INTRODUCTION

Influencing the Islamic Republic of Iran has proven to be a perennial conundrum for American presidents. The complexity of Iranian politics and the intractability of the problems posed by Tehran’s revolutionary theocracy may explain why, over the course of three decades, each U.S. administration has been forced to revise its initial approach to Iran in hopes of achieving better outcomes. The overall result has been an American tendency to oscillate between engagement and pressure, with frustratingly limited results.

And so it goes for the Obama administration. After an initial, high-profile effort to draw Tehran into a serious dialogue both to resolve the nuclear issue as well as transcend it, Washington now finds itself pivoting away from diplomatic engagement to a more coercive policy centered around economic pressure. The shift comes amidst a dramatic new context within the Islamic Republic, characterized by historic turmoil on the streets and bitter divisions among the elites, and at a moment when the international urgency surrounding Tehran’s nuclear ambitions has never been greater. This context raises the stakes and heightens the sensitivities of getting U.S. policy on Iran right after so many years of failure.

The turn toward sanctions is a predictable one. Sanctions have proven to be an instrument of American policy toward Tehran for the past thirty years. American use of economic pressure as a means of dissuading Iranian malfeasance began with the freezing of Iranian assets after Iranian students seized the U.S. Embassy in Tehran in 1979 and culminated in the nearly comprehensive ban on trade and investment in Iran that has been in place since the Clinton administration. But, despite the appeal of sanctions, their protracted duration underlines their limitations—particularly when they are unilateral—as a mechanism for categorically revising Iranian policy. Still, many find sanctions attractive because the overall track record of Iranian decision-making demonstrates that Tehran often considers the costs and benefits of its policy options in determining its course. As Iran’s internal strife exacerbates the regime’s vulnerabilities, the prospects for international consensus around new economic restrictions appear more realistic than ever before.

To examine the options and implications for using sanctions to address the multi-faceted challenges of Iran, the Saban Center for Middle East Policy at the Brookings Institution held a half-day symposium in late October 2009. The workshop featured off-the-record panel discussions led by experts on Iranian internal politics and the key actors shaping the diplomatic landscape. The conclusions from that session are presented below.

Downloads

• Download

The July 4th congressional recess’s pause in 2014’s record pace of judicial confirmations is a good time to explore the reason for the upsurge.

The 54 confirmations at 2014’s half-way point compare to 43 in all of 2013. What’s behind the increase? Some have said that the Senate’s November 2013 rules change—to allow a simple majority to end filibusters on most nominees—“has resulted in [the] sharp increase.” There is a lot of appeal (and even a little truth) to the claim, but beware the “post hoc ergo propter hoc” fallacy that if “B” follows “A”, “A” necessarily caused “B”.

There have been 61 confirmations since November 21. The rules change clearly enabled three of them. Late October and mid-November filibusters of three D.C. circuit appellate nominees were the immediate cause of the change, which in turn allowed their post-November confirmations.

Saying how many of the other post-November confirmations would have failed without the rules change is an exercise in informed speculation. Here’s one way to look at it: how many of those confirmations had enough negative votes to have sustained a filibuster under the old rule?

Invoking cloture—i.e., cutting off debate—under the old rule required 60 votes. Filibuster proponents were often able to prevent that by peeling off, if not 41 Nay votes, at least votes in the 30s, assuming not all 100 senators were present to vote. For this analysis, let’s set the bar at 34—the fewest number of votes that prevented a 60 vote cloture-invocation against any Obama nominee (most filibuster-sustaining votes were in the high 30’s and low 40’s).

Forty five of the 51 post-November district confirmations quite probably would have happened without the rules change. They had fewer than 34 Nays. And it’s hardly automatic that the six with at least 34 Nays would have been filibustered under the old rule. Senators can and do oppose a nominee but oppose filibustering her as well. Prior to the rules change, 12 district judges were confirmed even though they had at least 34 Nays. Only one of those needed a cloture vote to move to confirmation—33 voted against cloture and 44 voted against confirmation. (Cloture votes, a rarity before the rules change, have been routine since then, and they generally get around 30-40 negative notes. But these appear to be protest votes against the rules change, inasmuch as 27 of the 51 district confirmation had no Nays and another 14 had 20 or fewer Nays.)

So it’s reasonable speculation, but still speculation, that the rules change had no direct effect on district confirmations.

Circuit confirmations are a different story. The three D.C. nominees clearly owe their confirmations to the rules change. Three of the seven other circuit confirmations since November had well over 34 Nays (40, 43, and 45, in fact). One nominee had represented challengers to California’s since-overturned same-sex marriage ban; another, also a Californian, was nominated to a long-vacant seat that Republican senators claimed belonged in Idaho. The third, with 45 Nays, had authored Justice Department memos providing legal justifications for drone strikes against U.S. citizens. Successful filibusters against all three, under the old rule, seem quite plausible. (The other four post-rules-change nominees were confirmed with either no, or in one case, three negative votes.)

Bottom line: The rules change likely enabled at most twelve of the 61 post-rules change confirmations, and it more likely enabled only six.

The frenetic pace of 2014 confirmations is due mainly to Senate Democrats’ desire to secure as many as they can before the November elections and the possibility of losing control of the confirmation process.

Event Information

Puerto Rico is the latest, but probably not the last, case of a local government confronting financial strains that call into question its ability to meet its obligations to bondholders while providing services to its taxpaying constituents. Puerto Rico is, of course, a special case because it is a territory, not a state or municipality. Will Puerto Rico’s problems have ripple effects for the $3.7 trillion U.S. municipal bond market? What about the resolution of Detroit's bankruptcy? How will state and local governments and the courts weigh the interests of pensioners, employees, taxpayers and bondholders when there isn't enough money to go around?

On Tuesday, July 12, the Hutchins Center on Fiscal and Monetary Policy at Brookings webcasted the keynote address from the 5th annual Municipal Finance Conference, delivered by the sitting governor of Puerto Rico, Hon. Alejandro García Padilla. After Governor Padilla’s remarks on Puerto Rico’s future, Hutchins Center Director David Wessel moderated a panel on the politics and practice of municipal finance in the post-Detroit and post-Puerto Rico era.

Join the conversation and tweet questions for the panelists at #MuniFinance.

Video

• Keynote address by Alejandro García Padilla
• Panel: The muni market in the post-Detroit and post-Puerto Rico era
• Changing patterns in household ownership of municipal debt
• Municipal borrowing costs and state policies for distressed municipalities
• Municipal finance structure and Chapter 9 creditor priorities
• Term limits and municipal borrowing costs
• Why has regional income convergence in the U.S. declined?
• State strategies for detecting fiscal distress in local governments
• Pensions and other post-employment benefits

Transcript

• Download the uncorrected transcript (.pdf)

Event Materials

• Garcia Padilla Slides
• 20160712_munifinance_puertorico_detroit_transcript

Executive Summary

If the main purpose of the Emergency Economic Stabilization Act of 2008 is to give banks confidence in each other, then enabling Treasury directly to bolster the capital positions of banks that need more capital may be an even more effective way to restoring confidence to the inter-bank market than the purchased of troubled assets. Whatever Congress may have intended about the pricing of the distressed assets, it also authorized a much more direct way to recapitalize the financial system and weak banks in particular: direct purchases by Treasury of securities that individual institutions may wish to issue to bolster their capital. At this writing, Treasury reportedly is considering ways do this. In this essay, we outline a specific bank recapitalization plan for Treasury to consider.

In particular, Treasury could announce its willingness to entertain applications for capital injections, using a set pricing formula. For publicly traded banks, Treasury could buy at the price as of a given date, such as the price one or more days before its plan was announced. For privately-owned banks, Treasury could use a price based on the average price-to-book value for publicly traded banks as of that date. To prevent government intrusion into the affairs of the banks, the stock should be non-voting. Treasury would make clear that it only would take minority positions. There should be no takeovers of more companies—AIG, Fannie and Freddie are quite enough. Treasury also should announce that it will dispose (or sell back to the bank) any stock acquired through these actions as soon as the financial system has stabilized and the bank is in sound financial condition (perhaps a time limit, such as three years, should be a working presumption).

We believe Treasury can accommodate a systematic recapitalization plan within the funding it has been given – initially $350 billion and another $350 billion later upon request to Congress (unless it disapproves) – by using the required disclosures about its asset purchases as a way of jump starting private sector pricing and trading of these securities. This should conserve Treasury’s resources it might otherwise use for asset purchases, and thus free up funds to recapitalize weak banks directly, but in an orderly fashion.

Treasury will have to be careful when it buys distressed assets to guard against the possibility that banks will just dump their worst stuff on taxpayers. The Department will also have to be careful when buying equity in banks. There cannot be an open invitation for bank owners to move assets out of the bank and then, in effect, say: “We don’t want this bank, you buy it.” To avoid this problem, Treasury should work closely with the FDIC and other regulators to determine whether or not a particular bank is eligible for an equity injection. The Department also may need to limit the scope of the recapitalization program to larger national banks, if it becomes infeasible to allow smaller banks to participate.

Making the Rescue Package Work: Asset and Equity Purchases [1]

The unprecedented financial rescue plan – technically the Emergency Economic Stabilization Act of 2008 (“EESA,” the “Act”, or the “plan”) -- has now been enacted by the Congress. One of the goals of the plan is to end the immediate panic in inter-bank lending markets, and on this basis several omens are not encouraging.

The Dow Jones stock index has been dropping daily, by large amounts, since EESA was enacted. The TED spread measures the difference between the interest rate on short term Treasury bills and the interest rate banks pay to borrow from each other (the LIBOR) and is a widely accepted measure of perceived risk in the financial sector. For several years this spread had hovered around 50 basis points or half a percentage point, reflecting the fact that lending to other financial institutions was considered almost as safe as buying Treasury bills. However, the spread shot up to 2.4 percentage points in July 2007 as the financial crisis hit, and it fluctuated widely in subsequent months. Following passage of the plan it remains even more elevated than it was last July—it was 3.8 percentage points as of October 7 and broke 4 percent on October 8. Financial institutions simply do not trust each other’s credit worthiness. Some of the market worries, of course, reflect the fragile state of the U.S. and global economies, but clearly the passage of the rescue plan itself has not calmed markets.

A second and related goal for the plan, according to media accounts, is to facilitate the recapitalization of the financial system, but the language of the bill is surprisingly coy about this. While the Act aims to “restore liquidity and stability to the financial system” it also directs the Treasury Secretary to prevent “unjust enrichment of financial institutions participating” in the asset purchase program. It is not yet clear whether Treasury will choose to recapitalize banks through its asset purchases – by buying them at prices above the values to which banks and other sellers have already written them down – or whether Treasury will simply use its purchases to stabilize prices for these securities and thus provide liquidity to the market, even if it may result in additional write-downs of their values (and thus additional reductions in capital).

Whatever Congress may have intended about the pricing of the distressed assets, it also authorized a much more direct way to recapitalize the financial system and weak banks in particular: direct purchases by Treasury of securities that individual institutions may wish to issue to bolster their capital. Of course, in normal times, such authority would be unnecessary because financial institutions would seek to tap private sources of capital first. But these are not normal times, to say the least.

If the main purpose of the plan is to give banks confidence in each other, then enabling Treasury directly to bolster the capital positions of banks that need more capital may be an even more effective way to restoring confidence to the inter-bank market. Accordingly, we outline here a possible supplementary bank recapitalization plan that we believe Treasury should pursue, at the same time it purchases distressed assets. As this paper is being completed on October 9, 2008, The New York Times reports that the Treasury is now considering such a move. We are encouraged by this and in this essay we provide both a rationale for doing so and some concrete suggestions for how such a direct recapitalization program might work. We do not support further nationalization of the banking system beyond what has already been done but we believe that the crisis has become so severe that the asset purchase plan on its own will not be enough to turn the current situation around. Additional capital is urgently needed and could be supplied by Treasury purchases of minority, non-voting equity stakes, or by warrants.

We believe Treasury can accommodate a systematic recapitalization plan within the funding it has been given – initially $350 billion and another $350 billion later upon request to Congress (unless it disapproves) – by using the required disclosures about its asset purchases as a way of jump starting private sector pricing and trading of these securities. This should conserve Treasury’s resources it might otherwise use for asset purchases, and thus free up funds to recapitalize weak banks directly, but in an orderly fashion, as we describe below.

Why Do Banks Need More Capital?

Financial institutions make money by borrowing money on favorable terms, that is, at low interest rates, and then lending it out at higher rates or by buying assets that yield higher returns. They may make money in other ways too, but the state of their balance sheets of assets and liabilities is crucial. In order to create a viable financial institution that can accommodate requests by depositors to take money out, someone has to put up capital and typically this comes from the equity in the company. The owners of the company have an incentive to keep this equity capital low and to build a large volume of borrowing and lending off a small base of capital—to increase leverage. This is because the profits earned are divided among the equity owners and the less capital there is, the higher the return on equity.

Governments for many years and in almost all countries have regulations in place setting capital requirements for banks in particular to stop them from taking too much risk in the pursuit of high returns and also protect any fund that insures their deposits against loss (the FDIC in this country). But some of our larger banks in recent years found a way around these rules by establishing “off-balance sheet” entities – Structured Investment Vehicles (“SIVs”) – to purchase mortgage-related and other asset-backed securities that the banks were issuing. In addition, large investment banks significantly increased their leverage in the years running up to the recent crisis, and were able to do so without mandated capital requirements. As a result, when the mortgage crisis hit, our financial system was weaker than was widely believed, and in the case of large banks in particular, than was officially reported.[2]

The mortgage crisis, which first surfaced in 2006 and has escalated rapidly since then, has hit bank balance sheets severely. As banks were forced to recognize losses on the mortgages they held in their portfolio, and especially to write down the values of their mortgage securities to their “market values” (even though the prices in those “markets” reflected relatively few “fire-sale” trades), they suffered reductions of their capital. Furthermore, the large banks that had created SIVs to escape such events found they could not hide from them when the SIVs could no longer roll over the commercial paper they had issued to finance their holdings of mortgage securities. To avoid dumping these securities on the market to satisfy their creditors, the banks took the SIVs back on their balance sheets, only to suffer further losses to their capital.

As we have seen, some of our largest banks – Washington Mutual and Wachovia, to name two – have not been able to survive all of this, and have been forced or are or being forced into the hands of stronger survivors. Other banks have been doing their best to shore up their capital bases by issuing new equity to replace the losses they have absorbed on delinquent loans and declining prices of their asset-backed securities. According to media reports, financial institutions (largely banks) worldwide have suffered over $700 billion in such losses to date, of which they replaced approximately $500 billion by issuing new equity.

But more losses are sure to come; indeed Secretary Paulson has said to expect further bank failures. Earlier this year, the International Monetary Fund projected that losses due to the credit crisis worldwide could hit $1 trillion. The IMF has recently upped that forecast to $1.4 trillion. If anything close to this latest forecast is realized, then many banks – here and abroad – will need to raise even more equity, but in a capital market that is now highly more risk averse than only a few months ago.

It is in this environment that banks have grown much less comfortable dealing with each other, even though they must to keep the financial system running. Every day, some banks have more cash on hand, or reserves, than they need to meet reserve requirements and ordinary demands for liquidity, while others are short of such funds. In the United States, banks thus trade with each other in the Federal Funds market while global banks borrow and lend to each other through the London Interbank market using the LIBOR rate of interest. The Federal Reserve’s main objective of monetary policy is to stabilize the “Fed funds” rate around a target, now just lowered to 1.5%, down from 2% where it has been for some months (and down from 5.25% before subprime mortgage crisis). To do so, the Fed has added a huge amount of liquidity to the financial system, even going so far this week as to buy up commercial paper issued by corporations, an unprecedented step. But the Fed does not and probably cannot control the longer term inter-bank market, in which banks lend to each other typically over a 3-month period.

The steep jump in the 3-month inter-bank lending rate – well over 4 percent – reflects two fundamental facts that EESA is designed to address. One is that banks don’t trust each others’ valuations of the mortgage and possibly other asset-backed securities they are all holding, precisely because the “markets” in those securities are so thin and thus not generating reliable prices. The second problem is that banks either are short of capital themselves, or fear that their counterparties are. No wonder that banks are so unwilling to lend to each other for a period even as short as three months – which in this environment, can seem like an eternity.

The capital shortage in the banking system, in particular, has severe implications for the rest of the economy. An institution that is short of capital is forced to cut back on its lending and this shows up in denials of lines of credit to companies and reductions in credit limits for consumers. Households cut back on spending; it is difficult to get a mortgage or a car loan; and companies reduce investment and curtail operations. And as we learn in any college course on banking, the impact of a loss of capital on bank lending can be multiplied. Each dollar of bank capital supports roughly ten dollars of overall lending in the economy. Each dollar of lost capital thus can result in ten dollars of lending contraction. The impact of an economy-wide bank contraction can be devastating for Main Street. The Great Depression was greatly exacerbated by the collapse of banks. The long stagnation in Japan was in large part the result of a failure to recapitalize the banks.

How bad is the current problem? We do not know how many banks, insurance companies or other financial institutions are in a weakened state, or perhaps even more important, may become weakened as the overall economy deteriorates. The official data published so far don’t really help on this score. The FDIC compiles information on the number and collective assets held by “problem banks,” or those in danger in failing. As of the second quarter of 2008, there were 117 such banks with assets of $78 billion up from 90 in the second quarter with assets of $28 billion., These figures did not include Washington Mutual, which would have failed had it not been bought by J.P. Morgan, or Wachovia, which at this writing, looks like it will be acquired by Wells Fargo (but also was in danger of failing without being acquired by someone). Together these banks hold more than $500 billion in customer deposits. Furthermore, according to recent media reports, even some large insurance companies (beyond AIG) may be having capital problems, having suffered large losses on the securities they hold in reserve to meet future claims.

Can the Asset Purchase Plan Succeed in Recapitalizing the Banks?

In principle, there are two ways in which the original Treasury asset purchase plan would recapitalize the banks. The first method is premised on the view that private markets are unwilling to supply capital to the banks because investors do not know how much their assets are worth. The Treasury, it is argued, would use its asset purchase plan as a way of revealing the prices of the assets and once that information is known, the banks will be able to raise new capital again from private markets. But better pricing will only attract capital if there are investors out there who are willing to supply it. Given the dramatic downturn in equities markets, finding such willing investors will be difficult, to say the least. Those investors that provided capital to banks early on in the crisis have been hit hard by the subsequent decline in equity prices and are reluctant to get burned again. When Bank of America said it would raise $10 billion from the markets, for example, its stock price fell sharply, suggesting there is a lot of market resistance to be overcome before private investors are willing to recapitalize the banking system.

Second, in principle, Treasury could recapitalize the banks by buying distressed assets at prices above those at which the securities are currently carried on the books of the institutions that sell them (original book or purchase value minus any write-offs).[3] In this case, the bank would be able to report a capital gain from its sale to the Treasury, a gain that would reverse, at least in part, the capital losses it had taken in the past and thereby add to its capital.

Treasury has said it will use reverse auctions[4] when it buys assets, and it is possible that the Department will be able to construct some auctions that will enable some holders of troubled assets to sell them to the Treasury at prices that earn a capital gain. But we are somewhat skeptical how many securities will fall into this category. For one thing, asset-backed securities are not homogenous, like traditional equity or bonds. In addition, it would be surprising in the current environment if reverse auctions would reveal prices that are above the written-down values of many of these securities. After all, an auction does not necessarily produce valuations that reflect the “hold to maturity” price rather than the “liquidation” price for the securities, as Fed Chairman Ben Bernanke suggested the purchase plan would accomplish.

Accordingly, we strongly suspect that Treasury will have to purchase many securities in one-on-one deals rather than through auctions. But in doing this, it may be both legally and politically difficult for the Treasury to pay prices in negotiations that are above the valuations banks or other sellers already have given them. Section 101 (e) of EESA specifically requires the Treasury Secretary “to take such steps as may be necessary to prevent unjust enrichment” of participating financial institutions, and Congress could construe such language to preclude such sales.[5] Furthermore, even if there were not a specific prohibition in the EESA, Treasury may wish to avoid the public criticism it would face if it purchased assets at prices that would allow participating institutions to book gains. And, in the case of sales at prices below the explicit or implicit price of the securities carried on an institution’s books, the sales will trigger further accounting losses and thus additional deductions from reported capital.

In short, we are not at all confident that the Treasury’s planned purchases of troubled securities, by themselves, will do much to recapitalize the banking system. This does not mean that the planned asset purchases will not deliver some needed help. Although at this writing the inter-bank lending market remains frozen even though EESA has been enacted and signed into law, one reason why banks and others may not yet have confidence that it will lead to a thaw in credit markets is that the guidelines for the asset purchases have not yet been issued. Once these guidelines are announced and the purchases begin, and the markets start to see real results, it is possible that some of the missing trust in the banking system will come back.[6]

However, Treasury may not need to spend, and for reasons elaborated below we do not believe it should spend, anywhere near the full $700 billion, or perhaps even most of the initial $350 billion tranche in borrowing authority, to liquefy the markets for mortgage and other asset-backed securities. EESA requires Treasury to publish (within two days) information about each of these purchases. We urge the Department to include in such publications (presumably on its website) regular data on the defaults and delinquencies to date of the loans underlying each batch of securities it purchases. Such information should enable financial institutions that are still holding similar securities not only to price them more accurately, but also to give market participants enough confidence to begin trading these securities without further Treasury purchases.

Husbanding its resources should be a prime objective for Treasury. In conducting its purchases of troubled assets, it should target first those asset categories that are the most illiquid. The main objective always should be jump-starting private sector activity or at least bringing greater clarity to the pricing of particular classes of securities. There is no need for Treasury, therefore, to make repeat purchases of similar securities (such as collateralized debt obligations issued within several months of each other, structured in roughly a similar way). Rather, the aim should be to make a market in as many different asset categories as are reasonably necessary to provide guidance to market participants, no more, no less.

Yet no one can be confident at this point that asset purchases alone will give banks sufficient confidence to begin dealing with each other at much lower interest rates. If the asset purchases do the trick, fine. But if they don’t, Treasury should make sure it has enough financial ammunition to pursue a second, more direct, strategy for restoring banks’ confidence – the direct bank recapitalization strategy to which we now turn.

Recapitalizing the Financial System Directly

Having the government put capital into financial institutions directly is not a new idea. It is the approach followed in this crisis for Fannie and Freddie and has been used in other countries. Sweden recapitalized its banks by adding capital to them during its crisis in the 1980s. Most recently, the British government has announced a sweeping bank recapitalization amidst the current crisis. And of more relevance to the U.S. situation, Congress specifically added authority in EESA for Treasury to make direct capital injections into banks.

In recent days, Treasury Secretary Paulson has acknowledged that the Department may take advantage of this authority and thus use some of its funds to buy equity in troubled banks. This is a welcome development. Even if Treasury’s asset purchase program restores confidence in the pricing of troubled securities, many banks still believe that many other banks lack sufficient capital, and thus can still be reluctant to lend to them. The fact that the FDIC stands ready (especially with its new unlimited line of credit at the Treasury) to assist acquiring banks in taking over failing banks is probably not sufficient, even with a successful Treasury asset purchase program, to provide this confidence. Bank lenders to failed banks can still lose money in such transactions, or at the very least may have difficulty accessing their funds for some period, at times when all banks seem to want or need as much liquidity as they can get.

How might such a capital injection program work? Treasury could announce its willingness to entertain applications for capital injections, using a set pricing formula. For publicly traded banks, Treasury could buy at the price as of a given date, such as the price one or more days before its plan was announced, as has been suggested by former St. Louis Federal Reserve Bank President William Poole.[7] For privately-owned banks, Treasury could use a price based on the average price-to-book value for publicly traded banks as of that date. To prevent government intrusion into the affairs of the banks, the stock should be non-voting. Treasury would make clear that it only would take minority positions. There should be no takeovers of more companies—AIG, Fannie and Freddie are quite enough. Treasury also should announce that it will dispose (or sell back to the bank) any stock acquired through these actions as soon as the financial system has stabilized and the bank is in sound financial condition (perhaps a time limit, such as three years, should be a working presumption).

The Treasury will have to be careful when it buys distressed assets to guard against the possibility that banks will just dump their worst stuff on the taxpayers. The Department also will have to be careful when buying equity in banks, especially if it decides to go for a broad, nationwide program. There cannot be an open invitation for owners to move assets out of the bank and then, in effect, say: “We don’t want this bank, you buy it.” This problem suggests that Treasury would need to work closely with the FDIC and other regulators to determine whether or not a particular bank is eligible for an equity injection. Treasury also may need to limit the scope of the program to larger banks, if it becomes infeasible to allow smaller banks to participate.

We presume that Treasury did not initially embrace the idea of a more systematic recapitalization of the banking system out of concern not to have any further government involvement in the banking system, especially on the heels of the Fannie/Freddie conservatorship and the Fed’s rescue of AIG. That Treasury is now considering direct capital injections indicates that this may no longer be a concern. In our view, limiting Treasury’s purchases to non-voting stock in any event would address this concern directly.

Conclusion

Ben Bernanke has compared the current financial crisis to a heart attack in the economy. For some heart attacks, it is enough to administer drugs and change diet and exercise habits. But in acute cases, major surgery is needed and the current crisis is in the acute phase. Direct surgery in the form of capital injected into financial institutions, along with direct asset purchases, should help calm the inter-banking lending market.

Based on recent monthly data it appears that GDP started to fall in mid-year and the economy is moving into recession so the proposals made here will not change that. Nor can the proposals compel banks to make loans to their traditional customers – consumers and businesses – in the current climate of fear. But Treasury can do something to mitigate that fear and thus, along with the recent further easing of monetary policy, likely additional fiscal stimulus and further homeowner relief, the Department will help reduce the severity of the current recession if it uses all the tools in its financial arsenal.

Downloads

• Download

Editor’s Note: Admission rates this year are at an all-time low, while anxiety about the college admission process remains high. Carol Graham and Michael O’Hanlon write that an Ivy League degree does not necessarily determine happiness or success.

This year's college admission process in the United States was by most measures tougher than ever. Only about 5 percent of applicants were accepted at Stanford and many admission rates at other schools were comparably daunting. Meanwhile, our nation's teenagers are exposed to a background of noise about America's supposed economic decline, which would seem only to increase the pressure to get a head start on that declining pool of available high-paying and highly satisfying careers. In the Washington, D.C. area, this sense of malaise was compounded this year by a spate of suicides at a prestigious local high school, with the common thread reportedly being a sense of anxiety about the future among the teenagers.

Of course, some of this story is timeless, and reflects the inevitable challenges of growing up in a competitive society. But much of it is over-hyped or simply wrong. We need to help our college-bound teenagers maintain a sense of perspective and calm as they face what is among life's most exciting but also most stressful periods. As two proud Princeton grads, we recognize the value of a high-quality education and the social and professional networks that come with an Ivy League degree. But we also know from intuition and experience that a similar kind of experience is achievable in many, many other places in our country, fielding as it does the best ecosystem of higher education institutions in the history of the planet. And increasingly, there is a strong body of research to back this claim up.

Higher Education Is Important

First, though, it is worth noting one incontrovertible fact: higher education is important. Sure, there can be exceptions, and some people may not have the opportunity at a given point in life to pursue either a two-year or four-year college degree or graduate education. But it is a reality in America's modern economy, due to trends with globalization and automation. Those with college degrees continue to do better than previous generations in this country; those without have seen their incomes stagnate or even decline on average for a generation now, as our colleague Belle Sawhill has shown. Another Brookings colleague, Richard Reeves, cites evidence that college graduates have higher marriage rates, higher wages, better health, greater job security, more interesting work and greater personal autonomy.

However, where you go to college matters less than if you go, by any number of measures. This is not to say it is unimportant. But whether you are interested in happiness while in college, satisfaction later in life or even raw monetary income, the correlation between gaining a Harvard degree and achieving nirvana is less than many 18-year-olds may be led to believe.

Begin with the question of happiness--a new and scientifically measurable arena of social science. It turns out you can learn a lot about how happy people are by asking them, and then applying common-sense statistical methods to a pool of data. For one of us, this has been the focus of research for over a decade. While money matters to happiness, after a certain point more money does not increase many dimensions of well-being (such as how people experience their daily lives), and in general, it is less important than good health or fulfillment at the workplace, on the home-front and in the community. Happier people, meanwhile, tend to care less about income but are more likely to value learning and creativity. And they are also likely to have more positive outlooks about their own futures, outlooks which in turn lead to better labor market and health outcomes on average.

An Atmosphere For Success

Yale or Amherst graduates are no more likely to find happiness than those who attended less prestigious schools. A new Gallup poll, inspired largely by Purdue president Mitch Daniels, finds that the most important enduring effects of the college experience on human happiness relate to personal bonds with professors and a sense of ongoing intellectual curiosity, not to GPA or GRE scores.

America can provide this kind of stimulation and this kind of experience at thousands of its institutions of higher learning. To be sure, elite universities, with their higher percentage of dedicated and outstanding students, create an atmosphere that can be more motivating. Yet it can also be much more stressful. Students at somewhat less notable institutions may need a bit more self-motivation to excel in certain cases, but they may also find professors who are every bit as committed to their education as any Ivy Leaguer and perhaps more available on average.

It is true that networks of fellow alums from the nation's great universities are often hugely helpful to one's career prospects. But a surprising number of institutions in our country have such networks of committed graduates, professors and other patrons. And while Harvard grads may be a dime a dozen in a place like D.C., those hailing from somewhat less known or prestigious places arguably watch out for each other even more, compensating to a large extent for their smaller numbers.

Even on the narrower subject of financial success, the issue is not cut and dried. Sure, the big and prestigious universities tend to be richer, and their graduates on average make more money. But much of that is because the more motivated and gifted students tend to choose the elite schools in the first place, driving up the average regardless of the quality of education. For the 18-year-old who was just turned down by his or her top couple of college choices and having to settle for a "safety" school, it is not clear that this turn of fate really matters for long-term financial prospects. Assuming comparable degrees of drive and motivation, students appear to do just as well elsewhere. In 2004, Mathematica economist Stacy Dale compared students who willfully went to less prestigious schools with their cohorts at the most prestigious universities and showed little discernible income differential.

America is blessed by a wonderful new generation of young people; as parents of five of them, we see this every day. Maybe those of us who have been through some of life's ups and downs need to work harder to help them take down the collective stress level a notch or two. No graduating child should be unhappy because they are going to their second or third choice of college next fall. With the right attitude and encouragement, they will likely do well—and be happy—wherever they go.

One of global society’s foremost structural changes underway is its rapid aggregate shift from farmbased to city-based economies. More than half of humanity now lives in urban areas, and more than two-thirds of the world’s economies have a majority of their population living in urban settings. Much of the gradual movement from rural to urban areas is driven by long-term forces of economic progress. But one corresponding downside is that city-based societies become increasingly disconnected—certainly physically, and likely psychologically—from the practicalities of rural livelihoods, especially agriculture, the crucial economic sector that provides food to fuel humanity.

The nature of agriculture is especially important when considering the tantalizingly imminent prospect of eliminating extreme poverty within a generation. The majority of the world’s extremely poor people still live in rural areas, where farming is likely to play a central role in boosting average incomes. Agriculture is similarly important when considering environmental challenges like protecting biodiversity and tackling climate change. For example, agriculture and shifts in land use are responsible for roughly a quarter of greenhouse gas emissions.

As a single word, the concept of “agriculture” encompasses a remarkably diverse set of circumstances. It can be defined very simply, as at dictionary.com, as “the science or occupation of cultivating land and rearing crops and livestock.” But underneath that definition lies a vast array of landscape ecologies and climates in which different types of plant and animal species can grow. Focusing solely on crop species, each plant grows within a particular set of respective conditions. Some plants provide food—such as grains, fruits, or vegetables—that people or livestock can consume directly for metabolic energy. Other plants provide stimulants or medication that humans consume—such as coffee or Artemisia—but have no caloric value. Still others provide physical materials—like cotton or rubber—that provide valuable inputs to physical manufacturing.

One of the primary reasons why agriculture’s diversity is so important to understand is that it defines the possibilities, and limits, for the diffusion of relevant technologies. Some crops, like wheat, grow only in temperate areas, so relevant advances in breeding or plant productivity might be relatively easy to diffuse across similar agro-ecological environments but will not naturally transfer to tropical environments, where most of the world’s poor reside. Conversely, for example, rice originates in lowland tropical areas and it has historically been relatively easy to adopt farming technologies from one rice-growing region to another. But, again, its diffusion is limited by geography and climate. Meanwhile maize can grow in both temperate and tropical areas, but its unique germinating properties render it difficult to transfer seed technologies across geographies.

Given the centrality of agriculture in many crucial global challenges, including the internationally agreed Sustainable Development Goals recently established for 2030, it is worth unpacking the topic empirically to describe what the term actually means today. This short paper does so with a focus on developing country crops, answering five basic questions: 

1. What types of crops does each country grow? 

2. Which cereals are most prominent in each country? 

3. Which non-cereal crops are most prominent in each country? 

4. How common are “cash crops” in each country? 

5. How has area harvested been changing recently? 

Readers should note that the following assessments of crop prominence are measured by area harvested, and therefore do not capture each crop’s underlying level of productivity or overarching importance within an economy. For example, a local cereal crop might be worth only $200 per ton of output in a country, but average yields might vary across a spectrum from around 1 to 6 tons per hectare (or even higher). Meanwhile, an export-oriented cash crop like coffee might be worth $2,000 per ton, with potential yields ranging from roughly half a ton to 3 or more tons per hectare. Thus the extent of area harvested forms only one of many variables required for a thorough understanding of local agricultural systems. 

The underlying analysis for this paper was originally conducted for a related book chapter on “Agriculture’s role in ending extreme poverty” (McArthur, 2015). That chapter addresses similar questions for a subset of 61 countries still estimated to be struggling with extreme poverty challenges as of 2011. Here we present data for a broader set of 140 developing countries. All tables are also available online for download.

Downloads

• Download the full paper (PDF)
• Cropshares_tables_clean
• Crop_Shares_metadata
• FAO crop codes
• FAO_cropshares
• WB income class
• WBcodescountrycode

Click here to read the blog in English »

2016: une année décisive

Les décideurs politiques et les spécialistes du développement sont désormais confrontés à une nouvelle série d’enjeux suite à l’établissement, par consensus mondial, du triumvirat composé du Programme d’action d’Addis-Abeba, du Programme d’action 2030 et de l’Accord de Paris [1]  : mise en œuvre, suivi et passage en revue. Les professionnels des politiques de développement doivent aborder ces enjeux tout en y intégrant ces trois piliers du développement durable que sont le développement social, la croissance économique et la protection environnementale, sans oublier les trois volets intersectoriels du consensus mondial précités, tout cela en opérant au sein d’un contexte dans lequel la planification des politiques reste accomplie de façon cloisonnée. Ils doivent également incorporer le caractère universel de ces nouveaux accords en tenant compte des différentes circonstances nationales ; à savoir les divers besoins, réalités, capacités, niveaux de développement nationaux, de même que les diverses priorités et politiques nationales. Ils doivent aussi accroître considérablement l’allocation des ressources et les moyens de mise en œuvre (comme le financement, le renforcement des capacités et le transfert de technologies) pour changer les choses et améliorer les nouveaux partenariats réunissant plusieurs parties prenantes en vue de restreindre les mouvements mondiaux de toutes sortes (notamment la migration, le terrorisme, les maladies, la fiscalité, les phénomènes météorologiques extrêmes et la révolution numérique) dans un monde résolument interconnecté. Il va sans dire que la tâche est très ambitieuse !

Ces difficultés sont à l’origine de nouveaux accords nationaux et internationaux visant à honorer les engagements pris pour répondre à ces enjeux sans précédent. Plusieurs États africains ont déjà commencé à créer des comités interministériels et des groupes de travail pour assurer l’alignement entre les objectifs mondiaux et les processus, les aspirations et les priorités actuels. 

L’Afrique prépare, en collaboration avec la communauté internationale, le premier Forum politique de haut niveau depuis l’adoption du programme d’action 2030 qui aura lieu en juillet 2016 et dont le thème sera « Veiller à ce que nul ne soit laissé pour compte ». Afin d’éclairer le leadership, l’orientation et les recommandations relatifs au Programme d’action 2030, six pays africains [2] parmi les 22 États membres de l’ONU se sont portés volontaires pour présenter des études nationales sur le travail accompli en vue d’atteindre les Objectifs de développement durable (ODD), soit une opportunité unique de fournir un examen objectif sans compromis et de mettre en avant les leviers d’exploitation et les limites à surmonter afin d’avoir un impact.

Les Nations Unies ont déployé de nombreux efforts de coordination parallèlement au travail de terrain réalisé par l’Afrique : en premier lieu, la création d’un groupe de travail interinstitutions chargé de préparer le forum sur le financement du développement de suivi synchronisé avec le Forum mondial pour l’infrastructure, qui consultera sur les investissements en infrastructures, un aspect crucial pour le continent ; un groupe composé de 10 représentants nommés dont la mission consiste à soutenir le Mécanisme de facilitation des technologies aux fins du développement, du transfert et de la diffusion de technologies pour les ODD, soit un autre aspect très important pour l’Afrique ; et enfin une équipe de conseillers indépendants dont la mission consiste à fournir des conseils sur le positionnement à plus long terme du système de développement de l’ONU dans le contexte du Programme 2030 communément appelé  « UN fit for purpose », parmi tant d’autres efforts.

Ces obligations bureaucratiques écrasantes pèseront à elles seules lourdement sur les capacités limitées de l’Afrique. C’est la raison pour laquelle le continent à tout intérêt à regrouper ses ressources en tirant parti de ses robustes réseaux régionaux pour atténuer cet obstacle de façon cohérente et coordonnée et en capitalisant sur la convergence entre les textes nouvellement adoptés et l’Agenda 2063, le programme de transformation mis en place par l’Union Africaine sur une durée de 50 ans, avec l’aide d’institutions panafricaines.

Outre les échelons nationaux et internationaux, il convient de tenir compte d’une troisième dimension : l’échelon régional. Ainsi, les trois principaux accords conclus en 2015 privilégiaient le soutien aux projets et aux cadres de coopération encourageant l’intégration régionale et sous-régionale, en particulier en Afrique. [3] C’est la raison pour laquelle des politiques industrielles communes et cohérentes relatives aux chaînes de valeur régionales formulées par des institutions régionales renforcées et portées par un leadership transformationnel volontariste s’imposent comme le meilleur moyen de favoriser l’insertion de l’Afrique au sein de l’économie mondiale.

L’Afrique considère depuis longtemps l’intégration économique régionale, partie intégrante de ses principaux « piliers », à savoir les huit Communautés économiques régionales (CER), comme étant une stratégie de développement de base.

Le continent s’est manifestement engagé dans cette voie : l’été dernier, trois CER, le Marché commun pour l’Afrique de l’Est et de l’Afrique australe (COMESA), la Communauté d’Afrique de l’Est (CAE) et la Communauté de développement de l’Afrique de l’Est (SADC) ont créé le Traité de libre-échange tripartite (TFTA) regroupant 26 pays, avec plus de 600 millions d’habitants et un PIB global de mille milliards de dollars US. Cet accord tripartite ouvre la voie à l’accord « méga-régional » de l’Afrique, la Zone de libre échange continentale (CFTA) et à l’instauration d’une vaste communauté économique africaine. Si la régionalisation permet la libre circulation des personnes, des capitaux, des biens et des services, c’est la connectivité intra-africaine accrue en découlant qui stimulera les échanges commerciaux au sein de l’Afrique, favorisera la croissance, créera des emplois et attira des investissements. Il devrait enfin faire démarrer l’industrialisation, l’innovation et la compétitivité. À ces fins, les institutions panafricaines, soucieuses d’exploiter les récentes performances favorables enregistrés par le continent, redoublent d’efforts pour créer un environnement propice à l’harmonisation des politiques et des réglementations et aux économies d’échelle.

L’infrastructure, sans laquelle toute connectivité est impossible, constitue indéniablement le fondement de tout futur plan de régionalisation. Outre l’intégration du marché et le développement industriel, le développement des infrastructures est l’un des trois piliers de la stratégie du TFTA. De la même manière, l’agence pour le Nouveau partenariat économique pour le développement en Afrique (NEPAD), l’organe technique de l’Union africaine (UA) chargé de planifier et coordonner la mise en œuvre des priorités continentales et des programmes régionaux, a adopté l’intégration régionale en tant que méthode stratégique pour l’infrastructure. Le NEPAD a d’ailleurs organisé, en juin 2014, le Sommet de Dakar sur le financement des infrastructures ayant abouti à l’adoption du Programme d’action de Dakar qui présente des options en matière de mobilisation d’investissements dans des projets de développement des infrastructures, en commençant par 16 projets bancables clés issus du programme de développement des infrastructures en Afrique (PIDA). Il est intéressant de noter que ces « mégaprojets du NEPAD visant à transformer l’Afrique » ont tous une portée régionale.

En complémentant les efforts du NEPAD et du TFTA, le Réseau d’affaires continental a été formé pour promouvoir le dialogue entre les secteurs public et privé sur la thématique de l’investissement en infrastructures régionales. Le Fond Africa50 pour l’infrastructure a été constitué en guise de nouvelle plateforme de prestation gérée commercialement en vue de combler l’énorme vide au niveau du financement des infrastructures en Afrique, un trou évaluée à 50 milliards de dollars US par an.

L’élaboration de propositions propres et les progrès institutionnels récemment observés témoignent de la détermination de l’Afrique à accélérer le développement des infrastructures, et donc la régionalisation. Lors du dernier sommet de l’UA, le Comité d’orientation des chefs d’État et de gouvernement a approuvé l’institutionnalisation d’une Semaine PIDA organisée par la Banque africaine de développement (BAD) en vue d’assurer le suivi des progrès accomplis.

L’élan des projets énergétiques régionaux en Afrique

Les partenariats énergétiques indiqués ci-dessous illustrent les avantages potentiels des méthodes de mise en œuvre et de suivi transfrontalières : l’Africa Power Vision (APV) réalisée avec Power Africa, le modèle du Centre pour les énergies renouvelables et l’efficacité énergétique(ECREEE) de la CEDEAO accompagnant l’initiative Énergie Durable pour Tous (SE4LL), une initiative mise en œuvre par la plateforme Africaine et la solution Africa GreenCo basée sur le PIDA.

• Africa Power Vision : Les ministres Africains de l’énergie et des finances réunis à l’occasion du Forum économique mondial (FEM) de Davos en 2014 ont décidé de créer l’APV. La vision fournit un modèle stratégique de mobilisation de ressources afin de permettre aux entreprises, aux industries et aux foyers africains d’avoir un accès plus rapide à l’énergie moderne. Elle dresse une liste de projets énergétiques basés sur des priorités régionales établies par l’Afrique et extraites en grande partie du Programme d’action prioritaire du PIDA, à savoir l’éventail de projets à court terme devant être achevés à l’horizon 2020. Le projet hydroélectrique Inga III qui changera les règles du jeu, l’emblématique projet solaire DESERTEC Sahara et la gigantesque ligne de transport d’électricité nord-sud couvrant la quasi-totalité du TFTA sont parmi les 13 projets sélectionnés. La note conceptuelle et le plan de mise en œuvre intitulés « De la vision à l’action » élaborés par le NEPAD, en collaboration avec l’initiative Power Africa dirigée par le gouvernement américain ont été approuvés lors du Sommet de l’UA de janvier 2015. Le paquet présente des mesures permettant de surmonter les impasses afin d’atteindre des objectifs quantifiables, la « méthode d’accélération » basée sur l’Outil de classement de projets par ordre de priorité (PPCT en anglais), l’atténuation des risques et le financement de projets d’électricité. Une conception innovante a été élaborée pour éviter les doublons, économiser des ressources, améliorer la coordination et encourager des actions transformatrices en établissant des Conseillers transactionnels Power Africa – APV portant deux casquettes, qui supervisent les plans d’investissement jusqu’à la clôture financière si et quand des projets énergétiques d’intérêt commun viennent à se chevaucher. Globalement, comme il est basé sur le PIDA, le partenariat APV permet de mutualiser les expertises tout en promouvant l’intégration économique régionale au niveau de l’électrification.

• Centre pour les énergies renouvelables et l’efficience énergétique de la CEDEAO : Le secrétaire général des Nations Unies, Ban Ki-moon a lancé l’initiative Énergie durable pour tous dans le monde entier dès 2011, dans le triple objectif de garantir l’accès universel à des services énergétiques modernes, doubler le taux mondial d’amélioration de l’efficacité énergétique et doubler la proportion d'énergies renouvelables dans le bouquet énergétique mondial à l’horizon 2030. Depuis sa création, SE4ALL a suscité un fort enthousiasme sur le continent et compte désormais 44 pays africains participants. Par conséquent, la plateforme africaine SE4ALL a été la première plateforme lancée en 2013. Organisée par la BAD en partenariat avec la Commission de l’UA, le NEPAD et le Programme des Nations Unies pour le développement (PNUD), son rôle consiste à faciliter la mise en œuvre de SE4ALL sur le continent. Le troisième atelier annuel de la plateforme africaine de SE4ALL tenu à Abidjan en février dernier a révélé le potentiel de cette « coalition créative » (Yumkella 2014) pour produire des résultats tant au niveau des plans d’action nationaux et des approches régionales concertées conformes à la vision continentale qu’à celui de l’ODD7 pour l’énergie et aux Contributions prévues déterminées au niveau national (CPDN) créés pour l’Accord de Paris. Avant tout, l’atelier a prouvé que la plateforme est capable de commencer efficacement à harmoniser les processus pour obtenir un résultat dans les différents pays. En dépit du fait que les États membres de la CEDEAO participent à SE4ALL, les ministres ouest-africains ont chargé leur centre énergétique régional, le CEREEC, de coordonner la mise en œuvre des Programmes d’action de SE4ALL (PA), qui sont des documents décrivant les mesures que doivent prendre les pays pour satisfaire les objectifs en matière d’énergies renouvelables et de là les Prospectus d’investissement (PI), les documents présentant les critères d’investissement relatifs aux PA. Par conséquent, la Politique relative aux énergies renouvelables (PER) et la Politique relative à l’efficacité énergétique (PEE) de la CEDEAO ont été formulées et adoptées. Un cadre de surveillance régional visant à enrichir un Cadre de suivi mondial, le système de mesure et de préparation de rapports SE4ALL, est en cours de conception. L’efficace modèle du CEREEC, en créant un pont entre les inventaires nationaux et les acteurs mondiaux, est sur le point d’être reproduit dans deux autres régions d’Afrique, la CAE et la SADC, avec l’appui de l’Organisation des Nations Unies pour le développement industriel (ONUDI).

• Africa GreenCo : Enfin, des initiatives comme Africa GreenCo sont en cours d’incubation. Ce véhicule prometteur, actuellement financé au moyen d’une subvention accordée par la Fondation Rockefeller, se veut à la fois un négociant et un courtier en électricité indépendamment géré dont la fonction consiste à déplacer de l’électricité là où elle est nécessaire. Ainsi, Africa GreenCo cherche à capitaliser sur les projets énergétiques du PIDA : en sa qualité d’acheteur intermédiaire solvable, elle prévoit d’utiliser à l’avenir son statut régional en guise de valeur ajoutée au niveau de la garantie contre les risques. À ce jour, Africa GreenCo continue à peaufiner les aspects juridiques, réglementaires, techniques et financiers de sa future structure et forge des liens avec des parties prenantes clés du secteur (États membres, banques de développement multilatérales, services publics africains de génération et d’interconnexion appelés pools énergétiques) avant l’achèvement de son étude de faisabilité en juin 2016.

Les partenariats précités indiquent des tendances encourageantes en direction d’une coopération plus symbiotique entre les différentes parties prenantes. Comme ils relèvent d’initiatives « faites maison », il est important de ne pas perdre de vue la dimension continentale. D’une part, les plans élaborés par l’Afrique ont plus de chances de réussir que des solutions importées uniformes et d’autre part, des efforts cohérents et combinés allant dans la même direction renforcent la confiance et l’émulation et attirent des soutiens. Ceci implique que pour remplir les accords intergouvernementaux, il est nécessaire avant tout de les adapter aux réalités locales à travers un processus d’intégration respectueux de l’espace politique. Cette intégration peut ensuite faire l’objet d’ajustements en fonction d’expériences fondées sur des données et des preuves concrètes. Entre ces engagements mondiaux et les procédures nationales, la dimension nationale demeure le lien indispensable : permettre aux pays de contourner le caractère artificiel de leurs frontières héritées de l’époque coloniale et leur offrir des choix concrets pour éradiquer la pauvreté dans l’unité. L’intégration régionale est donc le préambule à l’opérationnalisation du développement durable au sein de l’Afrique et une étape clé de son parcours en direction d’une participation active sur la scène mondiale. La régionalisation peut également faire évoluer les relations internationales, à condition qu’elle aille de pair avec un multilatéralisme équitable et une gestion durable des connaissances globales. C’est pourquoi l’ouverture qui en découle et la complexité rencontrée sont autant de paramètres utiles pour enrichir la conception de réponses locales pertinentes.

Ces réussites ouvrent de grandes perspectives en termes de nouvelles expériences et synergies. Elles représentent pour moi la promesse d’un monde meilleur. Celle que je me plais à imaginer est empreinte d’écosystèmes mutuellement bénéfiques pour les personnes et la planète. Elle encourage les liens inversés où tout le monde est gagnant, c’est-à-dire un monde où les économies en développement ont des retombées plus positives sur les pays industriels. C’est un monde où, par exemple, une région d’Afrique pourrait tirer des leçons de la crise grecque et vice-versa : un monde où la Chine pourrait tirer des enseignements du Corridor de développement de Maputo pour sa ceinture économique de la route de la soie. Un monde dans lequel des instituts jumelés effectuant des travaux de recherche conjoints dans les différents centres de connaissances régionaux prospéreraient, où des « fab labs » innovateurs pourraient ambitionner une aventure spatiale basée sur des déchets électroniques recyclés en imprimantes 3D. Dans un tel monde, des collaborations innovantes dans les domaines des sciences, des technologies, de l’ingénierie et des mathématiques (STEM) seraient encouragées. Celles-ci encourageraient la participation des femmes, et aussi celle de la diaspora en vue de développer des avancées techniques solides du point de vue écologique. Des efforts proportionnels, une volonté sans faille, une ingénuité autochtone et une créativité sans limites mettent cet avenir plus souriant à notre portée.

Au-delà de la reconnaissance de la voix africaine tout au long des processus intergouvernementaux, l’Afrique doit désormais consolider ses avancées en maintenant fermement sa position et en protégeant ses gains tout au long de la phase préliminaire. Le continent doit de toute urgence définir des tactiques spécifiques offrant le plus grand potentiel en termes d’inclusion et de création de capacités de production. Parallèlement, les acteurs du développement africain doivent démarrer un cycle vertueux d’apprentissage par la pratique en vue de créer une philosophie de développement endogène prenant en considération les meilleures pratiques adaptables et les échecs. Néanmoins, la seule approche capable de produire à la fois une transformation structurelle et un changement informé conformes aux stratégies à long terme propres au continent et dirigées par lui est… l’intégration régionale.  

[1] Issus respectivement des négociations intergouvernementales à l’occasion de la Troisième Conférence sur le financement du développement (FFD3), l’Agenda du développement post 2015 et la Conférence des Nations Unies sur les changements climatiques (COP21).

[2] Égypte, Madagascar, Maroc, Sierra Leone, Togo et Ouganda

[3] Comme précisé au Programme d’action d’Addis-Abeba par exemple : « Nous engageons instamment la communauté internationale, notamment les institutions financières internationales et les banques multilatérales et régionales de développement, à accroître leur soutien aux projets et aux cadres de coopération qui favorisent cette intégration régionale et sous régionale, notamment en Afrique, et qui améliorent la participation et l’intégration des entreprises et notamment des petites entreprises industrielles, en particulier celles des pays en développement, dans les chaînes de valeur mondiales et les marchés mondiaux. »

The Venezuelan opposition Movement for Democratic Unity (or MUD by its Spanish acronym) won a major victory over pro-government parties in the December 6 legislative elections. Updated official results show 107 seats for the MUD, 55 for the governing party, 3 representing indigenous communities, with 2 still undecided.

This is remarkable considering the extent to which the government manipulated electoral rules and conditions ahead of the elections. There were a number of reported problems on election day, the most serious of which was to keep polling stations open for up to two additional hours so government supporters could scour voter rolls to find eligible voters who had not yet cast ballots and take them to polling stations. The result was a record 74 percent turnout for legislative elections, with 58 percent voting for the opposition and 42 percent for the government—the mirror image of electoral results in almost all elections since former President Hugo Chávez first took office in 1999. 

In the end, electoral dirty tricks were not enough to prevent an opposition landslide, and President Nicolás Maduro was forced to concede defeat shortly after midnight on December 7. Although the final number of opposition-held seats in the legislature is not yet certain, there are three main questions that should focus our attention over the coming weeks and months:

Venezuela’s legislative election rules are designed to over-represent the majority party and rural areas. This traditionally favored Chavista parties, but in this election, they have given the opposition a boost in the number of seats they won relative to the popular vote. The opposition has already achieved a three-fifths majority, which enables them to pass laws, approve government-proposed budgets, censure and remove government ministers and the executive vice president, and name new appointees to lead the national electoral authority and new magistrates to the Supreme Tribunal. The MUD has already promised to pass an amnesty law for political prisoners aimed at liberating a number of opposition political leaders imprisoned by the Maduro administration. It has also pledged to move legislation designed to promote economic recovery.

The opposition appears to be within striking distance of securing a two-thirds majority (112 seats), which would allow them a much wider array of powers: to remove the existing electoral authorities (with the support of the Supreme Tribunal), submit legislation to approval by popular referendum, and the equivalent of the “nuclear option” for Venezuelan legislators: convene a Constituent Assembly to write a new constitution. But with a few remaining seats in play, it appears that the MUD has more work to do to clear this hurdle and then to maintain discipline among legislators to keep a razor-thin two-thirds majority.

Either way, there is a dangerous gap between the euphoric expectations created by the elections and the actual power of the National Assembly. Not only are legislatures in Latin America typically weak, but the legislative branch has not operated independently thus far during the Chavista period. So many of its potential powers have not been exercised in practice. 

Before the vote, there was a general consensus among analysts that President Maduro would try to limit the power of the legislature in the event of an electoral loss. The tactic has many precedents, with the governments of Presidents Chávez and Maduro previously gutting the power and budgets of opposition-controlled elected offices at state and local levels.

One possibility is that the outgoing Chavista-dominated National Assembly that leaves office in January 2016 will simply pass an enabling law (Ley Habilitante) that would allow President Maduro to rule by decree for the rest of his term. There are plenty of precedents for this in Venezuela, although an enabling law that lasted for the remainder of the presidential term would be exceptional. But others have suggested that given the overwhelming opposition victory, such an approach may run too blatantly contrary to public opinion and consolidate popular sentiment against the government.

Instead, the government may simply use the Supreme Tribunal to invalidate opposition-initiated legislation. Of the 32 magistrates appointed to the highest court in Venezuela, 13 judges are retiring. Together with 5 empty seats, that will allow the outgoing legislative assembly to approve 18 new judges. These will join 12 magistrates appointed by the Chavista-controlled legislature in December 2014. With the government appointing so many members of the Supreme Tribunal, it will likely be easy for the Maduro administration to block inconvenient legislative proposals. The question for the opposition then becomes whether it can figure out how to use control of the legislature to affect the composition of the court and dilute the power of pro-government magistrates, something that would undoubtedly set off a struggle among the various branches of government.

It seems unlikely that the Chavista movement will simply accept divided government, something unknown to Venezuela since 1999. There are simply too many in the Chavista movement who cannot afford an “accountability moment” due to alleged participation in official corruption; waste, fraud, and abuse; or drug trafficking. Others will be ideologically opposed to allowing so much power to flow to an opposition-dominated national assembly.

The Chavista movement spans from the military to the governing party to armed pro-government militias and gangs (colectivos). Former President Chávez was adept at keeping the movement together. President Maduro is not nearly as skilled, and with this stunning electoral loss, his leadership within the movement (already damaged by poor economic results) is likely to come under further pressure. 

In a normal country, one might imagine some incentives for both sides to negotiate—the legislature and executive could work together to avert the coming economic catastrophe, for one. And the weakening of President Maduro’s leadership may lead to more open disagreement within Chavismo about the way ahead, allowing the possibility that moderates on both sides will find room to work together. But as journalist and long-time Venezuela observer Francisco Toro has argued, Chavismo is a machine for not negotiating; the selection process for top leadership has been designed to winnow out anyone who would consider sitting down to talk with the opposition. And in such a polarized situation, moderates always run the risk of being targeted by radicals from their own side if they negotiate with opponents.

Get the house in order

All Venezuelans should feel proud (and relieved) that these highly significant elections have been carried out peacefully. But a lot of work remains to be done. 

First, the outside study missions and electoral accompaniment missions need to remain focused on the tabulation process to ensure that the few undecided legislative seats are allocated according to electoral rules and the votes cast rather than government fiat. 

Second, Venezuela is entering a period of divided government, one that will potentially be riven by conflict among the branches of government. The outside actors that have thus far played a positive role—such as regional multilateral institutions, civil society, legislators across the hemisphere, and governments interested in supporting democracy—will need to continue to pay attention to and support favorable outcomes in Venezuela even when the country is out of the international headlines. 

And third, Venezuela’s economy is in very serious trouble now that oil has fallen as low as $35 a barrel. Further economic contraction, poverty rates not seen since before Hugo Chávez took office, and inflation in excess of 200 percent are all expected in 2016. If the government (both Chavistas and opponents) come to their senses and agree to a negotiated plan on how to address the economy, they will need the support of both traditional multilateral financial institutions and non-traditional sources of financing (such as China). 

As the opposition celebrates this major electoral win, it will undoubtedly dwell on the political implications of its victory over Chavismo. But it should not lose sight of the mandate it has now been given to make needed policy changes as well.

Update: As of December 9, 2015, media are reporting that the opposition party has won at least 112 seats, achieving a two-thirds majority in the National Assembly.

Editors’ Note: Turkey’s failed coup may lead to the worsening of Europe’s migration crisis, writes Jessica Brandt. That’s because it could lead to the dissolution of a recent pact between Brussels and Ankara over the plight of refugees arriving on the European Union’s shores. This post originally appeared on Vox.

Turkey’s recent failed coup may lead to the worsening of Europe’s migration crisis. That’s because it could lead to the dissolution of a recent pact between Brussels and Ankara over the plight of refugees arriving on the European Union’s shores. Even before the events of last weekend, the fate of the agreement was uncertain amid quarrels between the parties. Now its future is even more in doubt.

Last year, more than a million migrants and refugees crossed into Europe, roiling politics across the continent. It’s a crisis EU chief Donald Tusk has described as an “existential challenge.”

Under the terms of the deal, Turkey agreed to accept the “rapid return of all migrants not in need of international protection crossing from Turkey into Greece and to take back all irregular migrants intercepted in Turkish waters.” In other words, almost all refugees who cross into Greece are slated to be returned to Turkish soil.

In return, the EU pledged to speed up the allocation of €3 billion in aid to Turkey to help it house and care for refugees, “reenergize” Turkey's bid for membership in the EU, and lift visa restrictions on Turkish tourists and businessmen.

But the European Commission has conditioned changes to the visa restrictions on better governance in Turkey. In particular, it requires a change in President Recep Tayyip Erdoğan’s controversial anti-terror law, which he has used to crack down on journalists and critics. Erdoğan was already adamantly against narrowing the law to protect free speech. Having now overcome a determined coup attempt, he is even less likely to do so.

Instead, it appears probable that he will further clamp down on civil liberties, acting on his authoritarian instincts and retaliating against his detractors. On Sunday, he suggested that he might reintroduce the death penalty, a practice Turkey abolished in 2004 as part of its bid for EU membership. Doing so would widen the gap in political culture between Turkey and Europe and, as German Foreign Minister Frank-Walter Steinmeier asserted forcefully on Monday in Brussels, derail the already limited possibility of reigniting accession talks.

The pact has already been strongly opposed by the European left, and particularly by humanitarian and human rights groups. Rising authoritarianism in Turkey would only increase resistance to the deal, making implementation even harder, especially if those groups were to scale back their activities on the ground.

That would not be without precedent. The United Nations High Commissioner for Refugees, Doctors Without Borders, and the International Rescue Committee, among others, have suspended some of their activities in refugee centers because they do not want to be involved in implementing a deal that they describe as constituting the blanket expulsion of refugees from Turkey back to Greece.

[A] crackdown could also undermine the legal basis of the agreement.

Crucially, a crackdown could also undermine the legal basis of the agreement. One of the agreement’s key provisions is that individuals who cross from Turkey into Greece will be sent back across the Aegean to Turkey. That hinges on the notion that Turkey is a “safe third country” for migrants. A crackdown could prompt refugees to argue that it isn’t.

If that were the case, deporting them to Turkey could be seen as constituting “refoulement”—the forcible return of asylum seekers to a country where they are prone to be subjected to persecution—which is forbidden under both international and EU law.

That’s a problem, since some analysts believe worsening conditions in Turkey could lead even more people seeking refuge to journey onward to Europe. In the past, Erdoğan has threatened to “open the gates” and send refugees streaming into Europe when displeased with the level of financial assistance from Brussels earmarked for managing the crisis. Preoccupied by troubles at home, he may see stability as in his interest and resist taking aggressive steps that would cause an open breach.

For both parties, finding a stable, though imperfect, accommodation—as they were poised to do prior to the events of last weekend—is still the most promising path forward. Let’s hope the parties take it. Managing Europe’s migration crisis depends on it.

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.

Ruy Teixeira joins NPR's Talk of the Nation host Neal Conan to discuss the Pennsylvania primary and the working-class vote.

NEAL CONAN: With us here in Studio 3A is Ruy Teixeira, a visiting fellow at Brookings Institution, co-author of the report "The Decline of the White Working Class and the Rise of a Mass Upper Middle Class." He's kind enough to be with us here. Thanks very much for coming in, nice to see you again.

RUY TEIXEIRA: Great to be here.

NEAL CONAN: And, what are some of the common themes that we see around these working class voters that Sherry Linkon was talking to us about?

RUY TEIXEIRA: Well, I think Sherry touched on a number of them. I think one critical theme, obviously, for this election is their level of economic discontent and their sense that the economic ground has shifted underneath their feet, and they are sort of wondering where they are going to go in the future, where their kids are going to go, sort of, where their way of life is going to go.

This is a matter of great concern to these voters because the last, you know, actually the last several years, have not been kind to them. But more broadly, you can look back, you know, 35 years and say the last 35 years has not been very kind to them. This has been a period when America, by and large, has grown not as fast as it did and incomes have not risen as fast as they used to, but it's been particularly bad for these voters.

Anyone with less than a four-year college degree has really done rather poorly since about the middle 1970s. So, there's a real question in their minds of what America has in store for them in the future. And they are very interested to hear what politicians have to say about it. So far, it hasn't seemed to work out quite so well.

And the other side of it is really touched on by the controversy that you're referring to which is their sense of cultural traditionalism, their sense that, especially the Democrats, perhaps, seem out of touch with that at times. It seems like they don't respect their way of life. It seems like their social liberalism gets in the way of connecting to these voters and really hearing what they have to say and what their commitments and priorities really are and a sense of elitism on their part.

And that's really what, I think, Obama's getting slammed on this, you know, in general, and of course, obviously the McCain and Clinton campaigns have some interest in pushing this, but it did give them an opening to raise this issue and argue that, in fact, he is elitist. And Democrats, if they wish to get away from this, they have to adopt - I think it's a little bit unfair to the remark once you look at it in context.

But nevertheless, the perception was there particularly, I think the stuff about guns and about religion. I mean, can't you, like, own a gun and go to church and not be clinging to it? Because you know, your economic way of life is deteriorating. Again, I don't think that's what he meant. But that's how it's being interpreted. And that's where the discussion is.

Listen to the entire interview »

In last night’s Pennsylvania primary, Hillary Clinton won a sweeping if not quite overwhelming victory, receiving 55 percent of the vote and reducing Barack Obama’s overall popular vote edge by more than 200,000. Because of the Democratic party’s system of proportional representation, she netted fewer than 15 pledged delegates. These results have quieted calls for her to leave the race and will probably slow the steady flow of superdelegates to Obama. Nonetheless, her path to the nomination remains steep.

The demographics of the Pennsylvania vote followed a now-familiar pattern. Obama won among voters younger than 40, while Clinton prevailed among older voters. Obama won in big cities and some inner suburbs; Clinton carried suburbs overall while winning more than 60 percent of the small town and rural vote. Clinton did 9 points worse among men than among women, who constituted 59 percent of last night’s voters. She received 62 percent of the vote from gun-owning households and almost three-fifths of the vote from union households. Obama carried voters from families making less than $15,000 and more than $150,000; Clinton carried everyone in between. She received 64 percent of the vote from high school graduates but only 48 percent from college graduates. Obama won 55 percent of the vote among those who consider themselves “very liberal,” while Clinton got 60 percent of the vote among self-described moderates. Clinton took 56 percent among long-time Democrats, while Obama took 62 percent of new Democratic primary voters—principally Republicans and Independents who registered as Democrats to participate, but also the 4 percent of the primary electorate that previously been unregistered.

There is evidence that religion, gender and race all figured in the results. Clinton received 58 percent of the white Protestant vote and a stunning 71 percent of white Catholics. Obama got 64 percent of those who profess no religion and 56 percent of those who never attend church. Clinton did 22 points better among those who said gender was important than among those who did not. (Intriguingly, men who said it mattered were also more likely to support Clinton.) By contrast, race appears to have been a negative for Obama: whites who said it mattered gave 75 percent of their votes to Clinton, versus only 58 percent for those who said it did not. While nearly half the whites for whom race mattered refused to say that they would be willing to support Obama in the general election, their sentiments may well soften in coming months as differences between the parties come to the fore.

The long campaign mattered, and it left some bruises. 68 percent of the voters said that Clinton had attacked unfairly; 50 percent thought Obama had. Nearly a quarter of the electorate thought that Clinton was solely responsible for unfair attacks, versus only 6 percent who thought Obama was. Only 57 percent of the electorate thought that Clinton was honest and trustworthy, versus 67 percent for Obama. Only 40 percent said they would be satisfied if either candidate won; 32 percent wanted only Clinton, and 23 percent only Obama. But however negative the contest may have turned, it appears to have worked to Clinton’s advantage: she received 57 percent among voters who decided during the last week before the primary, 5 points better than she did among those who decided earlier.

The results also confirmed the surge in concern about the economy. Fifty-five percent of the voters regarded the economy as the top issue, versus only 27 percent for the war in Iraq and a modest 14 percent for health care. Obama prevailed only among voters who gave top priority to Iraq, while Clinton received 54 percent of the health care voters and 58 percent of the economy voters.

Attention now shifts to the May 6 primaries in North Carolina and Indiana. Obama is expected to prevail in North Carolina, but Indiana offers a level playing field. A split decision would be likely to prolong the race, while an Obama sweep might well induce many undecided superdelegates to declare for him and bring this protracted contest to an end. In addition, Obama’s fundraising edge is becoming increasingly important. Not long into her victory speech, Clinton made an urgent pitch for new contributions. Facing a mounting debt and dwindling cash on hand, her ability to continue on until the end of the primary and caucus season in early June may well depend on the size and speed of her supporters’ response.