Stephen was still a teenager on the north side of St. Louis when his dad, a police officer, was killed during a robbery in their neighborhood. Despite the trauma, Stephen later joined the police force to continue his dad’s legacy and commitment to safe and inclusive neighborhoods. But even before the fatal shooting of Michael Brown in Ferguson in 2014, Stephen (not his real name) yearned to right local wrongs through broader approaches. “The darkest forces weren’t necessarily the ones getting arrested,” he observed. “So I retired from the police force after 22 years, essentially to chase after a different type of perpetrator.” Wanting to focus on policies at multiple levels of government that “were causing the disparities that fueled increasing crime and violence in St. Louis,” Stephen pivoted to civil rights enforcement, tracking policy violations and innovations at a government agency in the St. Louis region.

I met Stephen in February while in St. Louis for a conference his agency organized on HUD’s recently strengthened Affirmatively Furthering Fair Housing (AFFH ) rule, which increases local accountability in promoting residential integration. He wasn’t a speaker at the event, but hearing his story reinforced the importance of combating the deeply entrenched and often invisible causes of segregation.

Recent events and new academic research, including landmark findings by Raj Chetty and colleagues testifying to the benefits of low-poverty neighborhoods for low-income kids, the updated AFFH rule, and the Supreme Court’s disparate impact decision upholding other tools to fight segregation have brought renewed attention to these challenges. Meanwhile, underlying these developments, poverty has failed to decline since the recession and, as recent Brookings research shows, has become more concentrated in neighborhoods of extreme poverty.

How can regional leaders and practitioners respond to these challenges? I was in St. Louis to discuss one part of the solution—advancing more mixed-income neighborhoods. In the Chicago region, our housing and community development-focused firm, BRicK Partners, is collaborating with the Chicago Metropolitan Agency for Planning (CMAP), the Illinois Housing Development Authority (IHDA), and 10 metropolitan Chicago public housing authorities, with support and leadership from HUD, to develop and operate the Regional Housing Initiative (RHI)

RHI is a small, systemic, and potentially scalable “work around” of a very specific set of programs and policies that contribute inadvertently to regional inequities. A flexible and regional pool of resources working across the many traditional public housing authority (PHA) and municipal jurisdictions in the Chicago region, RHI increases quality rental housing in neighborhoods with good jobs, schools, and transit access and provides more housing options to households on Housing Choice Voucher (HCV) waiting lists. Recognizing that the federal formulas allocating HCVs to each individual PHA are not responsive to population, employment, or poverty trends, RHI partners convert and pool a small portion of their HCVs to provide place-based operating subsidies in support of development activity that advances local and regional priorities. RHI supports both opportunity areas with strong markets and quality amenities as well as revitalization areas where public and private sector partners are planning and investing toward that end. In both cases, the bulk of RHI investments are in the suburbs, where the PHAs are smaller and the rental stock more limited. 

RHI has committed over 550 RHI subsidies to nearly 40 mixed-income and supportive housing developments across Chicagoland, supporting more than 2,200 total apartments, over half of which are in opportunity areas. The pooling and transferring of subsidies has allowed RHI to support proposals that local jurisdictions wouldn’t be able to undertake otherwise.

Although a number of innovative programs around the country provide assistance to households moving to opportunity areas, RHI is unique its focus on increasing the supply of housing in opportunity areas regionwide. Its approach is consistent with lessons learned from Brookings’ work on Confronting Suburban Poverty in America: With CMAP as a strong quarterback, RHI has addressed the shortage of rental housing in the suburbs by working across jurisdictions, developing shared priorities, metrics and selection criteria, and by working with IHDA and other stakeholders to leverage greater private sector investment.

This recipe for success is now being deployed in communities beyond Chicago. Baltimore is preparing to advertise for its first round of developer applicants under the leadership of the Baltimore Metropolitan Council, with regionwide PHAs, the State Housing Finance Agency, and a regional housing counselor lined up as supportive partners. In St. Louis, the regional planning and housing finance organizations both attended the February conference where I met Stephen, signaling the potential for greater collaboration for both these entities and the PHAs.

Like many housing advocates and professionals, my colleagues and I at BRicK Partners derive a lot of satisfaction from supporting communities like Baltimore and St. Louis and individuals like Stephen and his peers with replicable best practices. Given today’s political realities, we don’t expect major changes in the federal formulas and statutes behind some of the regional inequities, but “work arounds” such as RHI can still scale up. Nationwide, just a small percentage of HCVs have been converted for such flexible supply-side solutions, but there is reason to be hopeful that this will change. The Regional Mobility Demonstration proposed in the 2017 budget as well as federal public housing voucher legislation passed by the House of Representatives earlier this year are signs that there is real momentum to advance regional strategies that increase access to opportunity for low income residents and families. 

      

SUMMARY

The financial crisis that has been wreaking havoc in markets in the U.S. and across the world since August 2007 had its origins in an asset price bubble that interacted with new kinds of financial innovations that masked risk; with companies that failed to follow their own risk management procedures; and with regulators and supervisors that failed to restrain excessive risk taking.

A bubble formed in the housing markets as home prices across the country increased each year from the mid 1990s to 2006, moving out of line with fundamentals like household income. Like traditional asset price bubbles, expectations of future price increases developed and were a significant factor in inflating house prices. As individuals witnessed rising prices in their neighborhood and across the country, they began to expect those prices to continue to rise, even in the late years of the bubble when it had nearly peaked.

The rapid rise of lending to subprime borrowers helped inflate the housing price bubble. Before 2000, subprime lending was virtually non-existent, but thereafter it took off exponentially. The sustained rise in house prices, along with new financial innovations, suddenly made subprime borrowers — previously shut out of the mortgage markets — attractive customers for mortgage lenders. Lenders devised innovative Adjustable Rate Mortgages (ARMs) — with low "teaser rates," no down-payments, and some even allowing the borrower to postpone some of the interest due each month and add it to the principal of the loan — which were predicated on the expectation that home prices would continue to rise.

But innovation in mortgage design alone would not have enabled so many subprime borrowers to access credit without other innovations in the so-called process of "securitizing" mortgages — or the pooling of mortgages into packages and then selling securities backed by those packages to investors who receive pro rata payments of principal and interest by the borrowers. The two main government-sponsored enterprises devoted to mortgage lending, Fannie Mae and Freddie Mac, developed this financing technique in the 1970s, adding their guarantees to these "mortgage-backed securities" (MBS) to ensure their marketability. For roughly three decades, Fannie and Freddie confined their guarantees to "prime" borrowers who took out "conforming" loans, or loans with a principal below a certain dollar threshold and to borrowers with a credit score above a certain limit. Along the way, the private sector developed MBS backed by non-conforming loans that had other means of "credit enhancement," but this market stayed relatively small until the late 1990s. In this fashion, Wall Street investors effectively financed homebuyers on Main Street. Banks, thrifts, and a new industry of mortgage brokers originated the loans but did not keep them, which was the "old" way of financing home ownership.

Over the past decade, private sector commercial and investment banks developed new ways of securitizing subprime mortgages: by packaging them into "Collateralized Debt Obligations" (sometimes with other asset-backed securities), and then dividing the cash flows into different "tranches" to appeal to different classes of investors with different tolerances for risk. By ordering the rights to the cash flows, the developers of CDOs (and subsequently other securities built on this model), were able to convince the credit rating agencies to assign their highest ratings to the securities in the highest tranche, or risk class. In some cases, so-called "monoline" bond insurers (which had previously concentrated on insuring municipal bonds) sold protection insurance to CDO investors that would pay off in the event that loans went into default. In other cases, especially more recently, insurance companies, investment banks and other parties did the near equivalent by selling "credit default swaps" (CDS), which were similar to monocline insurance in principle but different in risk, as CDS sellers put up very little capital to back their transactions.

These new innovations enabled Wall Street to do for subprime mortgages what it had already done for conforming mortgages, and they facilitated the boom in subprime lending that occurred after 2000. By channeling funds of institutional investors to support the origination of subprime mortgages, many households previously unable to qualify for mortgage credit became eligible for loans. This new group of eligible borrowers increased housing demand and helped inflate home prices.

These new financial innovations thrived in an environment of easy monetary policy by the Federal Reserve and poor regulatory oversight. With interest rates so low and with regulators turning a blind eye, financial institutions borrowed more and more money (i.e. increased their leverage) to finance their purchases of mortgage-related securities. Banks created off-balance sheet affiliated entities such as Structured Investment Vehicles (SIVs) to purchase mortgage-related assets that were not subject to regulatory capital requirements Financial institutions also turned to short-term "collateralized borrowing" like repurchase agreements, so much so that by 2006 investment banks were on average rolling over a quarter of their balance sheet every night. During the years of rising asset prices, this short-term debt could be rolled over like clockwork. This tenuous situation shut down once panic hit in 2007, however, as sudden uncertainty over asset prices caused lenders to abruptly refuse to rollover their debts, and over-leveraged banks found themselves exposed to falling asset prices with very little capital.

While ex post we can certainly say that the system-wide increase in borrowed money was irresponsible and bound for catastrophe, it is not shocking that consumers, would-be homeowners, and profit-maximizing banks will borrow more money when asset prices are rising; indeed, it is quite intuitive. What is especially shocking, though, is how institutions along each link of the securitization chain failed so grossly to perform adequate risk assessment on the mortgage-related assets they held and traded. From the mortgage originator, to the loan servicer, to the mortgage-backed security issuer, to the CDO issuer, to the CDS protection seller, to the credit rating agencies, and to the holders of all those securities, at no point did any institution stop the party or question the little-understood computer risk models, or the blatantly unsustainable deterioration of the loan terms of the underlying mortgages.

A key point in understanding this system-wide failure of risk assessment is that each link of the securitization chain is plagued by asymmetric information – that is, one party has better information than the other. In such cases, one side is usually careful in doing business with the other and makes every effort to accurately assess the risk of the other side with the information it is given. However, this sort of due diligence that is to be expected from markets with asymmetric information was essentially absent in recent years of mortgage securitization. Computer models took the place of human judgment, as originators did not adequately assess the risk of borrowers, mortgage services did not adequately assess the risk of the terms of mortgage loans they serviced, MBS issuers did not adequately assess the risk of the securities they sold, and so on.

The lack of due diligence on all fronts was partly due to the incentives in the securitization model itself. With the ability to immediately pass off the risk of an asset to someone else, institutions had little financial incentive to worry about the actual risk of the assets in question. But what about the MBS, CDO, and CDS holders who did ultimately hold the risk? The buyers of these instruments had every incentive to understand the risk of the underlying assets. What explains their failure to do so?

One part of the reason is that these investors — like everyone else — were caught up in a bubble mentality that enveloped the entire system. Others saw the large profits from subprime-mortgage related assets and wanted to get in on the action. In addition, the sheer complexity and opacity of the securitized financial system meant that many people simply did not have the information or capacity to make their own judgment on the securities they held, instead relying on rating agencies and complex but flawed computer models. In other words, poor incentives, the bubble in home prices, and lack of transparency erased the frictions inherent in markets with asymmetric information (and since the crisis hit in 2007, the extreme opposite has been the case, with asymmetric information problems having effectively frozen credit markets). In the pages that follow, we tell this story more fully.

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INTRODUCTION

The Obama administration needs to focus on executing its existing financial rescue plans, keep the TARP focused on the banking sector, and create a contingency plan should the banking system destabilize again.

Crystal balls are dangerous, especially when it comes to economic predictions, which is why it is important for the administration to chart a path forward. Public policy must remain focused on the very real possibility that the apparent easing in the economy’s decline may be followed by little or no growth for several quarters and there could possibly be another negative turn. One of the risks is that the United States is very connected to the rest of the world, most of which is in severe recession. The global economy could be a significant drag on U.S. growth.

Cautious optimism should be the order of the day. We fear that the recent reactions of the financial markets and of some analysts carry too much of the optimism without recognizing enough of the uncertainty. There remains a lot of uncertainty and policymakers should not rest on their laurels or turn to other policies, even if they look more exciting. It is vital to follow through on the current financial rescue plans and to have well-conceived contingency plans in case there is another dip down.

We propose three recommendations for the financial rescue plans:

• Focus on execution of existing programs. The Administration has created programs to deal with each of the key elements necessary to solve the financial crisis. All of them have significant steps remaining and some of them have not even started yet, such as the programs to deal with toxic assets. As has been demonstrated multiple times now since October 2008, these are complex programs that require a great deal of attention. It is time to execute rather than to create still more efforts.
• Resist the temptation to allocate money from the TARP to other uses—it is essential to maintain a reserve of Congressionally-authorized funds in case they are needed for the banks. It would be difficult to overemphasize the remaining uncertainties about bank solvency as they navigate what will remain a rough year or more. The banks could easily need another $300 billion of equity capital and might need still more. It is essential that the administration have the ammunition readily available.
• Third, make sure there is a contingency plan to deal with a major setback for the banking system. The plan needs broad support within the administration and among regulators and, ideally, from key congressional leaders. We probably won’t need it, but there is too high a chance that we will require it for us to remain without one. The country cannot afford even the appearance of the ad hoc and changing nature of the responses that were evident last fall.

We also give the administration a thumbs-up for their bank recapitalization as well as the TALF program, while they are much more skeptical of the Treasury’s approaches to toxic assets. The authors also believe it is time to focus on the truly mind-blowing budget deficits given the danger that markets will not be able to absorb the amount of government borrowing needed without triggering a rise in U.S. interest rates and perhaps an unstable decline in the value of the dollar, nor do they believe there should be a another fiscal stimulus except under extreme circumstances.

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There are a number of causes of the financial crisis that has devastated the U.S. economy and spread globally. Weakness in financial sector regulation was one of the causes and the proliferation of different regulators is, in turn, a cause of the regulatory failure. There is a bewildering, alphabet soup variety of regulators and supervisors for banks and other financial institutions that failed in their task of preventing the crisis and, at the same time, created an excessive regulatory burden on the industry because of overlapping and duplicative functions.

We can do better. This paper makes the case for a single micro prudential regulator, that is to say, one federal agency that has responsibility for the supervision and regulation of all federally chartered banks and all major non-bank financial institutions. There would still be state-chartered financial institutions covered by state regulators, but the federal regulator would share regulatory authority with the states.

The Objectives Approach to Regulation

The Blueprint for financial reform prepared by the Paulson Treasury proposed a system of objectives-based regulation, an approach that had been previously suggested and that is the basis for regulation in Australia. The White Paper prepared by the Geithner Treasury did not use the same terminology, but it is clear from the structure of the paper that their approach is essentially an objectives-based one, as they lay out the different elements of regulatory reform that should be covered. I support the objectives approach to regulation.

There should be three major objectives of regulation, as follows.

• To make sure that there is micro-prudential supervisions, so that customers and taxpayers are protected against excessive risk taking that may cause a single institution to fail.

• To make sure that whole financial sector retains its balance and does not become unstable. That means someone has to warn about the build up of risk across several institutions and perhaps take regulatory actions to restrain lending used to purchase assets whose prices are creating a speculative bubble.

• To regulate the conduct of business. That means to watch out for the interests of consumers and investors, whether they are small shareholders in public companies or households deciding whether to take out a mortgage or use a credit card.

In applying this approach, it is vital for both the economy and the financial sector that the Federal Reserve has independence as it makes monetary policy. Experience in the United States and around the world supports the view that an independent central bank results in better macroeconomic performance and restrains inflationary expectations. An independent Fed setting monetary policy is essential.

An advantage of objectives-based regulation is that it forces us to consider what are the “must haves” of financial regulation—those things absolutely necessary to reduce the chances of another crisis. Additionally we can see the “must not haves”—the regulations that would have negative effects. It is much more important to make sure that the job gets done right, that there are no gaps in regulation that could contribute to another crisis and that there not be over-regulation that could stifle innovation and slow economic growth, than it is that the boxes of the regulatory system be arranged in a particular way. In turn, this means that the issue of regulatory consolidation is important but only to the extent that it makes it easier or harder to achieve the three major objectives of regulation efficiently and effectively.

For objectives-based regulation to work, it is essential to harness the power of the market as a way to enhance stability. It will never be possible to have enough smart regulators in place that can outwit private sector participants who really want to get around regulations because they inhibit profit opportunities or because of the burdens imposed. A good regulatory environment is structured so that people who take risks stand to lose their own money if their bets do not work out. The crisis we are going through was caused by both market and regulatory failures and the market failures were often the result of a lack of transparency (“asymmetric information” in the jargon of economics). Those who invested money and lost it often did not realize the risks they were taking. To the extent that policymakers can enhance transparency, they can make market forces work better and help achieve the goal of greater stability.

Having a single micro prudential regulator would help greatly in meeting the objectives of regulation, a point that will be taken up in more detail below. It is not a new idea. In 1993-94, the Clinton and Riegle proposals for financial regulation said that a single micro prudential regulator would provide the best protection for the economy and for the industry. In the Blueprint developed by the Paulson Treasury, it was proposed that there be a single micro prudential regulator. 

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The Roma people, the largest minority group in Europe and in many European countries, trail other ethnic groups in almost every characteristic that defines well-being. Perhaps of greatest importance, the Roma are less educated than other ethnic groups. But they also suffer from excess health problems, high unemployment, poverty, and political weakness. The Roma population of Bulgaria is certainly no less disadvantaged than the Roma in other countries. An especially poignant example of Bulgarian Roma disadvantage is that the death rate among children under age 1, a prime indicator of children’s health in any nation, is 25 per 1,000 for Roma children as compared with 9.9 for children of Bulgarian ethnic origin. The mathematics of death almost before life gets started is a symbolic indicator of the Roma burden in Bulgaria. Similarly, research conducted for UNICEF by the University of York shows that the poverty rate among Roma children in Bulgaria is 92 percent, perhaps the highest poverty rate for any ethnic group in Europe. By contrast, the poverty rate among children of Bulgarian heritage is less than half as high at 43 percent.

It is not surprising, then, that over at least the past decade, the European Union (EU) and most European governments, joined by the Open Society Foundation, the World Bank, and other organizations, have created important initiatives to address all these problems. It is possible to think that now is an historic moment in which European governments and dominant ethnic groups, after eight or nine centuries of the most pernicious types of discrimination against the Roma, are finally, albeit often reluctantly, admitting the problems facing their Roma populations and their own role in creating and sustaining these problems. Equally important, most of the Central and Eastern European (CEE) governments, where discrimination against the Roma has been and continues to be particularly intense, are gradually adopting policies to address the problems.

To the extent that the moment of Roma opportunity has arrived, perhaps the most important force moving Bulgaria and other CEE nations in the direction of integration and inclusion is the EU. In the period leading up to the ascension of Bulgaria and other CEE nations to membership in the EU, all the new member states were required to meet a host of conditions required by the EU as the price of admission. Among these conditions were laws outlawing discrimination and requiring equality of educational opportunity. The CEE nations complied with the EU directive to pass such laws, but implementation of the laws in Bulgaria and other nations has been something less than aggressive.

Nor is EU ascension the only force driving the CEE nations to reduce discrimination against the Roma and other minorities. The Open Society, the World Bank, and a number of other private organizations, including several Roma nongovernmental organizations (NGOs), have initiated a sweeping program to promote inclusion of the Roma in the civil society of the CEE nations. Called the “Decade of Roma Inclusion” (2005-2015) the initiative is notable for getting all the CEE nations (plus Spain) to participate, to commit themselves to activities designed to promote inclusion and nondiscrimination, and to make a financial commitment to a fund administered by the World Bank to promote the initiative. As a part of the initiative, Bulgaria and the other participating nations originated ten-year action plans. The Bulgarian action plan, the purpose of which is to create a set of goals and activities that will promote Roma integration, includes proposals for education, health care, housing, employment, discrimination and equal opportunity, and culture.

An important part of the Decade program was the establishment of the Roma Education Fund in 2005. Eight nations (Canada, Greece, Ireland, Netherlands, Slovenia, Sweden, Switzerland, and the UK), as well as several international agencies including the Open Society, pledged a total of 34 million Euros to support Fund activities during the Roma decade. The major goal of the fund is to “support policies and programs which ensure quality education for Roma, including the desegregation of education systems.”

By joining the EU, Bulgaria and the other CEE nations brought themselves into a well-developed culture of inclusion and a complex system of interlocking laws and agencies that not only outlaw exclusion and discrimination, but provide funds to implement inclusion policies and to monitor the extent to which EU nations are aggressively implementing these laws. The laws and directives include the EU Charter of Fundamental Rights, the European Commission against Racism and Intolerance, the Racial Equality Directive, and several others. It would be a mistake to conclude that every EU member, even the original 15 EU nations with relatively more advanced economies and longer histories as democracies than the CEE nations, faithfully implement every component of the various legal requirements of being an EU member. Even so, EU requirements and funds have initiated both profound legal changes and a host of programs to increase the social, economic, political, and cultural inclusion of the Roma as well as studies and evaluations that bring some light to the actual situation of the Roma and other minorities in member nations. Given the all but inevitable distance between the laws on inclusion and discrimination the CEE nations passed in order to join the EU and the actual implementation of those laws, studies commissioned by various EU agencies and NGOs illuminate the gaps between policies and implementation.

An excellent example of such illumination is a 2006 study commissioned by the Economic and Scientific Policy program of the European Parliament. The report is a hard-hitting assessment of the status of Roma throughout Europe with regard to their legal status and socio-economic conditions. The latter category includes assessments of Roma exclusion from employment, education, social services, health care, and community integration. The upshot of the report is that although there may be some progress in these important areas of integration, the Roma are still a second-class group throughout the CEE nations. Seemingly, good laws have not yet produced good results. Laws may be changed, but changing human behavior and culture takes longer.

CEE governments and their defenders are reluctant to admit the lamentable lack of progress in Roma integration. In part for this reason, the European Commission, based on extensive evidence from evaluations, surveys, and news reports of often ferocious discrimination against the Roma, felt the need to publish “An EU Framework for National Roma Integration Strategies up to 2020” in April 2011. The need for a new framework is a clear signal that the EU Commission believes the CEE governments in general and Bulgaria in particular are not achieving the results the EU hoped for when it approved these nations for EU membership and is therefore trying to push the governments of these nations into further action.

Following publication of the Framework, the Open Society released one of the most thorough and provocative reports on the situation faced by the Roma in Europe and strategies that should be adopted to attack the wide range of Roma disadvantages. Appropriately entitled “Beyond Rhetoric,” the Open Society report includes entire chapters on two issues that I will examine in more detail below.

First, the Open Society strongly recommends that nations collect ethnically disaggregated data. Logically enough, the report holds that it is impossible to document the effects of policy initiatives on the Roma and other groups unless outcome data, including measures of health, education, housing, employment, income, and death rates by age, are collected for individual ethnic groups. So important are ethnically disaggregated data that the report goes so far as to recommend that, if necessary, governments should change their statistical systems to “incorporate ethnic data components into regular statistical surveys.” A second recommendation that deserves special attention is the report’s emphasis on early childhood education and care. Virtually every report about the Roma emphasizes the vital importance of education in fighting Roma exclusion, but the Open Society report strongly recommends that nations implementing the EU Framework should “give urgent consideration” to establishing an early child development fund to “support innovative early development programs and allow for scale up of what works.”

Beyond these specific recommendations, the Open Society report emphasizes that the EU Commission stated explicitly in its Framework document that “member states do not properly use EU money for the purpose of effective social and economic integration of Roma. As if this judgment, which seems to represent the views of many EU agencies, the World Bank, the Open Society, and many Roma groups themselves, needed additional reinforcement, a United Nations expert on minority issues visited Bulgaria this summer and called upon the government to “turn its policies on Roma integration into concrete action.” She went on to give what seems to represent the views of all these groups on the flaws in the Bulgarian government’s approach to fighting Roma exclusion: “Many policies seem to remain largely only rhetorical undertakings aimed at external audiences – official commitments that are not fulfilled in practice.” The result, according to the UN expert, is that “all the evidence demonstrates that Roma remain in desperate circumstances at the very bottom of the socio-economic ladder.” In particular, she mentioned that the access of Roma children to quality education “remains overwhelmingly unfulfilled.”

If CEE nations are now entering a period in which governments will be working, often ineffectively or at a very modest pace, to improve the conditions of the Roma, judging by the efforts of other nations to reduce discrimination against minority groups and by the stately rate of progress so far in the CEE nations, it can be assumed that the fight for Roma equality in Bulgaria will be measured in decades. In the U.S., for example, the Civil Rights movement of the 1950s and 1960s was largely successful. By the mid-1960s, vital court decisions had dismantled major parts of the system of legal discrimination against blacks and the federal government had enacted programs to ensure voting rights and other fundamental rights to blacks. To enhance the legal war on poverty and discrimination, the federal government also initiated an army of social programs designed to boost the education, health, employment, housing, and political participation of the poor in general and blacks in particular. Yet today, nearly half a century after achieving legal rights and the initiation of large-scale government inclusion programs, blacks (and Hispanics) still trail whites by large margins in education, income, housing, poverty levels, and health. Although achieving significant progress against discrimination may require decades or generations, discrimination will not diminish until strong legal, economic, and social forces are mobilized against it. Expecting a long struggle cannot be a reason not to begin.

If the history of making substantial progress in overcoming ethnic discrimination in the U.S. can serve as a rough comparison to the situation of the Roma in CEE nations, several factors are going to be vital in the fight of the Roma to overcome discrimination and exclusion in Bulgaria and throughout Europe. These factors include an antidiscrimination plan, aggressive implementation of the plan by all levels of government, leadership by the Roma themselves, educational progress by Roma children and young adults, political activism by the Roma people, a media committed to accurate reporting and fairness, and a civil society that reflects underlying public opinion favoring integration and opposed to discrimination. Most of these factors appear to be present in Bulgaria, often in rudimentary and brittle form, but present and in many cases moving in the right direction nonetheless. The progress that is just now beginning can be greatly enhanced by the efforts of groups that have the resources, the will, and the vision to roll up their sleeves and help promote Roma inclusion.

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Many scholars have argued that once “basic needs” have been met, higher income is no longer associated with higher in subjective well-being. We assess the validity of this claim in comparisons of both rich and poor countries, and also of rich and poor people within a country. Analyzing multiple datasets, multiple definitions of “basic needs” and multiple questions about well-being, we find no support for this claim. The relationship between well-being and income is roughly linear-log and does not diminish as incomes rise. If there is a satiation point, we are yet to reach it.

Introduction

In 1974 Richard Easterlin famously posited that increasing average income did not raise average well-being, a claim that became known as the Easterlin Paradox. However, in recent years new and more comprehensive data has allowed for greater testing of Easterlin’s claim. Studies by us and others have pointed to a robust positive relationship between well-being and income across countries and over time (Deaton, 2008; Stevenson and Wolfers, 2008; Sacks, Stevenson, and Wolfers, 2013). Yet, some researchers have argued for a modified version of Easterlin’s hypothesis, acknowledging the existence of a link between income and well-being among those whose basic needs have not been met, but claiming that beyond a certain income threshold, further income is unrelated to well-being.

The existence of such a satiation point is claimed widely, although there has been no formal statistical evidence presented to support this view. For example Diener and Seligman (2004, p. 5) state that “there are only small increases in well-being” above some threshold. While Clark, Frijters and Shields (2008, p. 123) state more starkly that “greater economic prosperity at some point ceases to buy more happiness,” a similar claim is made by Di Tella and MacCulloch (2008, p. 17): “once basic needs have been satisfied, there is full adaptation to further economic growth.” The income level beyond which further income no longer yields greater well-being is typically said to be somewhere between $8,000 and $25,000. Layard (2003, p. 17) argues that “once a country has over $15,000 per head, its level of happiness appears to be independent of its income;” while in subsequent work he argued for a $20,000 threshold (Layard, 2005 p. 32-33). Frey and Stutzer (2002, p. 416) claim that “income provides happiness at low levels of development but once a threshold (around $10,000) is reached, the average income level in a country has little effect on average subjective well-being.”

Many of these claims, of a critical level of GDP beyond which happiness and GDP are no longer linked, come from cursorily examining plots of well-being against the level of per capita GDP. Such graphs show clearly that increasing income yields diminishing marginal gains in subjective well-being. However this relationship need not reach a point of nirvana beyond which further gains in well-being are absent. For instance Deaton (2008) and Stevenson and Wolfers (2008) find that the well-being–income relationship is roughly a linear-log relationship, such that, while each additional dollar of income yields a greater increment to measured happiness for the poor than for the rich, there is no satiation point.

In this paper we provide a sustained examination of whether there is a critical income level beyond which the well-being–income relationship is qualitatively different, a claim referred to as the modified-Easterlin hypothesis. As a statistical claim, we shall test two versions of the hypothesis. The first, a stronger version, is that beyond some level of basic needs, income is uncorrelated with subjective well-being; the second, a weaker version, is that the well-being–income link estimated among the poor differs from that found among the rich.

Claims of satiation have been made for comparisons between rich and poor people within a country, comparisons between rich and poor countries, and comparisons of average well-being in countries over time, as they grow. The time series analysis is complicated by the challenges of compiling comparable data over time and thus we focus in this short paper on the cross-sectional relationships seen within and between countries. Recent work by Sacks, Stevenson, and Wolfers (2013) provide evidence on the time series relationship that is consistent with the findings presented here.

To preview, we find no evidence of a satiation point. The income–well-being link that one finds when examining only the poor, is similar to that found when examining only the rich. We show that this finding is robust across a variety of datasets, for various measures of subjective well-being, at various thresholds, and that it holds in roughly equal measure when making cross-national comparisons between rich and poor countries as when making comparisons between rich and poor people within a country.

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At a time of decelerating regional growth in sub-Saharan Africa, South Africa—one of the continent’s leading economies—is facing the brunt of concurrent external and domestic growth shocks. During a Brookings event on April 14, 2016 moderated by Africa Growth Initiative Director Amadou Sy, South African minister of finance, the Honorable Pravin Gordhan, provided cause for encouragement, as he highlighted strategies that South Africa is implementing to reverse slowing growth trends, boost social cohesion, and springboard inclusive, sustainable development.

Throughout the event, Minister Gordhan emphasized that South Africa is refocusing its efforts on implementing homegrown policies to mitigate the effects of global and domestic shocks: “Our approach is not to keep pointing outside our borders and say, ‘That’s where the problem is.’ We've got our own challenges and difficulties, and potential and opportunities. And it's important to focus on those, and rally South Africans behind that set of initiatives so that we could go wherever we can in terms improving the situation.”

He began by explaining the major growth problems facing South Africa, including first-level structural challenges—consistent electricity supply and labor relations—as well as deeper structural challenges, for instance, reforming the oligopolistic sectors of its economy. To address these issues, he expanded on what collaborative, multi-stakeholder efforts would be necessary. Watch:

Contending with infrastructure needs—particularly energy and logistical, but also social, such as water and sanitation, health care, and educational facilities—will play a significant role in overcoming these aforementioned challenges. Minister Gordhan explained how the government aims to fill existing infrastructure gaps through innovative financing mechanisms. Watch:

Later in the event, Sy pressed Minister Gordhan on plans for implementation for the country’s ambitious goals. As an example, Minister Gordhan underlined “Operation Phakisa,” a results-driven approach to fast-track the implementation of initiatives to achieve development objectives. The government intends to use this methodology to address a number of social priorities, including unlocking the potential of South Africa’s coastlines and oceans. Watch:

Urbanization in South Africa and sub-Saharan Africa as a whole is widespread and increasing, creating a demand for governments to both maintain their infrastructure as well as harness their energy and human capacity. Cities, especially those in South Africa’s Gauteng Province (Johannesburg, Pretoria, and Ekurhuleni), will continue to be crucial engines of economic development if municipal governance systems effectively manage the region’s expected rapid urbanization in the years to come. Minister Gordhan discusses some of the lessons learned from the Gauteng city region. Watch:

In sum, referring to the confluence of adverse global conditions and internal problems currently affecting South Africa, Minister Gordhan stated, “Whenever you are in the middle of a storm it looks like the worst thing possible—but storms don’t last forever.” He did not doubt the ability of the South African people to weather and emerge stronger from the storm, offering: “Ultimately South Africans are hopeful, are optimistic and resilient.”

You can watch the full event here. 

Video

• Pravin Gordhan notes the major growth challenges in South Africa
• Pravin Gordhan on addressing South Africa’s infrastructure gaps
• Pravin Gordhan on implementation of South Africa's development objectives
• Pravin Gordhan on the vital role of cities in economic development in South Africa

       

Volunteerism remains a powerful tool for good around the world. Young people, in particular, are motivated by the prospect of creating real and lasting change, as well as gaining valuable learning experiences that come with volunteering. This energy and optimism among youth can be harnessed and mobilized to help meet challenges facing our world today and accomplish such targets as the United Nations 2030 Sustainable Development Goals (SDGs).

On June 14, young leaders and development agents from leading non-governmental organizations (NGOs), faith-based organizations, corporations, universities, the Peace Corps, and United Nations Volunteers came together at the Brookings Institution to answer the question on how to achieve impacts on the SDGs through international service.

This was also the 10th anniversary gathering of the Building Bridges Coalition—a multi-stakeholder consortium of development volunteers— and included the announcement of a new Service Year Alliance partnership with the coalition to step up international volunteers and village-based volunteering capacity around the world.

Brookings Senior Fellow Homi Kharas, who served as the lead author supporting the high-level panel advising the U.N. secretary-general on the post-2015 development agenda, noted the imperative of engaging community volunteers to scale up effective initiatives, build political awareness, and generate “partnerships with citizens at every level” to achieve the 2030 goals.  

Kharas’ call was echoed in reports on effective grassroots initiatives, including Omnimed’s mobilization of 1,200 village health workers in Uganda’s Mukono district, a dramatic reduction of malaria through Peace Corps efforts with Senegal village volunteers, and Seed Global Health’s partnership to scale up medical doctors and nurses to address critical health professional shortages in the developing world. 

U.N. Youth Envoy Ahmad Alhendawi of Jordan energized young leaders from Atlas Corps, Global Citizen Year, America Solidaria, International Young Leaders Academy, and universities, citing U.N. Security Council Resolution 2250 on youth, peace, and security as “a turning point when it comes to the way we engage with young people globally… to recognize their role for who they are, as peacebuilders, not troublemakers… and equal partners on the ground.”

Service Year Alliance Chair General Stanley McChrystal, former Joint Special Operations commander, acclaimed, “The big idea… of a culture where the expectation [and] habit of service has provided young people an opportunity to do a year of funded, full-time service.” 

Civic Enterprises President John Bridgeland and Brookings Senior Fellow E.J. Dionne, Jr. led a panel with Seed Global Health’s Vanessa Kerry and Atlas Corps’ Scott Beale on policy ideas for the next administration, including offering Global Service Fellowships in United States Agency for International Development (USAID) programs to grow health service corps, student service year loan forgiveness, and technical support through State Department volunteer exchanges. Former Senator Harris Wofford, Building Bridge Coalition’s senior advisor and a founding Peace Corps architect, shared how the coalition’s new “service quantum leap” furthers the original idea announced by President John F. Kennedy, which called for the Peace Corps and the mobilization of one million global volunteers through NGOs, faith-based groups, and universities.

The multi-stakeholder volunteering model was showcased by Richard Dictus, executive coordinator of U.N. Volunteers; Peace Corps Director Carrie Hessler-Radelet; USAID Counselor Susan Reischle; and Diane Melley, IBM vice president for Global Citizenship. Melley highlighted IBM’s 280,000 skills-based employee volunteers who are building community capacity in 130 countries along with Impact 2030—a consortium of 60 companies collaborating with the U.N.—that is “integrating service into overall citizenship activities” while furthering the SDGs.

The faith and millennial leaders who contributed to the coalition’s action plan included Jim Lindsay of Catholic Volunteer Network; Service Year’s Yasmeen Shaheen-McConnell; C. Eduardo Vargas of USAID’s Center for Faith-Based and Community Initiatives; and moderator David Eisner of Repair the World, a former CEO of the Corporation for National and Community Service. Jesuit Volunteer Corps President Tim Shriver, grandson of the Peace Corps’ founding director, addressed working sessions on engaging faith-based volunteers, which, according to research, account for an estimated 44 percent of nearly one million U.S. global volunteers

The key role of colleges and universities in the coalition’s action plan—including  linking service year with student learning, impact research, and gap year service—was  outlined by Dean Alan Solomont of Tisch College at Tufts University; Marlboro College President Kevin Quigley; and U.N. Volunteers researcher Ben Lough of University of Illinois Urbana-Champaign.

These panel discussion directed us towards the final goal of the event, which was a multi-stakeholder action campaign calling for ongoing collaboration and policy support to enhance the collective impact of international service in achieving the 2030 goals.

This resolution, which remains a working document, highlighted five major priorities:

1. Engage service abroad programs to more effectively address the 2030 SDGs by mobilizing 10,000 additional service year and short-term volunteers annually and partnerships that leverage local capacity and volunteers in host communities.
2. Promote a new generation of global leaders through global service fellowships promoting service and study abroad.
3. Expand cross-sectorial participation and partnerships.
4. Engage more volunteers of all ages in service abroad.
5. Study and foster best practices across international service programs, measure community impact, and ensure the highest quality of volunteer safety, well-being, and confidence.

Participants agreed that it’s through these types of efforts that volunteer service could become a common strategy throughout the world for meeting pressing challenges. Moreover, the cooperation of individuals and organizations will be vital in laying a foundation on which governments and civil society can build a more prosperous, healthy, and peaceful world.

       

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2016: The turning point

Policymakers and development practitioners now face a new set of challenges in the aftermath of the global consensus triumvirate Addis Agenda—2030 Agenda—Paris Agreement: [1] implementation, follow-up, and review. Development policy professionals must tackle these while at the same time including the three pillars of sustainable development—social development, economic growth, and environmental protection—and the above three global consensus’ cross-sectoral natures—all while working in a context where policy planning is still performed in silos. They also must incorporate the universality of these new agreements in the light of different national circumstances—different national realities, capacities, needs, levels of development, and national policies and priorities. And then they have to significantly scale up resource allocation and means of implementation (including financing, capacity building, and technology transfer) to make a difference and enhance novel multi-stakeholder partnerships to contain the surge of global flows of all kinds (such as migration, terrorism, diseases, taxation, extreme weather, and digital revolution) in a resolutely interconnected world. Quite an ambitious task!

Given the above complexities, new national and global arrangements are being made to honor the commitments put forth to answer these unprecedented challenges. Several African governments have already started establishing inter-ministerial committees and task forces to ensure alignment between the global goals and existing national planning processes, aspirations, and priorities.

With the international community, Africa is preparing for the first High-Level Political Forum since the 2030 Agenda adoption in July 2016 on the theme “Ensuring that no one is left behind.” In order to inform the 2030 Agenda’s implementation leadership, guidance, and recommendations, six African countries [2] of 22 U.N. Member States, volunteered to present national reviews on their work to achieve the Sustainable Development Goals (SDGs), a unique opportunity to provide an uncompromising reality check and highlight levers to exploit and limits to overcome for impact.

Paralleling Africa’s groundwork, the United Nations’ efforts for coordination have been numerous. They include an inter-agency task force to prepare for the follow-up forum to Financing For Development timed with the Global Infrastructure Forum that will consult on infrastructure investment, a crucial point for the continent; an appointed 10-representative group to support the Technology Facilitation Mechanism that facilitates the development, transfer and dissemination of technologies for the SDGs, another very important item for Africa; and an independent team of advisors to counsel on the longer-term positioning of the U.N. development system in the context of the 2030 Agenda, commonly called “U.N. fit for purpose,” among many other endeavors.

These overwhelming bureaucratic duties alone will put a meaningful burden on Africa’s limited capacity. Thus, it is in the interest of the continent to pool its assets by taking advantage of its robust regional networks in order to mitigate this obstacle in a coherent and coordinated manner, and by building on the convergence between the newly adopted texts and Agenda 2063, the African Union’s 50-year transformation blueprint, with the help of pan-African institutions.

Regionalization in Africa: The gearwheel to the next developmental phase

Besides national and global, there is a third level of consideration: the regional one. Indeed, the three major agreements in 2015 emphasized support to projects and cooperation frameworks that foster regional and subregional integration, particularly in Africa. [3] Indeed, common and coherent industrial policies for regional value chains developed by strengthened regional institutions and sustained by a strong-willed transformational leadership are gaining traction towards Africa’s insertion into the global economy.

Africa has long made regional economic integration within its main “building blocs,” the eight Regional Economic Communities (RECs), a core strategy for development. The continent is definitely engaged in this path: Last summer, three RECs, the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC), and the Southern African Development Community (SADC), launched the Tripartite Free Trade Area (TFTA) that covers 26 countries, over 600 million people, and $1 trillion GDP. The tripartite arrangement paves the way towards Africa’s own mega-regional one, the Continental Free Trade Area (CFTA), and the realization of one broad African Economic Community. If regionalization allows free movement of people, capital, goods, and services, the resulting increased intra-African connectivity will boost trade within Africa, promote growth, create jobs, and attract investments. Ultimately, it should ignite industrialization, innovation, and competitiveness. To that end, pan-African institutions, capitalizing on the recent positive continental performances, are redoubling their efforts to build an enabling environment for policy and regulation harmonization and economies of scale.

Infrastructure and regionalization

Importantly, infrastructure, without which no connectivity is possible, is undeniably the enabling bedrock to all future regionalization plans. Together with market integration and industrial development, infrastructure development is one of the three pillars of the TFTA strategy. Similarly, the New Partnership for Africa’s Development (NEPAD) Agency, the technical body of the African Union (AU) mandated with planning and coordinating the implementation of continental priorities and regional programs, adopted regional integration as a strategic approach to infrastructure. In fact, in June 2014, the NEPAD Agency organized the Dakar Financing Summit for Infrastructure, culminating with the adoption of the Dakar Agenda for Action that lays down options for investment mobilization towards infrastructure development projects, starting with 16 key bankable projects stemming from the Programme for Infrastructure Development in Africa (PIDA). These “NEPAD mega-projects to transform Africa” are, notably, all regional in scope.

See the full map of NEPAD’s 16 mega-projects to transform Africa here »

Supplementing NEPAD and TFTA, the Continental Business Network was formed to promote public-private dialogue with regard to regional infrastructure investment. The Africa50 Infrastructure Fund was constituted as a new delivery platform commercially managed to narrow the massive infrastructure finance gap in Africa evaluated at $50 billion per annum.

The development of homegrown proposals and institutional advances observed lately demonstrate Africa’s assertive engagement towards accelerating infrastructure development, thereby regionalization. At the last AU Summit, the NEPAD Heads of State and Government Orientation Committee approved the institutionalization of an annual PIDA Week hosted at the African Development Bank (AfDB) to follow up on the progresses made.

The momentum of Africa’s regional energy projects

The energy partnerships listed below illustrate the possible gain from adopting trans-boundary approaches for implementation and follow-up: the Africa Power Vision (APV) undertaken with Power Africa; the ECOWAS Centre for Renewable Energy and Energy Efficiency (ECREEE) model accompanying the Sustainable Energy for All (SE4ALL) Africa Hub efforts; and the Africa GreenCo solution that is to bank on PIDA.

• Africa Power Vision: African ministers of power and finance gathered at the World Economic Forum (WEF) in Davos in 2014 decided to create the APV. The vision provides a strategic template harnessing resources to fast-track access to modern energy for African households, businesses, and industries. It draws up a shortlist of African-driven regional priority energy projects mostly extracted from the PIDA Priority Action Program, which is the PIDA short-term pipeline to be completed by 2020. The game changer Inga III hydropower project, the iconic DESERTEC Sahara solar project, and the gigantic North-South Interconnection Transmission Line covering almost the entire TFTA are among the 13 selected projects. The APV concept note and implementation plan entitled “From vision to action” developed by the NEPAD Agency, in collaboration with U.S. government-led Power Africa initiative, was endorsed at the January 2015 AU Summit. The package elaborates on responses to counter bottlenecks to achieve quantifiable targets, the “acceleration methodology” based on NEPAD Project Prioritization Considerations Tool (PPCT), risk mitigation, and power projects’ financing. Innovative design was thought to avoid duplication, save resources, improve coordination and foster transformative action with the setting up of dual-hatted Power Africa – APV Transaction Advisors, who supervise investment schemes up to financial closure where and when there is an overlap of energy projects or common interest. Overall, the APV partnership permits a mutualization of expertise while at the same time, since it is based on PIDA, promoting regional economic integration for electrification.

• ECOWAS Centre for Renewable Energy and Energy Efficiency: U.N. Secretary-General Ban Ki-moon launched the Sustainable Energy for All initiative worldwide as early as 2011 with the triple objective of ensuring universal access to modern energy services, doubling the rate of improvement of energy efficiency, and doubling the share of renewable energy in the global energy mix by 2030. Since its inception, SE4ALL prompted a lot of enthusiasm on the continent, and is now counting 44 opt-in African countries. As a result, the SE4ALL Africa Hub was the first regional hub to be launched in 2013. Hosted at the AfDB in partnership with the AU Commission, NEPAD Agency, and the U.N. Development Program (UNDP), its role is to facilitate the implementation of SE4ALL on the continent. The SE4ALL Africa Hub 3rd Annual Workshop held in Abidjan last February showed the potential of this “creative coalition” (Yumkella, 2014) to deliver on areas spanning from national plans of action, regionally concerted approaches in line with the continental vision, to SDG7 on energy, to climate Intended Nationally Determined Contributions (INDCs) made for the Paris Agreement. Above all, the workshop displayed the hub’s ability to efficiently kick-start the harmonization of processes for impact among countries. Forasmuch as all ECOWAS Member States opted-in to SE4ALL, the West African ministers mandated their regional energy center, ECREEE, to coordinate the implementation of the SE4ALL Action Agendas (AAs), which are documents outlining country actions required to achieve sustainable energy objectives, and from then Investment Prospectuses (IPs), the documents presenting the AAs investment requirements. As a result, the ECOWAS Renewable Energy Policy (EREP) and the Energy Efficiency Policy (EEEP) were formulated and adopted; and a regional monitoring framework to feed into a Global Tracking Framework, the SE4ALL measuring and reporting system, is now being conceived. The successful ECREEE model, bridging national inventory and global players, is about to be duplicated in two other African regions, EAC and SADC, with the support of the U.N. Industrial Development Organization (UNIDO).

• Africa GreenCo: Lastly, initiatives like Africa GreenCo are incubating. This promising vehicle, currently funded by a grant from the Rockefeller Foundation, envisions itself as an independently managed power trader and broker to move energy where needed. Indeed, Africa GreenCo aims to capitalize on PIDA power projects: In its capacity as intermediary creditworthy off taker, it plans to eventually utilize their regional character as a value addition to risk guarantee. To date, Africa GreenCo is refining the legal, regulatory, technical, and financial aspects of its future structure and forging links with key stakeholders in the sector (member states, multilateral development banks, African regional utilities for generation and interconnection called Power Pools) ahead of the completion of its feasibility study in June 2016.

Leapfrog and paradigm shift ahead: Towards transnationalism

The above-mentioned partnerships are encouraging trends towards more symbiotic multi-stakeholders cooperation. As they relate to home-crafted initiatives, it is imperative that we do not drift away from a continental vision. Not only do Africa-grown plans have higher chance of success than the one-size-fits-all imported solutions, but consistent and combined efforts in the same direction reinforce confidence, emulation, and attract supportive attention. It implies that the fulfillment of intergovernmental agreements requires first and foremost their adaptation to local realities in a domestication process that is respectful of the policy space. Mainstreaming adjustments can be later conducted according to evidence-based and data-driven experiments. Between these global engagements and national procedures, the regional dimension is the indispensable link: Enabling countries to bypass the artificiality of borders inherited from colonial times and offering concrete options to eradicate poverty in a united-we-stand fashion. Regional integration is therefore a prelude to sustainable development operationalization within Africa and a key step towards its active partaking in the global arena. Regionalization can also trigger international relations shift provided that it encompasses fair multilateralism and sustainable management of global knowledge. Indeed, the resulting openness and the complexity encountered are useful parameters to enrich the conception of relevant local answers.

These success stories show the great potential for new experiments and synergies. To me, they inspire the promise of a better world. The one I like to imagine is characterized by mutually beneficial ecosystems for the people and the planet. It encourages win-win reverse linkages, or in other words, more positive spillovers of developing economies on industrial countries. It is a place where, for example, an African region could draw lessons from the Greek crisis and the other way around: China could learn from Africa’s Maputo Development Corridor for its Silk Road Economic Belt. Twin institutes performing joint research among regional knowledge hubs would flourish. Innovative Fab Labs would be entitled to strive after spatial adventure with e-waste material recycled into 3D printers. In that world, innovative collaborations in science, technology, engineering, and math (STEM) would be favored and involve not only women but also the diaspora in order to develop environmentally sound technical progress. Commensurate efforts, persistent willingness, indigenous ingenuity, and unbridled creativity place this brighter future within our reach.

Beyond the recognition of the African voice throughout the intergovernmental processes, Africa should now consolidate its gains by firmly maintaining its position and safeguarding its winnings throughout the preliminary phase. The continent should urgently set singular tactics with the greatest potential in terms of inclusiveness and creation of productive capacity. While doing so, African development actors should initiate a “learning by doing” virtuous cycle to create an endogenous development narrative cognizant of adaptable best practices as well as failures. Yet the only approach capable of generating both structural transformation and informative change that are in line with continentally own and led long-term strategies is … regional integration.

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

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

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

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

Figure 1. Role of SE sector in public service provision

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

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

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

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

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

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Saudi Arabia, America’s oldest ally in the Middle East, is in the midst of the most profound changes in decades. The leadership is going through an unprecedented generational change and has adopted an aggressive foreign policy. The driver of change is the king’s favorite son, Deputy Crown Prince and Minister of Defense Mohammed bin Salman.

MBS, as he’s often called, is 30 years old, remarkably energetic, and very ambitious. King Salman has promoted him to an array of powerful positions and concentrated power in his hands quickly. In addition to being third in the line of succession behind the king and his cousin Crown Prince Mohammed bin Nayef, he often acts as the country’s top diplomat and he chairs the committee that sets economic and energy policy. He acquires new titles and responsibilities every week. Late in April he became the Saudi chief of a new cooperation council with Jordan, for example, with promises this will lead to stepped-up Saudi financial aid to Jordan.

The prince is the author of “Saudi Vision 2030,” an ambitious plan to wean the country of its dependence on oil income and create a more diverse economy. On May 7 the king issued 51 royal orders restructuring the government to implement his son’s plan, including sacking the oil minister, Ali Naimi, who had run the portfolio for two decades. The new orders also seek to encourage more foreign pilgrimage to the two holy cities of Mecca and Medinah by highlighting the opportunity for pilgrimage not just during the traditional Haj holy month, but year-round as well. Encouraging tourism is a major part of “Vision 2030.” All of the changes bear MBS’s stamp.

MBS effectively makes Saudi oil policy now. He sabotaged Naimi’s efforts to freeze or reduce OPEC oil production last month. His plan to open ARAMCO to outside investment is the centerpiece of “Vision 2030.” Oil is being used as a weapon by keeping production high to keep Iran from getting an oil bonus after the nuclear deal lifted sanctions.

The king has other and older sons with more experience than Prince Mohammed. One is Saudi Arabia’s only astronaut and another is governor of Medinah. But King Salman apparently has unique confidence in the young prince who controls access to his father and the Royal Court.

Other Saudis have been given great responsibility at an early age before. The modern kingdom’s founder, Abdelaziz ibn Saud, captured Riyadh when he was only in his late twenties. His son Faisal represented the kingdom after the First World War in London and Paris at the age of 14 and commanded an army three years later in battle. Prince Bandar became ambassador to the U.S. in his early forties. But MBS’s rise is unique for an heir to the throne in the last half-century. He is the symbol of youth in a nation where most of the population is his age or younger.

The prince is also the hand behind the creation of a new Islamic military alliance based in the kingdom. Some three dozen countries have joined. The prince envisioned the alliance as both a counter to terrorist groups like the so-called Islamic State and al Qaida as well as a counter to Iran and its allies like Hezbollah and Bashar Assad. It held large military exercises called “Northern Thunder” in the kingdom this winter.

MBS is also the architect of Saudi Arabia’s year-old war in Yemen. Initially it was called Operation Decisive Storm but then the war settled into a stalemate so the name was changed. The Saudis and their allies, especially the United Arab Emirates, captured the southern port of Aden but have been unable to wrest control of the capital Sanaa from Zaydi Shia rebels called Houthis and their partner, former Yemeni President Ali Abdullah Saleh.

A fragile cease-fire began last month. Political talks are underway in Kuwait between the rival Yemeni groups but there has been little progress. Meanwhile the Saudis and Emiratis have driven al Qaeda out of several cities along the southeast coast of Yemen. Al Qaeda in the Arabian Peninsula is regrouping and is far from destroyed. But it no longer is the main beneficiary of the war.

The Yemeni people have paid an enormous cost. Both sides have been guilty of egregious violence. The Saudi blockade has left millions of Yemenis at risk of malnutrition and without medical help. The rebels have starved the city of Taiz for months.

The Saudis claim they acted to prevent Iran from creating a puppet regime on the kingdom’s southern border. They were concerned when the Houthis set up direct air links from Sanaa to Tehran and offered use of the port of Hodeida to Iran. Hezbollah and Iran have provided some military advisers to the Houthis, but their influence on the rebels is limited.

The king and his son are pro-American but disenchanted with President Barack Obama. He has sold the kingdom over $100 billion in arms on his watch, according to the Congressional Research service. Obama has backed the Saudi-Yemen war with diplomatic, logistical, and intelligence support. U.S. advisers are now on the ground fighting al Qaeda.

But the Saudis cannot forgive Obama for abandoning Egypt’s President Hosni Mubarak in 2011. If one autocrat could be thrown under the bus, who might be next? They don’t like the Iran nuclear deal and believe Obama has been indecisive in Syria. MBS says he wants America to do more, not less, in the region. He is courting American journalists and think tanks.

King Salman has already dismissed one succesor. His half-brother, Crown Prince Muqrin, was removed from office a year ago without warning or explanation. The 80-year-old king could remove the current crown prince, his nephew Prince Mohammed bin Nayef, and elevate MBS at any time. The old guard in the royal family, which believes MBS is reckless and inexperienced, won’t like it, but they have few options to resist. If the king does put his son in the crown prince position the kingdom will skip a whole generation. It’s already been a remarkable journey for MBS.

This piece was originally published in The Daily Beast.

       

       

       

       

       

Editor's Note : In this piece from South Asia Hand, Teresita Schaffer and her husband, Howard Schaffer, reflect on how India and Pakistan sometimes find it difficult to shift gears to solve problems, even when they would greatly benefit from doing so. The authors develop this theme more fully in their forthcoming book, "India at the Global High Table: The Quest for Regional Primacy and Strategic Autonomy." The book will be published by Brookings Institution Press this spring.

A deadly avalanche that killed ten Indian soldiers earlier this month on the disputed 20,000 foot high Siachen glacier in Kashmir received extensive coverage in the Indian and Pakistani media. The avalanche prompted some commentators in both countries to call for an early settlement of what seemed to them and to many others (including ourselves) a senseless dispute.

Their voices were largely drowned out in India by an outpouring of patriotic fervor that cast the dead soldiers as “Bravehearts” who had died for their country. The Indian Defense Minister publicly dismissed pleas that both sides pull back from the 47-mile long glacier where they have confronted one another since 1984. Possibilities for a settlement seem remote.

Siachen is one of several disputes between India and Pakistan that range in importance from the future status of Kashmir to the precise location of a small stretch of their international boundary near the Indian Ocean. The Siachen dispute arose because the Line of Control drawn between the contending armies in Kashmir terminates in the high Himalayas. India and Pakistan have different versions of where it should go from there as it makes its way toward the Chinese border. This made the glacier a no-man’s land.

Anticipating a Pakistani move in 1984 to seize Siachen, the Indian army struck first. Since then it has controlled most of the glacier, including the main range. Pakistan also deploys troops in the area. Published figures say that the two countries together maintain about 150 outposts. Published figures would put the numbers of troops somewhere around 1000-2000 for each side. These are small numbers for both armies, but there is a long and complicated logistical and support chain that goes with them. India’s formal reports to parliament put the numbers of soldiers killed from 1984 to date at just under 900; Pakistani losses are variously estimated at 1000-3000.

Some fighting took place in the earlier years, but a ceasefire was worked out in 2003 and remains in place. The real enemy is nature, in this high altitude freezing desert. There have been no deaths by enemy fire in recent years. At the post most recently struck by an avalanche, the oxygen is so thin that it cannot support fire for cooking. Over time, both sides learned to deal more effectively with the bitter cold and piercing winds. The mudslides and avalanches that have kept up a steady stream of death have been triggered both by climate change and by human activity that unsettled the packed snow on the glacier itself. The recent disaster was by no means the most deadly: in April 2012, 140 Pakistani soldiers were buried by another avalanche.

Sporadic efforts to resolve the dispute have included the idea of converting Siachen into an “international peace park.” Less idealistic approaches have focused on the demilitarization of the glacier, but only after both sides had reached an agreement delineating the areas they had occupied before withdrawing and pledging not to try to take them back. These efforts won some support within the government headed by Indian National Congress party leader Manmohan Singh in the 2000s. But they were stoutly opposed by the Indian Army, one of the few security issues on which the normally apolitical uniformed military has taken a public stand.

This was particularly evident in 2006, when India and Pakistan seemed to be coming close to an agreement on the issue. In a telegram later released by Wikileaks, the U.S. Embassy in New Delhi reported in May of that year that “Army Chief J.J. Singh appears on the front page of the Indian Express seemingly fortnightly to tell readers the Army cannot support a withdrawal from Siachen.” The embassy went on to note that “given India’s high degree of civilian control over the armed forces, it is improbable that Gen. Singh could repeatedly make such statements without Ministry of Defense civilians giving it at least tacit approval.” It concluded that “[w]hether or not this is the case, a Siachen deal is improbable while his – and the Army’s – opposition continues to circulate publicly.” After the most recent tragedy, LtGen D. S. Hooda, who heads the Northern Command of the Indian army, has maintained this position. He was quoted in a Kashmiri paper as saying that despite these tragic casualties, India must remain in its present positions. He specifically ruled out the mutual demilitarization suggested by Pakistan.

The Indian public has had ample opportunity to read about the terrible human cost of Siachen, but civilian public opinion is unlikely to force the issue. For Indians, the avalanche tragedy was heightened by the apparently miraculous survival of one of the soldiers, who was reportedly buried under twenty-five feet of snow for six days before being rescued. Medically evacuated to New Delhi, he was visited in the hospital by Prime Minister Narendra Modi and became an instant, highly publicized hero. His death a couple of days later made him a national martyr.

Siachen has been one of the issues discussed between India and Pakistan in the on-again, off-again dialogue they initiated in the late ‘90s. Plans to recommence these wide-ranging discussions in January were postponed following the attack on an Indian air base by Kashmiri dissidents whom the Indians were convinced had been directed from within Pakistan.

Progress on Siachen is unlikely when and if these talks actually begin. Although the Modi government was willing to exchange with Bangladesh a small number of enclaves along their border, abandoning territory in Kashmir would strike a much different nerve both in the ruling BJP, the army, and the country at large. (It would be easier for the Pakistanis to accept since their military, which calls the shots on these issues, could argue that Pakistan had got the better deal by forcing the Indians off the main glacier range.)

So the issue is likely to continue to perplex outsiders like ourselves. Retired Indian Army friends have told us how important Siachen is for Indian security. But we find it difficult to accept the assertion that Siachen is a potential invasion route. The difficulty both Pakistan and India have had sustaining small forces in that terrain would be magnified many-fold if one attempted a major military operation. By the same token, we wonder how important Siachen would be in India’s strategy against China. It has long struck us as a great waste of men and material which, were the two sides to act rationally, could be satisfactory resolved. Worse, the deaths suffered by both sides are only likely to increase as climate change increases the risk of avalanches and mudslides.

But Indians and Pakistanis are not the only people in the world who don’t always act rationally on emotionally-charged issues.

      

A number of policymakers and analysts in the United States have called for countries like China and India to “do more” in the Middle East. Arguably, both Beijing and Delhi are doing more—though perhaps not in the way these advocates of greater Asian engagement in the Middle East might have wanted. President Xi Jinping recently traveled to the region and India’s Prime Minister Modi will return there over the weekend. After quick trips to Brussels for the India-EU Summit and a bilateral, as well as to Washington for the Nuclear Security Summit, Indian Prime Minister Narendra Modi will head to Riyadh tomorrow. The trip reflects not just the importance of Saudi Arabia for India but also the Middle East (or what India calls West Asia) and the opportunity this particular moment offers to Indian policymakers.

The Middle East has been crucial for India for decades. It’s been a source of energy, jobs, remittances, and military equipment, and holds religious significance for tens of millions of Indians. It’s also been a source of concern, with fears about the negative impact of regional instability on Indian interests. But today, as Modi visits, there’s also opportunity for Indian policymakers in the fact that, for a number of reasons, India is important to Saudi Arabia and a number of Middle Eastern countries in a way and to an extent that was never true before. 

It’s a two-way street

As it has globally, India has a diversified set of partnerships in the Middle East, maintaining and balancing its relationships with the Gulf Cooperation Council countries, Iran, and Israel. The region remains India’s main source of imported oil and natural gas (58 percent of its oil imports and 88 percent of its liquefied natural gas imports in 2014-15 came from the Middle East). In addition, as of January 2015, there were 7.3 million non-resident Indians in the region (64 percent of the total). These non-resident Indians remitted over $36 billion in 2015 (52 percent of the total remittances to India). Add to that India’s Sunni and Shiite populations (among the largest in the world), counter-terrorism cooperation with some countries, India’s defense relationship with Israel, the desire to connect with Afghanistan and Central Asia through Iran, and the potential market and source of capital it represents for Indian companies, and it becomes clear why this region is important for India. 

But, with many Middle Eastern countries pivoting to Asia or at least giving it a fresh look, India arguably has more leverage than it has ever had in the past. There have been a number of reasons why these countries have been looking east recently: 

• traditional strategic partnerships in flux and questions about the U.S. role in the region; 
• the economic slowdown in Europe and the U.S. following the 2008 financial crisis; 
• changing global energy consumption patterns; 
• growing concerns about terrorism in the region; 
• And, in Israel’s case, the boycott, divestment, and sanctions movement. 

In this context, India has some advantages. Its economy is doing relatively well compared to that of other countries and offers a market for goods and services, as well as potentially an investment destination. India, for example, has become Israeli defense companies’ largest foreign customer. 

Crucially for the oil and natural gas-producing states in the region, India also continues to guzzle significant—and growing—quantities of both. But, today, Delhi has buyer’s power. Why? Because oil prices are relatively low and there’s a lot of gas on the market, traditional buyers are looking elsewhere for fossil fuels or looking beyond them to cleaner energy sources. India, too, has more options and has been diversifying its sources of supply (compare India’s 74 percent dependence on the Middle East for oil in 2006-07 to the lower 58 percent that it gets from there now). 

India might still be dependent on the Middle East for energy, but now the Middle East also depends on India as a market.

Thus, India might still be dependent on the Middle East for energy, but now the Middle East also depends on India as a market. This has altered dynamics—and India’s increased leverage has been evident, for example, in the renegotiated natural gas supply deal between Qatar’s RasGas and India’s Petronet, which came with lower prices and waived penalties. Even countries like Iran, which now have more options for partners and have not hesitated to point that out to Delhi, still have an interest in maintaining their India option. Regional rivalries might have made Delhi’s balancing act in the region more complicated, but it also gives each country a reason to maintain its relationship with India. 

And the Modi government has been looking to take advantage of this situation. While its Act East policy received a lot more attention over the last couple of years—from policymakers and the press—this region hasn’t been missing from the agenda or travel itineraries. For example, Modi has traveled to the United Arab Emirates and met with Iranian President Hassan Rouhani on the sidelines of the last Shanghai Cooperation Organization conference, and the Indian president has traveled to Israel, Jordan, and the Palestinian territories. The Indian foreign minister has visited Bahrain, Israel, the Palestinian territories, Jordan, Oman, and the UAE and also participated the first ministerial meeting of the Arab-India Cooperation Forum in Manama earlier this year. The Modi government has also hosted the emir of Qatar, the crown prince of Abu Dhabi, the Bahraini, Iranian, Omani, Saudi, Syrian, and UAE foreign ministers, as well as the Israeli defense minister to India.

China’s increased activity in the region, as well as Pakistan’s engagement with Iran and the rush of European leaders to the latter, have led to calls for speedier action.

But there have been concerns that this engagement is not sufficient, particularly relative to that of some countries. For example, China’s increased activity in the region, as well as Pakistan’s engagement with Iran and the rush of European leaders to the latter, have led to calls for speedier action. The Indian foreign secretary’s recent comment that “we are no longer content to be passive recipients of outcomes” in this region also seemed to reflect the understanding that Delhi needs to be more proactive about deepening its relationships with the countries in the region, rather than waiting for them to take shape organically or just reacting to events as they occur. 

The Saudi connection

It is in this context that Modi travels to Riyadh. The relationship with Saudi Arabia is one of the key pillars of India’s Middle East policy. A major source of oil, jobs, and remittances, it is also a destination for over 400,000 Indians who go to the country for Hajj or Umra every year. In addition, in recent years, there has been more security cooperation, with Riyadh handing over individuals wanted in India and the two countries working together on countering money laundering and terrorism financing. 

The relationship has not been without problems from Delhi’s perspective. Just to list a few: 

• the Saudi-Pakistan relationship; 
• diaspora-related issues, including the treatment of Indian workers in-country and efforts towards Saudization that might limit employment opportunities for Indian expatriates;
• ideology-related concerns, particularly funding from Saudi Arabia for organizations in India, which might be increasing the influence of Wahhabism in the country; and
• regional dynamics, including Saudi Arabia’s rising tensions with Iran that has had consequences for Indian citizens, for example, in Yemen from where Delhi had to evacuate 4,640 Indians (as well as 960 foreigners).

More recently, incidents involving Saudi diplomats in India have also negatively affected (elite) public perceptions of the country, though the broader impact of this, if any, is unclear. Over the medium-to-long term, there are also concerns about potential instability within Saudi Arabia.

During Modi’s trip, however, the emphasis will be on the positives—not least in the hope that these might help alleviate some of the problems. The prime minister will be hosted by King Salman, who visited India as crown prince and defense minister just before Modi took office. He will also meet a slate of Saudi political and business leaders. The Indian wish-list will likely include diversification of economic ties, greater two-way investment, as well as more and better counter-terrorism cooperation. 

There will not be a large diaspora event—as Modi has done in Australia, Singapore, the UAE, United Kingdom, and the United States—but the prime minister will engage privately with members of the Indian community. He will also meet with Indian workers employed by an Indian company that is building part of the Riyadh metro. It is not hard to assess the reason for this particular engagement, given increased sensitivity in India (particularly in the media) about the treatment of citizens abroad, as well as the government’s interest in making a pitch for Indian companies to get greater market access. But, with Riyadh’s interest in creating jobs for Saudis, Modi will also try to highlight that Indian companies are contributing to the training and employment of locals (especially women) by visiting another Indian company’s all-female business process service center.

This will reflect the broader theme of highlighting to Riyadh and Saudis that it is not just India that benefits from the relationship—they do too. Some in India hope this has an additional effect: of giving Riyadh a reason not to let its relationship with Pakistan limit that with India, and perhaps occasionally making it willing to use some of its leverage with that country to India’s benefit. Despite recent irritants in the Saudi-Pakistan relationship, however, Delhi is realistic about the limits of weaning Riyadh away from Islamabad.

So does all this mean India will “do more” in the Middle East? For all the reasons mentioned above, the country has been involved in the region for a number of years—though, as the Indian foreign secretary has noted, this involvement was not in large part the product of active state policy. Indian interests in the region will likely increase in the future and, thus, so will its corporate and official engagement. But that engagement might not be what some American observers have in mind. As India’s capabilities grow, it might do more in terms of providing maritime security, intelligence sharing, evacuating expatriates when necessary, and contributing to U.N. peacekeeping operations. It could also potentially do more in terms of capacity building within these countries with the support of the host governments. There might also be scope for India to expand its West Asia dialogue with countries like the United States. But it will likely remain wary of picking sides or getting involved in non-U.N.-sanctioned military interventions in the region unless its interests are directly affected (the previous BJP-led coalition government did briefly consider—and then reject—joining the United States coalition in the Iraq war, for instance).

      

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Editors’ Note: How do states manage their armed forces, domestic politics, and foreign affairs? Stephen Cohen, senior fellow with the India Project at Brookings, has studied this and a range of other issues in Southeast Asia since the 1960s. In a new book, titled “The South Asia Papers: A Critical Anthology of Writings,” Cohen reflects on more than a half-century of scholarship on India, describing the dramatic changes he has personally witnessed in the field of research. The following is an excerpt from the book’s preface.

[In the 1960s, questions about how states manage their armed forces] were not only unasked in the South Asian context by scholars; they were also frowned on by the Indian government. This made preparation both interesting and difficult. It was interesting because a burgeoning literature on civil–military relations in non-Western states could be applied to India. Most of it dealt with two themes: the “man on horseback,” or how the military came to power in a large number of new states, and how the military could assist in the developmental process. No one had asked these questions of India, although the first was relevant to Pakistan, then still governed by the Pakistani army in the form of Field Marshal Ayub Khan.

***

During my first and second trips [in the 1960s] my research was as a historian, albeit one interested in the army’s social, cultural, and policy dimensions. I discovered, by accident, that this was part of the movement toward the “new military history.” Over the years I have thus interacted with those historians who were interested in Indian military history, including several of my own students. 

While the standard of historians in India was high in places like the University of Calcutta, military history was a minor field, just as it was in the West. Military historians are often dismissed as the “drums and trumpets” crowd, interested in battles, regiments, and hardware, but not much else. My own self-tutoring in military history uncovered something quite different: a number of scholars, especially sociologists, had written on the social and cultural impact of armed forces, a literature largely ignored by the historians. While none of this group was interested in India, the connection between one of the world’s most complicated and subtle societies, the state’s use of force, and the emergence of a democratic India was self-evident. 

***

A new generation of scholars and experts, many of them Indians (some trained in the United States) and Indian Americans who have done research in India, have it right: this is a complex civilizational-state with expanding power, and its rise is dependent on its domestic stability, its policies toward neighbors (notably Pakistan), the rise of China, and the policies of the United States. 

The literature that predicts a conflict between the rising powers (India and China), and between them and America the “hegemon,” is misguided: the existence of nuclear weapons by all three states, plus Pakistan, ensures that barring insanity, any rivalries between rising and established states will be channeled into “ordinary” diplomatic posturing, ruthless economic competition, and the clash of soft power. In this competition, India has some liabilities and many advantages, and the structure of the emerging world suggests a closer relationship between the United States and India, without ruling out much closer ties between China and India. 

There remain some questions: Can the present Indian leadership show magnanimity in dealing with Pakistan, and does it have the foresight to look ahead to new challenges, notably environmental and energy issues that require new skills and new international arrangements? Importantly, some of the best work on answering these questions is being done in India itself, and the work of Kanti Bajpai, Amitabh Mattoo, Harsh Pant, C. Raja Mohan, Rajesh Basrur, and others reveals the maturity of Indian thinking on strategic issues. It has not come too soon, as the challenges that India will face are growing, and those of Pakistan are even more daunting.

      

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U.S. policy towards South Asia has changed considerably over the last seven decades. The nature of U.S. engagement with different countries in the region has varied over time, as has the level of U.S. interest. While India and Pakistan have received the most attention from Washington, the United States has also been engaging with Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, and Sri Lanka, albeit to different degrees. 

On May 19, The India Project at Brookings hosted a panel discussion exploring the past and present U.S approaches towards South Asia, based on Senior Fellow Stephen Cohen’s new book, “The South Asia Papers: A Critical Anthology of Writings” (Brookings Institution Press, 2016). Panelists also assessed the Obama administration’s policies toward the region, and the challenges and opportunities that lie ahead for the next U.S. administration. Fellow Tanvi Madan, director of The India Project, moderated the discussion.

After the discussion, the panelists took questions.

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• U.S. policy toward South Asia: Past, present, and future

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• U.S. policy toward South Asia: Past, present, and future

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