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ABSTRACT

This study analyzes the willingness to pay for health insurance and hence the potential market for new low-cost health insurance product in Namibia, using the double bounded contingent valuation (DBCV) method. The findings suggest that 87 percent of the uninsured respondents are willing to join the proposed health insurance scheme and on average are willing to insure 3.2 individuals (around 90 percent of the average family size). On average respondents are willing to pay NAD 48 per capita per month and respondents in the poorest income quintile are willing to pay up to 11.4 percent of their income. This implies that private voluntary health insurance schemes, in addition to the potential for protecting the poor against the negative financial shock of illness, may be able to serve as a reliable income flow for health care providers in this setting.

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There are currently an estimated 3 million people living with HIV/AIDS in Nigeria, making it the second most infected country worldwide. In light of these stark figures and the general failure by African countries to curb the HIV/AIDS pandemic, how can Nigeria expect to achieve a breakthrough in dealing with its HIV/AIDS epidemic? What policy actions should the global public health community, international donors and the Nigerian government take to help end this health crisis?

The Research Alliance to Combat HIV/AIDS (REACH), a joint collaboration between Northwestern University and the University of Ibadan in Nigeria, has sought to answer these questions. Since 2006, REACH has engaged social scientists in community-based research to explore the attitudes and behaviors related to HIV/AIDS prevention in four Nigerian states and advance strategies to reduce infection rates. On May 27, Global Economy and Development at Brookings and the Buffett Center for International and Comparative Studies at Northwestern University hosted a discussion on REACH’s most recent findings and policy recommendations. The first panel focused on the current state of the epidemic in Nigeria. The second panel examined a preventative approach to HIV/AIDS in Nigeria and other African countries.

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Editor’s note: In a presentation to the 2011 International Conference on Early Childhood Development in Beijing, China, Jacques van der Gaag makes the economic case for investing in young children. He references the seminal works by several Nobel laureates in economics to demonstrate how development hinges on investments in early childhood, including health, nutrition, and education.

Thank you for inviting me to the 2011 International Conference on Early Childhood Development. I am very grateful to the organizers from the China Development Research Foundation for giving me a chance to make the economic case for investing in young children. While I have been giving these types of presentations for more than two decades in over a dozen countries worldwide, I prefer to have some back-up from a number of serious economists who, over time, have made major contributions to a key finding in development economics: countries prosper if they invest in their people, and the well-being of all people improves in a prosperous country that values equality.

To begin with, I would like to introduce my fellow countryman Jan Tinbergen, who received the first Nobel Prize in Economics, in 1969, for his work on economic development. Being a physicist by training, he pioneered the use of mathematical models to mimic the working of a country’s economy. The equations he used to formulate these models will probably look very foreign to you, but the important point I want to make is that these early models already included people, in the form of labor. People were seen as an input in the production process. Since there was an abundance of people in the developing world, and a shortage of capital, the development process, it was argued, could be sped up by providing more capital to low income countries to invest in infrastructure, factories, and other forms of physical capital. And to invest in human capital -- people. The economy needs all forms of human capital, from unskilled labor to highly skilled labor, and therefore investment in people, through education, was considered an integrated part of the development process.

Another well-known economist (Theodore W. Schulz, Nobel prize 1979) emphasized an important difference between physical capital and human capital: people respond to incentives. Thus, when food prices are being kept artificially low (to allow wages in the cities to stay low), farmers may decide that it is no longer worth their while to produce food, and they may migrate to the cities to work in the new factories. In other words, it is important to invest in human capital to stimulate the economy, but the broad preferences of the (working) population should not be overlooked.
 
Robert W. Fogel (Nobel laureate in 1993) underscored the role of workers in the production process by emphasizing the importance of health and nutrition to enhance productivity. Indeed, he calculated that about half of the speedy growth of the British economy during the Industrial Revolution was the result of better health and nutrition conditions of the working population. In turn, of course, the economic growth made the improvements in sanitation and the increased availability of (better) food possible.

A major breakthrough in the thinking about development (note that I am no longer saying “economic development”) came with the work of Amartya Sen (Nobel prize winner in 1998). His work has led to a re-definition of the development process from one that focuses solely on economic growth to one in which the fruits of economic growth benefits the population in terms of higher literacy rates and education levels, better health and nutrition, higher levels of social cohesion and social skills, and more equality. These four broad dimensions of well-being, together with economic growth, are now the building blocks of the Human Development Index. Indeed, human development, as currently understood, has been further specified in the Millennium Development Goals that drive today’s development discussion and policies in every corner of the world.

Before I finish my very brief (and very selective) history of development economics, allow me to mention the work of one more Nobel laureate in economics: Jim Heckman (2000). Heckman understands, of course, the importance of investing in people to increase a country’s human capital. But he also understands both the economics of early childhood development (ECD) and its scientific underpinnings. In recent work, he has extensively referred to the scientific basis that shows the causal link between deprivations early in life and education, social and health outcomes later in life. His economic work on ECD confirms what others have been saying for decades: The highest economic returns to investments in people come from the investments that occur in the early years of life.  

In sum, with an increased understanding of the basic development process, in which people are both the driving force for development and its main beneficiaries, the importance of investing in very young children is now seen as a key factor in the broad human development process of a country.
Taking care of very young children has long been on the development agenda. Immunization programs have been pushed to improve the health status of young children, nutrition programs have been implemented to prevent malnutrition and hunger, schooling has been emphasized as important for prosperity later in life, and as a possible “equalizer” of society. What the recent literature on brain development, on the interaction of genes and the environment, on the importance of cognitive and non-cognitive skill development (“social skills”), and on the link between early deprivations and a variety of problems later in life (from health problems to increased delinquency) has added to these efforts, is a better understanding of the long-term economic implications of these interventions.
 
Simply stated, economists look at investments in human capital as a means to increase lifelong “productivity”. The easiest way to measure differences in productivity is by comparing differences in wage rates (in well functioning labor markets) among workers with different levels of education (skills). Higher levels of education (more and better skills) lead to higher productivity, and this advantage can be maintained during one’s entire (working) life. Of course, not everyone works for wages, but similar results (more educated workers are more productive) have been found in agriculture and other forms of self-employment. Indeed, even the productivity of people who do not work in the labor market can be improved by education. Case in point: women who finished secondary education are much better equipped to address the health and nutrition needs of their children than illiterate mothers (and they have fewer children and make sure that these children go to school).

When economist do the numbers, solely based on increased productivity in the labor market, the economic returns to ECD are impressive (see slides 21 and 22). Integrated ECD programs reduce infant and child mortality, increase children’s nutritional and health status, increase on-time school enrollment, decrease drop-out and repetition rates, and increase progression to higher levels of education. All this leads to a more productive labor force. The economic returns from these ECD benefits alone are estimated to be in the 7 percent to 12 percent range, with some estimates being much higher. When ECD interventions are properly seen as investments in the human development of a country, the benefits are very large indeed.
 
Chances are that you were a little surprised to get a lecture on the “the history of development economics” at a conference about early childhood development. But the organizers asked me to make the economic case for investing in young children. I decided that I could do this as forcefully as possible by invoking the help of no fewer than five Nobel laureates in economics. Development is now understood as a process by people for people. All the evidence shows that investment in the health, in nutrition, and in cognitive and non-cognitive skill development is crucial for a prosperous and equal society. Of all the investments in people one can make, investments in the very young have the highest economic returns.

I congratulate our organizers from the China Development Research Foundation for their work on ECD to benefit the children of poor minorities in western China, providing them with a chance to benefit from China’s impressive growth record. And I thank you again for the opportunity to address this distinguished audience on such an important topic.

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ABSTRACT

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

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A conversation with Deputy Secretary of State Antony Blinken

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

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

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

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

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

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

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

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

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

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

Editor's note: Tamara Cofman Wittes testifies before the Senate Committee on Foreign Relations for a session on aggravating factors and ways to stem the violence in the Syrian conflict. Read her full written testimony below or watch the live coverage.

Thank you, Mr. Chairman and Senator Cardin, for the invitation to appear before you today. I’d like to request that my full statement be entered into the record, and I’ll give you the highlight reel. And let me begin by emphasizing, as always, that I represent only myself before you today – the Brookings Institution does not take institutional positions on policy issues.

Opportunities Lost

When I last testified before this committee regarding Syria, in April 2012, I expressed my concern that American reticence to act to shape the emergent civil war and the involvement of regional powers in it risked enabling an unbridled escalation of the conflict. I suggested then that uncontrolled escalation could entrench sectarian violence, empower radicals, destabilize the neighborhood, and generate wide human suffering. While the Obama Administration has taken incremental steps over the last four years to try and shape both the battlefield and the context for diplomacy, those steps have proved too little and too late to alter the conflict’s fundamental dynamics.

President Obama’s initial read of the Syrian conflict as holding only narrow implications for American interests was a signal failure to learn the lessons of the post-Cold War period, and the civil wars of the 1990s, by recognizing the risk that Syria’s civil war could spill over in ways that directly implicated U.S. interests. The experience of the 1990s clearly suggested how a neglected civil war offered easy opportunities for a violent jihadist movement—just as the Afghanistan war did for the Taliban in the mid-1990s—and how large-scale refugee flows would destabilize Syria’s neighbors, including key U.S. security partners like Jordan and Turkey. And as we now know, ISIS used the security and governance vacuums created by the Syrian civil war to consolidate a territorial and financial base that the United States has been seeking since late 2014, with limited success, to undermine.

Unfortunately, the realistic policy options available to the United States have narrowed considerably since 2012, the violence is entrenched, the spillover is creating serious challenges for the neighborhood and for Europe, and the number of actors engaged directly in the Syrian conflict has proliferated. All of this means that the continuation of the Syrian civil war has direct and dire consequences today, not just for regional order, but for international security. This reality, combined with the tremendous human suffering this war generates every day, drives two clear imperatives for U.S. policy: to intensify efforts to contain the spillover and misery, and to seek an end to the conflict as soon as possible.

Ending the War

We must be realistic, however, about what steps will, and will not, end the Syrian conflict. Recently, some policy experts have suggested that, in the name of advancing great-power concord to end the war, the United States should relax its view that Bashar al-Assad’s departure from power is a requisite for any political settlement. This view rests on the assumption that Russia will not bend in its insistence on Assad’s remaining in place, and on the assumption that a U.S.-Russian agreement on leaving Assad in place would override the preferences of those fighting on the ground to remove him. Both of these premises, in my view, are incorrect.

We must therefore understand clearly the interests and imperatives driving the major players in this conflict, and we must understand, too, that the battlefield dynamics will heavily condition the prospects of any political settlement. Ending the bloody war in Bosnia in the 1990s involved getting the major external powers with stakes in the outcome – the United States, the Europeans, and Russia – to agree on basic outlines of a settlement and impose it on the parties. But imposing it on the parties required a shift in the balance of power on the battlefield, brought about by Croat military victories and ultimately a NATO bombing campaign. Bosnia also required a large-scale, long-term United Nations presence to separate the factions and to enforce and implement the agreement.

So I believe that, absent a change on the ground, diplomacy alone is unlikely to end the Syrian war – but I certainly agree with diplomatic efforts to advance a country-wide cessation of hostilities and advance a vision for a political settlement. A full-scale cease-fire could create more space for political bargaining, and in the meantime reduce human suffering and mitigate the spillover effects of the ongoing violence. Right now, however, the Assad government and its patrons in Tehran and Moscow have no interest in a sustained cease-fire, because the battleground dynamics continue to shift in their favor. They used the partial cease-fires of the past weeks to consolidate territorial gains from opposition forces and to further weaken those forces through continued air attacks. Without agreement amongst the various governments around the table as to which fighting groups constitute terrorist organizations, a ceasefire will inevitably disadvantage opposition factions as the Assad regime targets them in the name of counterterrorism. That will likewise advantage the most extreme among the rebel factions as well as jihadi groups like ISIS and Al Qaeda’s affiliate, Jabhat al-Nusra, who will all continue to use force to acquire and hold territory and to force their political opponents and inconvenient civilians off the field.

Likewise, some suggest that the sectarian nature of the conflict, and the deep investment of regional powers in backing their preferred sides, mean that it is not possible to hasten an end to the war at all, and that it must be allowed to “burn itself out.” This policy option is infeasible for the United States, from moral, political, and security standpoints. The scale of death and destruction already, over nearly five years of war, should shame the conscience of the world. Those seeking to escape this misery deserve our succor, and those seeking to end the carnage deserve our support. And it is beyond question that Bashar al-Assad and his allies are the ones responsible for the vast majority of this death, destruction, and displacement.

In political and security terms, the war’s spillover into neighboring countries and now into Europe can still get worse. Key states like Lebanon and Jordan are at risk of destabilization and/or extremist terrorism the longer the conflict goes on and the more of its consequences they must absorb. Turkey, as we know, has already suffered attacks by extremist groups. And the war has continued to be a powerful source of recruitment for extremists, drawing fighters and fellow travelers from around the world. ISIS and Al Qaeda feed on the civil conflict and the chaos on the ground is what gives them room to operate. It is indeed imperative that the United States remain engaged, and intensify its engagement as needed, to secure an end to the conflict as soon as possible.

Understanding the Geopolitical Context

In the ongoing diplomacy over how the conflict ends and what political settlement results, there are two issues on which the parties involved in the Vienna talks demonstrate sharp disagreement, and about which the United States needs to advance clear views. The first is a disagreement over the primacy of preserving the central Syrian government, currently headed by Assad. Russia, along with some regional actors (even some opponents of Assad), believe that the most important determinant structuring a political settlement must be the preservation of the Syrian central government, even if that means preserving Bashar al Assad in office. If Assad is ousted without an agreed-upon successor in place, they argue, then Syria will become a failed state like Libya, in which ISIS will have even more space to consolidate and operate, with dire consequences for regional and international security. It is this concern over state collapse and the desire for strong central authority that keeps Russia united with Iran behind Assad.

It’s understandable to desire the preservation of Syrian government institutions as a bulwark against anarchy, and to want a central government in Syria with which to work on counterterrorism and postwar reconstruction. The problem with elevating this concern to a primary objective in negotiations is its embedded assumption that any Syrian government based in Damascus will be able to exercise meaningful control over most or all of Syria’s territory after rebels and government forces stop fighting one another. That’s a faulty assumption, for several reasons.

First, it is extremely unlikely that we’ll see swift or effective demobilization and disarmament of sub-state fighting factions in favor of a unified Syrian military force. If the central government remains largely in the form and structure of Assad’s government, and even more so if Assad himself remains in power, it is hard to imagine rebel groups agreeing to put down their weapons and rely on security provided by the central government. Thus, local militias will remain important providers of local order and also important players in either defeating or enabling extremist groups like ISIS and Al Qaeda.

Second, effective governance from Damascus is extremely difficult to imagine, much less implement. The degree of displacement, the extent of physical destruction, and the hardening of sectarian and ethnic divisions due to five years of brutal conflict (and decades of coercive rule before that) all present steep challenges to centralized rule. Those with resources and capacity within local communities will end up being the primary providers of order at the local level – and it is local order, more than a central government, that will enable communities to resist ISIS infiltration. Thus, countries concerned with having effective governance in Syria as a bulwark against extremists need to recognize the value and importance of local governance in any post-war scenario.

Finally, there is the unalterable fact that Bashar al-Assad and his allies have slaughtered perhaps as many as 400,000 of Syria’s citizens; have used chemical weapons against civilians; have imprisoned and tortured thousands and displaced millions; and, through Assad’s own horrific decisions, have broken Syria’s government, the Syrian state, and the Syrian nation to bits. Those who demand his ouster as a prerequisite for ending the war are justified in their view that Assad does not have and will not have legitimacy to govern from a majority of Syrians, that his continued rule would be divisive and destructive of Syrian unity and security, and that he should instead face justice for war crimes and crimes against humanity. As a practical matter, and because of all this, many Syrian fighting factions on the ground and their supporters, are committed to Assad’s ouster. US-Russian concurrence on setting that goal aside will not induce them to end their fight. The only way that might occur is if Turkey, Qatar, and Saudi Arabia – who are committed to Assad’s ouster – relent on their demands and agree to curtail support to rebel factions who continue to fight. This is hard to imagine in the current circumstances.

In other words, while preserving the Syrian state is a laudable goal, it will not alone achieve the objectives set by those who hold it out as the primary imperative in the political negotiations over the future of Syria. I would suggest that, while the fate of Bashar al Assad is not perhaps of primary concern from the perspective of U.S. interests, the United States should be pressing Russia and others involved in the talks to relax their fixation on Syria’s central government (and who runs it) as a counterterrorism goal, and to recognize that a significant degree of decentralization and international engagement with local actors inside Syria will be necessary to preserve the peace, to carry out reconstruction, and to defeat ISIS. Likewise, the Syrian opposition and those states demanding Assad’s ouster as a precondition for peace must recognize that they have even more to gain from insisting on decentralization and local autonomy than they do from Assad’s departure from power. They might even be able to trade their current demand for Assad’s immediate departure against robust assurances for empowerment of local authority, release of detainees and internationally guaranteed transitional justice.

The second major issue under contention regarding a negotiated end to the Syrian war is the role that Iran will play in post-conflict Syria. Iran’s efforts to expand its infuence – in Syria and in the region as a whole – present a concern that unites all of the United States’s partners in the region, and should be a major concern for Washington as well. The gains made by the Assad regime (with Russian and Iranian help) over the past eight months enhance the disturbing prospect of a Syrian government remaining in power in Damascus that is dependent on Iranian funding, Iranian military support, and the importation of Iranian-backed militias. While the Russians are perhaps concerned more about the Syrian state as a bulwark against extremism, Iran is deeply committed to the survival of its Alawi client and the maintenance of Syria as a channel for Iranian support to Hizballah. And while some Sunni Arab states embrace the goal of preserving Syrian territorial integrity and the central government, all are troubled at the prospect that this government would be under the thumb of Tehran. Any political settlement that institutionalizes Iran’s overwhelming role in Syria will likewise increase Iran’s ability to impact to threaten Israel’s northern border, to destabilize Lebanese and perhaps also Jordanian politics, and to interfere with ongoing efforts to assuage the anxieties of Iraqi Sunnis and bring them back into alignment with the government in Baghdad.

The rising likelihood of an Iranian-dominated Syria emerging from the war has induced a change in attitude toward the Syrian conflict by America’s closest regional partner, Israel. Israeli officials took a fairly ambivalent stance toward the civil war for several years, although they were always wary of the Syrian-Iranian alliance. But today, they judge Assad’s survival as possible only through effective Iranian suzerainty, putting their most powerful enemy right on their border. Iranian domination of post-conflict Syria would also likely spell an escalation in Iranian weapons transfers to Hizballah – and Israel cannot expect to have 100% success in preventing the provision of increasingly sophisticated rocket and missile technology to Hizballah. These and other types of support from Iran through Damascus could increase Hizballah’s capacity to wage asymmetric war against Israel, at great cost to Israel’s civilian population. Israeli observers are increasingly alarmed at this scenario, and Israeli officials now state clearly that, if faced with a choice, they’d prefer to confront ISIS than Iran across the Israeli-Syrian frontier.

American diplomacy in Vienna must take greater account of the destabilizing implications of an Iranian-dominated Syrian government, even a rump government that does not control all of Syrian territory. A U.S. focus on constructing a political settlement that limits Iran’s influence in postwar Syria could induce greater coherence among American partners in Vienna currently divided over the fate of Assad; and it could prevent a situation in which the United States trades the threat of ISIS in Syria for the threat of Iranian-sponsored terrorism and subversion emanating from Syria.

Al Qaeda and the Syrian conflict

Al Qaeda’s affiliate Jabhat al-Nusra has particularly benefited from the war’s continuation, from the weakness and partiality of the ceasefires negotiated earlier this year, and from the inability of the U.S.-Russian diplomatic process to generate any progress toward a political transition. Shrewdly, Nusra has focused on building its reputation as the most consistent, and most effective, military opponent of the Assad regime, and on its readiness to cooperate with anti-Assad factions with whom it has other, ideological and political, disagreements. The failures of diplomacy feed Nusra’s strength and win it allies amongst more nationalist rebel factions. And while it’s tempting for American efforts to focus on rallying forces to defeat ISIS, our diplomats and decision makers must beware that leaning too far back on the issue of political transition for the sake of building an anti-ISIS coalition might just end up pushing more hardline opposition elements into the arms of a different extremist movement, one with demonstrated intent and capability to attack the United States.

To summarize, it’s imperative that American diplomacy to produce a political settlement of the Syrian war be firmly focused achieving two goals crucial to the interests of the United States and its regional partners: first, enabling and institutionalizing local governance as a bulwark against ISIS (more than central government institutions), and second, establishing hard limits on Iran’s role in a post-conflict Syria and on its ability to use Syria as a conduit for support to Hizballah.

Managing Spillover and Restoring Stability

A second major priority for US policy, in addition to this refocused diplomacy, must be stepped-up efforts to mitigate the destabilizing consequences of the Syrian war, no matter how long it goes on. And, while the United States continues to work through diplomacy and pressure to produce an end to the war, work must also begin now to prepare for the long-term and wide-scale effort needed for post-conflict stabilization and reconstruction.

The scope of death, displacement and destruction threatens to rob Syria of the basic ingredients for social stability, regardless of what lines might be drawn at a negotiating table in Vienna. Without concerted effort to ameliorate the effects of this conflict for people on the ground, to rebuild social trust, and to nurture resilience within these battered communities against conflict and division, any peace settlement could quickly unravel the face of local security dilemmas and intercommunal tensions, as well as in light of the unaddressed scars and grievances of Assad’s brutality against the Syrian people.

Meeting this challenge requires at least four lines of effort:

• doing more to engage Syrians in building local governance and community resilience, especially skills and platforms for conflict resolution;
• doing more to stabilize and secure frontline states, including support for integrating refugees into the economy and society;
• helping more refugees create new lives far from the conflict zone, including much more resettlement in the United States; and
• working diligently with regional partners to tamp down the sectarianism that both drives and is driven by the war, and that feeds extremist recruitment and violence.

As we have seen, ISIS markets itself partly on the order it provides to local communities – a brutal order to be sure, but still a contrast with the chaos and insecurity of civil war. To counter ISIS effectively, we must help local communities with governance and service delivery. More can be done even now to put into place the ingredients for successful and sustainable conflict resolution for Syrians. These steps include enabling and encouraging Syrians displaced by the fighting, whether in neighboring countries or in areas of Syria not under ISIS or regime control, to engage in dialogue over, and planning for, their own communal future. Neighboring states accepting refugees have understandably sought to tamp down political discussion and debate within refugee camps, for example. But these refugee populations need to engage in dialogue to build the basis, in social trust, that will enable them to manage daily governance and resolve differences peacefully if and when they are no longer living under refugee agencies and host-government security services. These processes can also connect, over time, to negotiating efforts on a political transition in which the Syrian opposition is represented, yielding greater legitimacy and efficacy to that more formal political process.

Too often, in discussing Syria, we posit a choice between working with the central government and working with unsavory non-state actors. There is an obvious additional option, already in play, that deserves greater emphasis: empowering and engaging local municipalities, local business sectors, local civil society, and other actors who exist in territory not under extremist or regime control and who have an obvious stake in the success of their own communities and their defense against coercion either from ISIS or from the Assad government. It is these local actors who will make or break the implementation of any political settlement, because they are the ones who will give it life and legitimacy. They are the ones who will help manage differences within their own communities and with their neighbors to avoid outbreaks of violence, and they are the ones who will lead the establishment of a new social compact to enable long-term stability in Syria. USAID and its implementing partners have been creative in developing programs to engage local communities and local governing institutions, and this work deserves robust, sustained support from Congress.

The United States continues to lead in international support for refugee relief – but it lags woefully in refugee resettlement. Only about 1300 of the 10,000 Syrian refugees the Obama Administration promised to admit into the United States have been resettled here so far; and the United States can and should accept more.

In addition, American policy efforts to address the refugee crisis must go beyond humanitarian relief and expanded resettlement. Working with European partners, the United States government can work to save lives along the transit routes for refugees fleeing the region, can support successful integration of refugees into European cities (again, working at the municipal level), and can do more to support social stabilization, livelihoods, and development for the large refugee communities in Lebanon, Jordan, and Turkey and for the societies hosting them.

On June 14 and 15^th, the Brookings Institution will convene a high-level gathering of regional, European, and American leaders to develop new responses and more robust forms of cooperation to meet this global humanitarian crisis. I look forward to reporting back to you on our results.

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• War in Syria: Next steps to mitigate the crisis

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With the rise of ISIS and a growing terrorist threat in the West, unprecedented attention has focused on Islam, which despite being the world’s fastest growing religion, is also one of the most misunderstood. In his new book “Islamic Exceptionalism: How the Struggle over Islam is Reshaping the World” (St. Martin’s Press, 2016), Senior Fellow Shadi Hamid offers a novel and provocative argument on how Islam is, in fact, “exceptional” in how it relates to politics, with profound implications for how we understand the future of the Middle East. Hamid argues for a new understanding of how Islam and Islamism shape politics by examining different modes of reckoning with the problem of religion and state, including the terrifying—and alarmingly successful—example of ISIS.

On June 9, Shadi Hamid and Isaiah Berlin Senior Fellow in Culture and Policy Leon Wieseltier discussed the unresolved questions of religion’s role in public life and whether Islam can—or should—be reformed or secularized.

Join the conversation on Twitter using #IslamicExceptionalism

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• Islamic exceptionalism: How the struggle over Islam is reshaping the world - Part 1
• Islamic exceptionalism: How the struggle over Islam is reshaping the world - Part 2

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• Islamic exceptionalism: How the struggle over Islam is reshaping the world

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• Uncorrected Transcript (.pdf)

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• 20160609_islamic_exceptionalism_transcript

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With the violence in the Middle East continuing, and further attacks on American soil in the name of Islam, the election campaigns have paid significant attention to policy issues related to the Middle East. But as both Republicans and Democrats prepare for their national conventions, how do Americans prioritize Middle East issues compared with other global priorities? Have public attitudes shifted in light of recent ISIS-inspired attacks overseas and at home and in response to heated campaign rhetoric? If so, in what direction?

On July 11, Brookings launched two new public opinion surveys focusing on American attitudes towards the Middle East, conducted by Nonresident Senior Fellow Shibley Telhami: One was conducted just two weeks before the Orlando shooting, the other taken two weeks after—thus providing an opportunity to evaluate any shift in public attitudes. In addition, some of the same questions were asked in Telhami’s polls the previous two years, thus providing a further opportunity to evaluate trends. One of the polls also includes a significant oversample of millennials (18-34) for further demographic analysis.

Telhami was joined in discussion by William Galston, the Ezra K. Zilkha Chair in Governance Studies at Brookings. Tamara Cofman Wittes, senior fellow and director of the Center for Middle East Policy at Brookings, provided introductory remarks and moderated the discussion.

Join the conversation on Twitter using #AfterOrlando

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• Orlando, the Middle East, and the U.S. election

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• Orlando, the Middle East, and the U.S. election

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• Uncorrected Transcript (.pdf)

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On October 17, the Brookings Institution’s Project on International Order and Strategy hosted two of the most prominent thinkers on American grand strategy to discuss whether Washington should remain forward-leaning in its posture, or if it should adopt a more restrained approach to global engagement.

The event was moderated by Brookings Foreign Policy Fellow Jeremy Shapiro, and featured a debate between Brookings Foreign Policy Senior Fellow Robert Kagan and Barry Posen, Ford International Professor at Massachusetts Institute of Technology.

Kagan argued that the United States has an enduring responsibility and capacity to shape the world order and must remain actively engaged abroad to prevent the international order from collapse. Posen, on the other hand, warned against American overreach in foreign policy and urged Washington to embrace restraint, focusing on its own national security interests and limiting engagement – particularly military - abroad.

In their discussion of the Middle East, both scholars sought to define American regional interests with greater precision. Posen argued that “affective” relationships, such as those with Israel, do not explain the U.S. defense budget dedicated to the region or contingency plans for the region. Posen also disputed the view that oil is the primary driver of U.S. regional policy, suggesting that threats to major suppliers could be managed with a less robust regional security commitment than Washington has traditionally maintained.

Kagan argued that President Obama is more intellectually inclined toward Posen’s strategy of restraint than most of his predecessors, and yet he too has been drawn into the Middle East. “It can’t just be pure stupidity that has had the United States involved in the Middle East as consistently as it has been for almost 70 years now, taking the place of the previous powers that had been involved in the Middle East,” he said.

Posen discussed U.S. efforts against the Islamic State group (also called ISIS or ISIL). He noted that President Obama’s rhetoric on ISIS has gone beyond what is prudent, describing the strategy as one of “containment that’s augmented by the promise of future counter-offensives and destruction.” Washington’s current strategy, Posen argued, has demobilized allies by enabling them to skirt responsibility for the crisis.

Posen and Kagan differed in their interpretations of the track record of American interventions in the region. Posen criticized American understanding of the causes and effects of intervention, saying that it is easier to oust a government than to generate internal consensus or transform a country into a stable democracy. By contrast, Kagan argued that the U.S. has never invaded a Middle Eastern country with the purpose of rearranging domestic politics.

There was little discussion of terrorism and nuclear proliferation, though Posen identifies these two threats as major items on which the U.S. should remain engaged. More information about Posen’s arguments can be found in his new book, Restraint: A New Foundation for U.S. Grand Strategy (Cornell University Press, 2014). Kagan’s argument for continued pre-eminence and engagement in grand strategy can be found in his influential May 2014 New Republic essay “Superpowers Don’t Get to Retire.”

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

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• Economic opportunities and the liberal international order

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On February 2 and 3, 2010, the Brookings Institution Metropolitan Policy Program and Lazard convened leaders from the public sector, energy, infrastructure, finance and venture capital communities for an in-depth conversation focused on innovative policy and business practices that will help build the next American economy.

California Governor Arnold Schwarzenegger and Pennsylvania Governor Edward G. Rendell provided the keynote remarks. Both stressed the need for strategic investments in innovative infrastructure and energy practices going forward.

Framing the conference was the notion that the next American economy must be export-oriented, low carbon, innovation-fueled and opportunity rich—an idea which has been proposed by leading economists such as Director of the National Economic Council Larry Summers. It is with this mindset that Brookings and Lazard put together high-level, dynamic panels that centered around the private sector needs for building out the next American economy—and the policy implications. Specifically, they focused on how the traditional industry leaders (e.g., utility companies), the new industry leaders (e.g., venture capital investors), and public sector leaders can work together to move our country forward, especially within the metro areas where the resources and networks that drive innovation are rooted.

Video

• The Keys to American Competitiveness

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• The Next American Economy: Transforming Energy and Infrastructure Investment

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• Transcript (.pdf)
• Bruce Katz's delivered remarks (.pdf)

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• 0203_transcript
• 0203_nextecon_katz
• 0203_overview
• 0203_agenda
• 0203_nextecon_pres

In partnership with the ESADE Business School and the City of Barcelona, the Metropolitan Policy Program planned and participated in three intensive days of learning in Barcelona in June 2011.  The focus of the session was to look at examples of strategies Barcelona, Spain and its greater metropolitan region is embracing to rebuild and re-invent their economies.  The goal is to share innovative ideas with U.S. metros engaged in similar initiatives as they face the challenge of moving to a new economic growth model.

This paper features brief synopses of the tours and meetings held with the City of Barcelona and the Catalonia Region on their economic development strategies.

Specific strategies include:

Barcelona Activa »

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ABSTRACT

Recent literature has expressed considerable pessimism about the prospects for both productivity and overall economic growth in the U.S. economy, based either on the idea that the pace of innovation has slowed or on concern that innovation today is hurting job creation. While recognizing the problems facing the economy, this paper offers a more optimistic view of both innovation and future growth, a potential return to the innovation and employment-led growth of the 1990s. Technological opportunities remain strong in advanced manufacturing and the energy revolution will spur new investment, not only in energy extraction, but also in the transportation sector and in energy-intensive manufacturing. Education, health care, infrastructure (construction) and government are large sectors of the economy that have lagged behind in productivity growth historically. This is not because of a lack of opportunities for innovation and change but because of a lack of incentives for change and institutional rigidity.

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• U.S. Productivity Growth: An Optimistic Perspective

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Productivity growth in the United States slowed sharply around 2005, which has contributed to slow growth in wages and downward revisions to estimates of long run economic growth. The global economy has grown incredibly fast since 1950, with global GDP expanding six-fold and average per capita income nearly tripling. A larger workforce and increased productivity spurred this growth. However, the global workforce is expected to grow more slowly over the coming years, and peak in size around 2050. If strong economic growth is to be achieved, in both the United States and globally, productivity must increase strongly.

On Wednesday, April 8, the Initiative on Business and Public Policy hosted an event exploring these and related issues. The event featured keynote remarks by Jason Furman, Chairman of the Council of Economic Advisers, and Alan Greenspan, former Chairman of the Federal Reserve Board. James Manyika and Jaana Remes of the McKinsey Global Institute considered the potential for faster global productivity growth. Marco Annunziata of General Electric will gave his perspective, and Martin Baily looked at explanations for slow growth in the U.S. economy.

Download a McKinsey report on global productivity trends »

Video

• Opening keynote by Jason Furman
• Global growth: Can productivity save the day in an aging world?
• Closing keynote by Alan Greenspan

Audio

• Achieving strong economic growth

Transcript

• Uncorrected Transcript (.pdf)

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• MGI_Global_growth_Full_report_February_2015pdf (3)
• 20150408_strong_economic_growth_transcript
• BAILY_slides
• GREENSPAN_slides
• REMES_MANYIKA_slides

Unlike prime-age Americans, who have experienced declines in employment and labor force participation since the onset of the Great Recession, Americans past 60 have seen their employment and labor force participation rates increase.

In order to understand the contrasting labor force developments among the old, on the one hand, and the prime-aged, on the other, this paper develops and analyzes a new data file containing information on monthly labor force changes of adults interviewed in the Current Population Survey (CPS).

The paper documents notable differences among age groups with respect to the changes in labor force transition rates that have occurred over the past two decades. What is crucial for understanding the surprising strength of old-age labor force participation and employment are changes in labor force transition probabilities within and across age groups. The paper identifies several shifts that help account for the increase in old-age employment and labor force participation:

• Like workers in all age groups, workers in older groups saw a surge in monthly transitions from employment to unemployment in the Great Recession.
• Unlike workers in prime-age and younger groups, however, older workers also saw a sizeable decline in exits to nonparticipation during and after the recession. While the surge in exits from employment to unemployment tended to reduce the employment rates of all age groups, the drop in employment exits to nonparticipation among the aged tended to hold up labor force participation rates and employment rates among the elderly compared with the nonelderly. Among the elderly, but not the nonelderly, the exit rate from employment into nonparticipation fell more than the exit rate from employment into unemployment increased.
• The Great Recession and slow recovery from that recession made it harder for the unemployed to transition into employment. Exit rates from unemployment into employment fell sharply in all age groups, old and young.
• In contrast to unemployed workers in younger age groups, the unemployed in the oldest age groups also saw a drop in their exits to nonparticipation. Compared with the nonaged, this tended to help maintain the labor force participation rates of the old.
• Flows from out-of-the-labor-force status into employment have declined for most age groups, but they have declined the least or have actually increased modestly among older nonparticipants.

Some of the favorable trends seen in older age groups are likely to be explained, in part, by the substantial improvement in older Americans’ educational attainment. Better educated older people tend to have lower monthly flows from employment into unemployment and nonparticipation, and they have higher monthly flows from nonparticipant status into employment compared with less educated workers.

The policy implications of the paper are:

• A serious recession inflicts severe and immediate harm on workers and potential workers in all age groups, in the form of layoffs and depressed prospects for finding work.
• Unlike younger age groups, however, workers in older groups have high rates of voluntary exit from employment and the workforce, even when labor markets are strong. Consequently, reduced rates of voluntary exit from employment and the labor force can have an outsize impact on their employment and participation rates.
• The aged, as a whole, can therefore experience rising employment and participation rates even as a minority of aged workers suffer severe harm as a result of permanent job loss at an unexpectedly early age and exceptional difficulty finding a new job.
• Between 2001 and 2015, the old-age employment and participation rates rose, apparently signaling that older workers did not suffer severe harm in the Great Recession.
• Analysis of the gross flow data suggests, however, that the apparent improvements were the combined result of continued declines in age-specific voluntary exit rates, mostly from the ranks of the employed, and worsening reemployment rates among the unemployed. The older workers who suffered involuntary layoffs were more numerous than before the Great Recession, and they found it much harder to get reemployed than laid off workers in years before 2008. The turnover data show that it has proved much harder for these workers to recover from the loss of their late-career job loss.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Americans are enjoying longer lifespans than ever before. Living longer affords individuals the opportunity to make more contributions to the world, to spend more time with their loved ones, and to devote more years to their favorite activities – but a longer life, and particularly a longer retirement, is also expensive. The retirement security landscape is evolving as workers, employers, retirees, and financial services companies find their needs shifting. Once, many workers planned to stay with a single employer for most or all of their careers, building up a sizeable pension and looking forward to a comfortable retirement. Today, workers more and more workers will be employed by many different employers.  Additionally, generous defined benefit (DB) retirement plans are less popular than they once were – though they were never truly commonplace – and defined contribution (DC) plans are becoming ever more prevalent.  

Figure 1, below, shows the change from DB to DC that has occurred over the past three decades.

In the past many retirees struggled financially towards the end of their lives, just as they do now, but even so, the changes to the retirement security landscape have been real and marked, and have had a serious impact on workers and retirees alike. DB plans are dwindling, DC plans are on the rise, and as a result individuals must now take a more active role in managing their retirement savings. DC plans incorporate contributions from employees and employers alike, and workers much choose how to invest their nest egg.  When a worker leaves a job for retirement or for a different job he or she will often roll over the money from a 401(k) plan into an Individual Retirement Account (IRA). While having more control over one’s retirement funds might seem on its face to be a net improvement, the reality is that the average American lacks the financial literacy to make sound decisions (SEC 2012).

The Council of Economic Advisers (CEA) expressed concern earlier this year that savers with IRA accounts may receive poor investment advice, particularly in cases where their financial advisors are compensated through fees and commissions. “[The] best recommendation for the saver may not be the best recommendation for the adviser’s bottom line” (CEA 2015). President Obama echoed these concerns in a speech at AARP in February, asking the Department of Labor (DoL) to update its rules for financial advisors to follow when handling IRA accounts (White House 2015). The DoL receives its authority to craft such rules and requirements from the 1974 Employee Retirement Income Security Act (ERISA) (DoL 2015a).

The DoL recently proposed a regulation designed to increase consumer protection by treating some investment advisors as fiduciaries under ERISA and the 1986 Internal Revenue Code (DoL 2015b). The proposed rule has generated heated debate, and some financial advisors have responded with great concern, arguing that it will be difficult or impossible to comply with the rule without raising costs to consumers and/or abandoning smaller accounts that generate little or no profit. Advisors who have traditionally offered only the proprietary products of a single company worry that the business model they have used for many years will no longer be considered to be serving the best interests of clients.

Rather than offering detailed comments on the DoL proposals, this paper will look more broadly at the problem of saving for retirement and the role for professional advice. This is, of course, a well-travelled road with a large literature by academics, institutions and policy-makers, however, it is worthwhile to think about market failures, lack of information and individual incentives and what they imply for the investment advice market.

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Earlier this summer, we examined how the Big Four banks – Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo – performed before, during, and after the 2007-09 financial crisis.  We also blogged about the lending trends within these large banks, expressing concern about the growing gap between deposits taken and loans made by the Big Four, and calling on policymakers to explore the issue further.  We have conducted a similar analysis on the regional banks - The regional banks: The evolution of the financial sector, Part II - and find that these smaller banks are actually faring somewhat better than their bigger counterparts.

Despite the mergers and acquisitions that happened during the crisis, the Big Four banks are a smaller share of banking today than they were in 2007.  The 15 regionals we evaluated, on the other hand, are thriving in the post-crisis environment and have a slightly larger share of total bank assets than they had in 2007.  The Big Four experienced rapid growth in the years leading up to the crisis but much slower growth in the years since.  The regionals, however, have been chugging along: with the exception of a small downward trend during the crisis, they have enjoyed slow but steady growth since 2003.

There is a gap between deposits and loans among the regionals, but it is smaller than the Big Four’s gap.  Tellingly, the regionals’ gap has remained basically constant in size during the recovery, unlike the Big Four’s gap, which is growing.  Bank loans are important to economic growth, and the regional banks are growing their loan portfolios faster than the biggest banks.  That may be a good sign for the future if the regional banks provide more competition for the big banks and a more competitive banking sector overall.

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

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

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

Video

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

Audio

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

Transcript

• Uncorrected Transcript (.pdf)

Event Materials

• 20160211_economic_advisers_transcript