture and industry often exercise great influence over regulators and law enforcement. In slum areas, mostly unconnected to legal pipelines, the suppression of illegal water distribution can sever access to water and hence threaten the physical survival of the most marginalized and poor. Across the world, citizens tend to be vehemently opposed to increased water pricing. Yet without effective regulation, appropriate pricing, and suppression of water crimes, the sustainability, long-term viability, and inclusive and equitable use of water cannot easily be achieved.

Among the ways to improve water policy and suppress water smuggling, Felbab-Brown notes: (1) Recognizing the extent of water misuse, abuse, and crimes; (2) developing better inventories and water-level monitoring capacity, better regulation, including pricing, greater transparency, and a broadly-based external oversight of water authorities; (3) increasing stakeholder-participation of water regulation, including farmers, businesses, and the poor who are traditionally excluded; and (4) selectively licensing some currently illegal water distributors to areas without legal water distribution systems while cracking down on the most usury, unreliable, and abusive ones. Looking ahead, coping with scarcity will require not just more innovation, but particularly better conservation.

Key messages and Policy Pointers

• Given the stalemate in U.N. climate negotiations, the best arena to strike a workable deal is among the members the Major Economies Forum on Energy and Climate (MEF).

• The 13 MEF members—including the EU-27 (but not double-counting the four EU countries that are also individual members of the MEF)—account for 81.3 percent of all global emissions.

• This proposal devises a fair compromise to break the impasse to develop a science-based approach for fairly sharing the carbon budget in order to have a 75 percent chance of avoiding dangerous climate change.

• To increase the likelihood of a future climate agreement, carbon accounting must shift from pro­duction-based inventories to consumption-based ones.

• The shares of a carbon budget to stay below 2 °C through 2050 are calculated by cumulative emis­sions since 1990, i.e. according to a short-horizon polluter pays principle, and national capability (income), and allocated to MEF members through emission rights. This proposed fair compromise addresses key concerns of major emitters.

• According to this accounting, no countries have negative carbon budgets, there is substantial time for greening major developing economies, and some developed countries need to institute very rapid reductions in emissions.

• To provide a ‘green ladder’ to developing countries and to ensure a fair global deal, it will be crucial to agree how to extend sufficient and predictable financial support and the rapid transfer of technology.

The most urgent and complicated ethical issue in addressing climate change is how human society will share the work of reducing greenhouse gases (GHG) emissions. Looking ahead to 2015 when a new international treaty on climate change should be agreed upon, we fear we are headed towards a train wreck.

Key developed countries have made it clear they will not accept any regime excluding emerging economies such as China and Brazil, and the U.S. and other ‘umbrella’ countries are calling for only voluntary, bottom-up com­mitments. Yet the major developing countries have made equity the sine qua non for any kind of agreement: they will not take on mandatory emission reduction targets with perceived implications for their economic growth and social development, unless the wealthier countries commit to deep emissions cuts and act first.

These entrenched positions between the different blocs have led to the current impasse, but as Nobel laureate economist and philosopher, Amaryta Sen pointed out, the perfect agreement that never happens is more unjust than an imperfect one that is obtainable.

What is a fair and feasible way to break the impasse, given that all efforts are faltering? The most difficult task is determining a country’s fair share of the required emissions reductions in a way that is politically feasible. After 20 years of negotiations and gridlock, it is clear that many conflicting principles of equity are brought to the table, so a solution will have to be based on some kind of ‘negotiated justice,’ or a ‘fair compromise,’ which will not be one preferred by just one group of countries.

A few basic requirements must be met. A feasible, fair and effective climate agreement must involve the largest emitters from both the developed and developing countries. Such an agreement must find a way to engage the latter without penalizing them or the former countries too much. In order to secure progress, above all it must be acceptable to the two world superpowers and top carbon emitters, China and the U.S.; with this leadership, in fact, other emitters will likely follow. This agreement could be forged in a ‘plurilateral’ setting where a limited number of countries come together first, and then be brought into the formal U.N. negotiations as the basis for a future deal, perhaps by 2015.

How can future negotiations on emissions reductions overcome such political inertia? We suggest that taking three manageable steps to a fair compromise will unlock progress.

First, negotiate a core agreement between the 13 members in the MEF (including the EU-27), which accounts for 81.3 percent of all global emissions. This makes the negotiations feasible, where deals can be struck that would be impossible in the vast U.N. forum.

Second, use consumption-based emissions accounting, which is much fairer than the cur­rent production/territorial-based accounting that all past agreements and negotiations have been based upon. These are relatively new numbers developed by the Norwegian research center CICERO, and have been vetted by the top scientific journals and increasingly utilized by policymakers.

Third, forge a fair compromise to allocate emissions rights. We propose a compromise based on a short-horizon ‘polluter pays principle’ and an indicator of national capability (income).

This third step in particular is a genuine compromise for both developed and developing countries, but it is re­quired to break the current gridlock. Each MEF member gives and takes something from this simple, workable framework and all gain a liveable planet in the future.

Throughout the paper we first explain why counting carbon emissions by consumption is far better and the im­plications of doing so, and we then introduce the MEF and why it is a promising arena for forging a bold compro­mise like the one so badly needed before 2015. We then calculate what the numbers actually mean for that group of countries and develop a proposal for a fair compromise that embodies a feasible but fair operationalization of the central equity principles of the U.N. climate treaty, i.e. action by countries according to their responsibility and capability. We conclude with a discussion of how a start in the MEF could lead to a new framework being brought into those broader negotiations.

Downloads

• Download the paper

Brexit has little direct effect on the Chinese economy though it does increase the risk of financial volatility. In the long run it is hard to see it as anything but a plus for China as the West continues to decline and China continues to rise.

In the immediate aftermath of the Brexit vote, stock markets all over the world tanked. The interesting exception was China: The Shanghai market fell 1 percent on Friday and then more than recovered it on Monday. In the short run, Brexit is a modest negative as Europe’s gross domestic product (GDP) and trade are likely to grow less rapidly, and the EU is China’s largest trading partner. But the Chinese economy is simply not that export-oriented anymore. In the aftermath of the global financial crisis, the contribution of net exports to China’s GDP growth has averaged around zero. China initially made up for lost external demand with a massive stimulus program aimed at investment. This has now led to excessive capacity in real estate, manufacturing, and infrastructure. As a result, investment growth is slowing (see figure below). But China’s GDP growth has held up well because consumption is now the main source of demand. It consistently delivers more than 4 percentage points of GDP growth and its contribution has been on an upward trend.

China has developed a virtuous circle in which wages are rising at a healthy rate (more than 10 percent over the past year), consumption is growing, consumption is mostly services so the service sectors expand, and they are more labor-intensive than industry so sufficient jobs are created to keep the labor market tight. There are plenty of things that could go wrong, but maintaining consumption is the big challenge for China, not the external sector.

Another feature of China’s new growth pattern is that there is a steady outflow of capital as investment opportunities at home diminish. The U.K. had been one of the favored destinations for China’s outward investment, seen as a welcoming location that could be used as a jumping off point for the rest of Europe. Chinese firms will now need to rethink that strategy but this should not be too difficult an adjustment. The United States has been the destination for the largest share of China’s overseas investment and it is likely that that trend will strengthen in the wake of Brexit.

Brexit does complicate China’s currency policy. The dollar and the yen have strengthened while the pound and euro decline. In past global crises, China has been a source of stability but the yuan fixing on Monday suggests that the central bank does not want to follow the dollar up if it is going to keep rising. Ideally they would like relative stability against a basket. There continues to be a risk that this policy will excite accelerating capital outflows so in that sense financial risks have increased somewhat. But probably the central bank will be able to manage the capital outflows so that the trade-weighted exchange rate is stable.

A U.K. no longer in the European Union will presumably be anxious to strengthen its ties with China so it may well be willing to make compromises on market-economy status and investment deals that a unified Europe would not have made.

Finally, from a larger geostrategic perspective, it would seem that China is the big winner from Brexit. Europe is likely to be a less influential player on the world stage and will be absorbed with internal issues of negotiating the British exit, controlling immigration, and keeping the periphery inside the eurozone. The United States is also likely to be distracted by these European challenges. This gives China more scope to pursue its reclamation activities in the South China Sea and to play divide and conquer with European states on various issues. For example, China would like to be recognized as a market economy, which is both symbolic and a practical matter for adjudicating anti-dumping cases. It is also negotiating investment treaties with both the United States and the EU, though so far China’s offers have not been very attractive in the sense that they exempt many important sectors from open investment. A U.K. no longer in the European Union will presumably be anxious to strengthen its ties with China so it may well be willing to make compromises on market-economy status and investment deals that a unified Europe would not have made. Brexit itself may not be that important but it may prove to be a good signal of the decline of Europe and the rise of China.

Americans often think of our country as being one of great opportunity – where anyone can rise from very modest circumstances, if they work hard and make good choices. We believe that often remains true.

But, for children and youth growing up in poverty, such upward mobility in America is too rare. Indeed, just 30 percent of those growing up in poverty make it to middle class or higher as adults. Though we’ve made progress in reducing poverty over the past several decades, our poverty rates are still too high and our rate of economic advancement for poor children has been stuck for decades. That is an embarrassment for a nation that prides itself on everyone having a shot at the American Dream.

What can we do to reduce poverty and increase economic mobility? In our polarized and poisoned political atmosphere, it is hard to reach consensus on policy efforts. Both progressives and conservatives want lower poverty; but progressives want more public spending programs to improve opportunity and security for the poor, while conservatives generally argue for more responsibility from them before providing more help.

Even so, progressives and conservatives might not be as far apart as these stereotypes suggest. The two of us—one a conservative Republican and the other a progressive Democrat—were recently part of an ideologically balanced group of 15 scholars brought together by the American Enterprise Institute and the Brookings Institution. Our charge was to generate a report with policy proposals to reduce poverty and increase upward mobility. An additional goal was simply to see whether we could arrive at consensus among ourselves, and bridge the ideological divide that has so paralyzed our political leaders.

Together we decided that the most important issues facing poor Americans and their children are family, education and work. We had to listen to each other’s perspectives on these issues, and be open to others’ truths. We also agreed to be mindful of the research evidence on these topics. In the end, we managed to generate a set of policy proposals we all find compelling.

To begin with, the progressives among us had to acknowledge that marriage is a positive family outcome that reduces poverty and raises upward mobility in America. The evidence is clear: stable two-parent families have positive impacts on children’s success, and in America marriage is the strongest predictor of such stability. Therefore marriage should be promoted as the norm in America, along with responsible and delayed child-bearing.

At the same time, the conservatives among us had to acknowledge that investing more resources in the skills and employability of poor adults and children is crucial if we want them to have higher incomes over time. Indeed, stable families are hard to maintain when the parents – including both the custodial mothers and the (often) non-custodial fathers – struggle to maintain employment and earn enough to support their families. Investing in proven, cost-effective, education and training programs such as high-quality preschool and training for jobs in high-growth economic sectors can improve the skills and employability of kids from poor families and lift them out of poverty through work.

Another important compromise was that progressives acknowledged that expecting and even requiring adults on public assistance to work can reduce poverty, as we learned in the 1990s from welfare reform; programs today like Disability Insurance, among others, need reforms to encourage more work. And reforms that encourage innovation and accountability would make our public education programs for the poor more effective at all levels. We need more choice in public K-12 education (through charter schools) and a stronger emphasis on developing and retaining effective teachers, while basing our state subsidies to higher education institutions more heavily on graduation rates, employment, and earnings of their graduates.

Conservatives also had to acknowledge that requiring the poor to work only makes sense when work is available to them. In periods or places with weak labor markets, we might need to create jobs for some by subsidizing their employment in either the private or public sector (as we did during the Great Recession). We agreed that no one should be dropped from the benefit rolls unless they have been offered a suitable work activity and rejected it. And we also need to “make work pay” for those who remain unskilled or can find only low-wage jobs – by expanding the Earned Income Tax Credit (especially for adults without custody of children) and modestly raising the minimum wage.

We also all agreed on other topics. For instance, work-based learning—in the form of paid apprenticeships and other models of high-quality career and technical education—can play an important role in raising both skills and work experience among poor youth and adults.  And, if we raise public spending for the poor, we need to pay for it—and not increase federal deficits. We all agree that reducing certain tax deductions for high-income families and making our retirement programs more progressive are good ways to finance our proposals.

As our report demonstrates, it is possible for progressives and conservatives to bridge their differences and reach compromises to generate a set of policies that will reduce poverty and improve upward mobility. Can Congress and the President do the same?

Editor's Note: this piece first appeared in Inside Sources.

Downloads

• Explore the full report

In his new book, “The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War,” Northwestern University economist Bob Gordon argues that the century between 1870 and 1970 was exceptionally good for U.S. households (particularly 1920 to 1950) but that the years since 1970 have been disappointing and the future looks disappointing too.

His postscript includes a few thoughts that deserve immediate attention in today’s economic policy debates: Whatever the causes of the distressing slowdown in the growth of productivity (the amount of stuff produced for each hour of work) and the increase in inequality, what policies might both increase productivity and decrease inequality? 

Many years ago, economist Art Okun argued that we had to choose between policies that increased efficiency and those that increased equity. Perhaps. But  if there are policies that could achieve both, it’s time to try them. 

Mr. Gordon lists several at the end of his book, some conventional and others less so. They include: 

1. Make the earned-income tax credit (a bonus paid by the government to low-wage workers) more comprehensive and generous, a complement to raising the minimum wage. The earned-income tax credit, most economists agree, encourages work. 

2. Reduce the share of Americans who are in prison, which is costly, disproportionately hurts the poor, and has long-lasting negative effects on former prisoners and their families. Also, legalize drug use to save money on enforcement, raise tax revenue, and eliminate the negative consequence a criminal record has on employment.

3. Shift financing of K-12 schooling from local property taxes to statewide revenue sources to reduce inequality and improve outcomes. Shift college financing from loans to income-contingent repayment administered through the income tax system, which is what Australia does.

4. Roll back regulations that hurt the economy and the less affluent, including copyright and patent laws (which have gone too far), occupational licensing (which is a barrier to entry and employment), and zoning and land-use regulations (which boost housing costs). 

5. Reform immigration laws to encourage high-skilled workers, including those trained at U.S. graduate schools. 

Mr. Gordon notes (Page 314) “the extraordinary investment” by state and local governments in education and infrastructure between 1870 and 1940 and cites the substantial boost to productivity created by the interstate highway system. He doesn’t put increased public infrastructure investment on his list, though it belongs there. 

Every presidential candidate should be asked what policies he or she would offer to increase the pace of U.S. productivity growth and to narrow the widening gap between winners and losers in the economy. Bob Gordon’s list is a good place to start.

Editor's note: this post first appeared in the Wall Street Journal Washington Wire blog.

 Bruce Katz's keynote presentation to the Mid-America Region Council discussed what metropolitan areas need to succeed in a competitive world, with specific information about how Greater Kansas City compares to other regions and areas for improvement.

The urban center hosts and participates in a variety of public forums. To view a complete list of these events, please visit the urban center's Speeches and Events page which provides copies of major speeches, powerpoint presentations, event transcripts, and event summaries.

Downloads

• Download