International volunteer service is defined as an organized period of engagement and contribution to society by individuals who volunteer across an international border. There is growing interest in the potential of international service to foster international understanding between peoples and nations and to promote global citizenship and intercultural cooperation. Studies suggest that international service develops skills, mindsets, behaviors and networks that prepare volunteers for living and working in a knowledge-based global economy. Many believe that even short-term experiences abroad can begin to prepare participants for longer-term engagement and future international service.

International service may be growing in prevalence worldwide. In the United States, more than one million Americans reported volunteering abroad in 2008. Despite the scale of international service, its impacts are not well understood. Although there is a growing body of descriptive evidence about the various models and intended outcomes of international service, the overwhelming majority of research is based on case and cross-sectional studies, which do not permit conclusions about the impacts of international service. Scholars and practitioners in the field have called for rigorous research that documents impacts.

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High unemployment, the Gulf oil spill, and mounting fiscal worries clouded our July 4th celebrations. Yet, one patriotic highlight in President Obama's first year was bipartisan support of the Serve America Act, which expanded opportunities for Americans of all ages to meet urgent domestic challenges through community and national service. In the process, Americans who otherwise would have been unemployed are engaging in productive work, at low cost to taxpayers, to meet problems like the high school dropout epidemic. Similar efforts can expand volunteer service abroad.

As President Obama made clear in his first major policy speech to the international community in Cairo, Egypt, the world must unleash its collective imagination through social innovators, entrepreneurs and citizen diplomats to contribute to global development, respond to natural disasters, and initiate interfaith action to tackle preventable diseases like malaria. The moment is now.

Fifty years after John F. Kennedy's call for a Peace Corps, we might reconsider our obligations to meet needs around the world. President Kennedy said that the Peace Corps would be serious when 100,000 Americans were serving abroad each year. Although the Peace Corps is America's flagship international service program, today less than 8,000 volunteers are spread across 77 countries. Since 1961, America has sent and returned nearly 200,000 volunteers, a number significantly less than the millions Kennedy envisioned by his Peace Corps' 50th year. Had the Peace Corps grown at the rate Kennedy envisioned, the course of our country's foreign policy, diplomatic strategy and global awareness over the past 50 years would be very different.

Last week, ServiceWorld, an international service coalition of more than 300 non-profits, colleges, corporations and faith-based institutions, released a bold plan to meet President Kennedy's goal of mobilizing 100,000 Americans every year - and one million over a decade - to serve abroad. The proposed Sargent Shriver International Service Act calls for doubling Peace Corps to 15,000 by 2015, lowering costs per volunteer, and forging partnerships with the hundreds of non-profits that have emerged since its creation. Doubling of the Peace Corps is a goal that both Presidents George W. Bush and Barack Obama have embraced.

Volunteers for Prosperity will tap 75,000 skilled Americans for flexible term assignments to work on international challenges Congress and many Presidents have made priorities, such as HIV/AIDS, malaria, and clean water. Global Service Fellows will enable Members of Congress to nominate top talent from their districts and states, as they do for the military academies today, to serve for up to one year abroad. Together with the Peace Corps, these efforts will meet John Kennedy's goal of mobilizing 100,000 Americans to serve abroad each year.

The Service World plan focuses on multi-lateral partnerships and exchanges so Americans serve side-by-side with people from other countries, including in the United States. Under the plan, both skilled and non-skilled volunteers of all classes and ages will serve abroad for both long- and short-term assignments and veterans have specific opportunities to utilize their many skills in a civilian capacity. We believe an inclusive and mobile model of volunteering will contribute to the development of a new generation of global leaders, provide skills for U.S. citizens to compete in a global economy, increase international awareness, strengthen development, and improve the image of America abroad.

Volunteer service by people of all nations should become a common strategy in meeting pressing challenges in education, health, the environment, agriculture and more. By having national policies that engage more Americans in international service at every stage of life, we will be sharing our most valuable assets - the skills, talents and perspectives of our people - to make a significant difference in communities and nations throughout the world.

It was fifty years ago that President Kennedy famously launched the Peace Corps, bringing international volunteerism to its true prominence in this country. Today, a diverse set of international volunteer efforts are supported by federal, state and local governments and through partnerships with NGOs. These efforts have been particularly effective at engaging two segments of our population: students or recent graduates; and retirees or those pursuing second careers.

But the segment that holds perhaps the greatest promise for global development has – for the most part – been underserved. We’re referring to mid-career employees at corporations: particularly large, globally-integrated enterprises. These corporate employees have what is most required for a successful international service engagement: cutting edge skills, deep expertise and relevant strategic knowhow.

Why has this resource largely gone untapped? Because a clear connection to business strategy and return on investment has been made in only a few cases.

There exists a triple benefit from corporate-sponsored international volunteerism. Local communities receive premier business and consulting services. Employees enrich their skill sets by working in international markets and leadership experience from working with diverse teams of colleagues and local partners. And corporations gain experienced leaders, insights into new markets, and brand and reputation enhancement that can ultimately create new global business opportunities.

IBM’s Corporate Service Corps (CSC) was developed with those benefits in mind. Often referred to as a “corporate peace corps,” CSC provides IBM employees with unique opportunities to develop and explore their roles as global citizens. Through one month deployments, IBM’s top talent works in teams of roughly 12 to provide in-depth business and IT consulting support to local entrepreneurs and small businesses, nonprofit organizations, educational institutions and governmental agencies. Already in its third year, Corporate Service Corps has deployed 700 IBM employees from 47 countries on 70 teams to 14 countries including China, Nigeria, Romania, Poland and Vietnam. The result is a leadership development program that has made strides in answering the economic, social and environmental sustainability challenges faced by many emerging markets.

We’re pleased to see that other organizations are adopting similar programs. In fact, the U.S. Agency for International Development (USAID) has announced a partnership with IBM to accelerate international volunteerism by leveraging the Corporate Service Corps model. USAID and IBM are creating an Alliance for International Corporate Volunteerism Program to help smaller companies and organizations eager to implement their own corporate peace corps, but lacking the resources and scale to do so.

As we look to help expand international service opportunities, there are several best practices to share based on IBM’s experience.

• In the case of executives, keep the duration of the projects relatively short. This allows for better access to a company’s top talent because rather than interrupting a career, you are asking someone to make service an integral part of it.
• Continue the relationship. While the duration of an individual’s participation may be short, your involvement with the region should be long-term and sustainable. It is not a vendor relationship; it is a partnership.
• Identify the right projects. The most successful development efforts take time and effort to scope out and plan. Partner with NGOs early and often to find the best local opportunities for growth and impact.
• Carefully mix and match skills when forming a team of service participants. This allows them to deliver results quickly and build capacity on the local level.
• Take advantage of technology. Technology can be a powerful tool to help train and prepare service participants. Technology like social networking can also help build a community of service participants and allow them to share their experiences.

The world has changed significantly over the last 50 years. Corporate-sponsored international volunteerism is now building upon the government’s original architecture of the Peace Corps. The same conditions and capabilities that have made the world “flat”, allowing its systems to become smarter, are also opening up new paths for citizen diplomacy. Those seeking out international volunteer service opportunities are no longer limited to government guidance and other official avenues into long-term engagements.

In an interconnected world, citizens have the choice of participating more directly in service through short-term assignments that will not disrupt their careers but enrich them. And it is these mid-career volunteers who possess the skills to make such assignments successful. Forward-thinking corporations with a clear understanding of the benefits of international volunteer programs can empower meaningful citizen diplomacy, contributing to sustainable development practices and building partnerships in a globalized world.

David Caprara, a Brookings nonresident fellow and expert on volunteering, says that John F. Kennedy’s call to service a half-century ago led to the founding of dozens of international aid organizations, and leaves a legacy of programs aimed at improving health, nutrition, education, living standards and peaceful cooperation around the globe.

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Robert Sargent Shriver, Jr. guided the Peace Corps from its inception in 1961 (when it was a nascent vision of service and citizen diplomacy) to establish a renowned track record of success over the past half century, in which more than 200,000 volunteers and trainees have served in 139 countries.

The legacy of Shriver’s leadership with the Peace Corps and later with the Office on Economic Opportunity and Special Olympics has reached and changed millions of lives—of both those empowered and those who served—from impoverished communities across rural and urban America to huts and villages in developing nations throughout the world. Yet one of the greatest gifts he leaves us is the foundation to build on those accomplishments to scale-up service as a direly needed “soft power” alternative to establish international understanding and collaboration in a volatile world. As Sarge put it, so simply but powerfully: “Caring for others is the practice of peace.”

Sarge Shriver’s unquenchable idealism today is being advanced by a new generation of social entrepreneurs such as Dr. Ed O’Neil, founder of OmniMed and chair of the Brookings International Volunteering Project health service policy group. With the help of Peace Corps volunteers and USAID-supported Volunteers for Prosperity, O’Neil has fielded an impressive service initiative in Ugandan villages that has expanded the capacity and reach of local health-service volunteers engaged in malaria prevention and education on basic hygiene. 

Timothy Shriver, who succeeded his parents, Sarge and Eunice, at the helm of the Special Olympics, speaks eloquently on the move of a second generation from politics to building civil society coalitions promoting soft power acts of service and love, one at a time. This impulse is echoed in the Service World policy platform which hundreds of NGOs and faith-based groups, corporations and universities have launched to scale-up the impact of international service initiatives. This ambitious undertaking was first announced by longtime Shriver protégé former Senator Harris Wofford at a Service Nation forum convened on the morning of President Obama’s Cairo speech in which he called for a new wave of global service and interfaith initiatives.

I had the privilege of serving as a national director of the VISTA program inspired by Shriver and  to work alongside Senator Wofford and John Bridgeland, President George W. Bush’s  former White House Freedom Corps director, who have co-chaired the Brookings International Volunteering Project policy team. Along with Tim Shriver, they have ignited the Service World call to action, together with Michelle Nunn of Points of Light Institute, Steve Rosenthal of the Building Bridges Coalition, Kevin Quigley of the National Peace Corps Association and many others.

The Obama administration and Congress would best honor the life and legacy of Sarge Shriver by calling for congressional hearings and fast- tracking agency actions outlined in the Service World platform and naming the global service legislation after him. Coupled with innovative private-sector and federal agency innovations, the legislation would authorize Global Service Fellowships, link volunteer capacity-building to USAID development programs such as  Volunteers for Prosperity, and double the Peace Corps to reach a combined goal of 100,000 global service volunteers annually—a goal first declared by JFK.

Those who promote opportunity and service as vehicles to advance peace and international collaboration will continue to draw inspiration from Sargent Shriver’s indefatigable quest for social justice―from the time he talked then-Senator John F. Kennedy into intervening in the unjust jailing of Martin Luther King, Jr. to his refusal to accept wanton violence and impoverished conditions in any corner of the world.

Information on offering online tributes to the Shriver family and donations in lieu of flowers requested by the family of Sargent Shriver can be found at www.sargentshriver.org .

This week, our nation reflects on the 50-year legacy of the Peace Corps, which President John F. Kennedy signed into law on September 22, 1961. The passing earlier this year of Sargent Shriver, the indefatigable founding director of the Peace Corps, furthered national and international recognition of America’s longstanding traditions of service to the world. The time is right to expand the national policy discussion to include a broadened array of global service actors inspired by the example of Peace Corps volunteers to address critical human needs.

The largest independent representative survey of Peace Corps volunteers to date is being released this week as part of the 50th anniversary assessments by Civic Enterprises and the National Peace Corps Association with Peter D. Hart Research Associates. The survey documents responses from 11,138 Peace Corps volunteers who served from 1961 to 2011.

Among the survey findings of the returned Peace Corps volunteers:

• 82 percent view Peace Corps service “effective in promoting a better understanding of Americans in the communities they served,” and 74 percent indicated they view it “helps the U.S. adapt to globalization.”

• 59 percent view their service as, “effective in meeting the needs for trained workers.”

• 98 percent would recommend Peace Corps service to their family members.

Enhanced international awareness among volunteers was underscored in prior research assessing international NGO service released at a Brookings-Washington University joint forum. The Center for Social Development (CSD) report found that cross-cultural service also contributes significantly to international social capital, by developing a group of volunteers abroad who can leverage additional resources and connections to coordinate humanitarian aid projects.
 
Impacts of the broadened field of global and local volunteers are being demonstrated in critical issue areas such as basic hygiene and malaria reduction by Peace Corps and Malaria No More in Senegal, and a promising demonstration project led by Omnimed and Makarere University in Kampala, Uganda. The Omnimed model has utilized an innovative combination of international medical volunteers, supported by Volunteers for Prosperity at USAID and Peace Corps, to train and equip local village volunteers in Community Health Teams in sustaining malaria prevention. By expanding this network of public and private partners, and empowering local social entrepreneurs and village volunteers, potential exists to spread effective, results-based malaria health service corps across Sub-Saharan Africa and worldwide.

A steadily growing recognition of the importance of the wider landscape of volunteers— including NGOs, faith-based institutions, corporations and universities—is furthering goals for multi-sector inclusion in international service that Peace Corps’ founding director Sargent Shriver articulated to President Kennedy in his original 1961 report.

The Call to Peace and accompanying Service World recommendations represent a fresh call to action which should be taken up by foundations and both national parties to develop innovative and results-oriented solutions to today’s challenges of development and peace.

INTRODUCTION

Over the past decade, the focused attention of African nations, the United States, U.N. agencies and other multilateral partners has brought significant progress toward achievement of the Millennium Development Goals (MDGs) in health and malaria control and elimination. The potential contribution of these strategies to long-term peace-building objectives and overall regional prosperity is of paramount significance in sub-regions such as the Horn of Africa and Western Africa that are facing the challenges of malaria and other health crises compounded by identity-based conflicts.

National campaigns to address health Millennium Development Goals through cross-ethnic campaigns tackling basic hygiene and malaria have proven effective in reducing child infant mortality while also contributing to comprehensive efforts to overcome health disparities and achieve higher levels of societal well-being.

There is also growing if nascent research to suggest that health and other humanitarian interventions can result in additional benefits to both recipients and donors alike.

The social, economic and political fault lines of conflicts, according to a new study, are most pronounced in Africa within nations (as opposed to international conflicts). Addressing issues of disparate resource allocations in areas such as health could be a primary factor in mitigating such intra-national conflicts. However, to date there has been insufficient research on and policy attention to the potential for wedding proven life-saving health solutions such as malaria intervention to conflict mitigation or other non-health benefits.

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In late October at the United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP) headquarters in Bangkok, a multi-stakeholder coalition was launched to promote the role of youth and civil society in advancing post-2015 United Nations Sustainable Development Goals (SDGs). The youth initiatives, fostering regional integration and youth service impact in the Association of Southeast Asian Nations (ASEAN) and counterpart regions of Northeast and South Asia, will be furthered through a new Asia-Pacific Peace Service Alliance. The alliance is comprised of youth leaders, foundations, civil society entities, multilateral partners and U.N. agencies. Together, their initiatives illustrate the potential of youth and multi-stakeholder coalitions to scale impacts to meet SDG development targets through youth service and social media campaigns, and partnerships with multilateral agencies, nongovernmental organizations, corporations and research institutes.

The “Asia-Pacific Forum on Youth Volunteerism to Promote Participation in Development and Peace” at UN ESCAP featured a new joint partnership of the U.S. Peace Corps and the Korea International Cooperation Agency (KOICA) as well as USAID support for the ASEAN Youth Volunteering Program. With key leadership from ASEAN youth entitles, sponsor FK Norway, Youth Corps Singapore and Peace Corps’ innovative program in Thailand, the forum also furthered President Obama’s goal of Americans serving “side by side” with other nations’ volunteers. The multi-stakeholder Asia-Pacific alliance will be powered by creative youth action and a broad array of private and public partners from Thailand, Malaysia, Myanmar, Indonesia, Singapore, the Philippines, Australia, Korea, China, Mongolia, Japan, India, Nepal, Pakistan, the U.S. and other nations.

During the event, Dr. Shamshad Akhtar, ESCAP executive secretary, pointed out that “tapping youth potential is critical to shape our shared destiny, as they are a source of new ideas, talent and inspiration. For ESCAP and the United Nations, a dynamic youth agenda is vital to ensure the success of post-2015 sustainable development.”

Dr. Surin Pitsuwan, former ASEAN secretary-general, called for a new Asia-wide multilateralism engaging youth and civil society.  In his remarks, he drew from his experience in mobilizing Asian relief and recovery efforts after Cyclone Nargis devastated the delta region of Myanmar in May 2008. Surin, honorary Alliance chairman and this year’s recipient of the Harris Wofford Global Citizenship Award, also noted the necessity of a “spiritual evolution” to a common sense of well-being to redress the “present course of possible extinction” caused by global conflicts and climate challenges. He summoned Asia-Pacific youth, representing 60 percent of the world’s young population, to “be the change you want to see” and to “commit our youth to a useful cause for humanity.”

The potential for similar upscaled service efforts in Africa, weaving regional integration and youth volunteering impact, has been assessed in Brookings research and policy recommendations being implemented in the Common Market of Eastern and Southern Africa (COMESA). Recommendations, many of which COMESA and ASEAN are undertaking, include enabling youth entrepreneurship and service contributions to livelihoods in regional economic integration schemes, and commissioning third-party support for impact evidence research.

A good example of successful voluntary service contributions from which regional economic communities like ASEAN can learn a lot is the current Omnimed pilot research intervention in Uganda. In eastern Ugandan villages, 1,200 village health workers supported by volunteer medical doctors, Uganda’s Health Ministry, Peace Corps volunteers and Global Peace Women are addressing lifesaving maternal and child health outcomes furthering UNICEF’s campaign on “integrated health” addressing malaria, diarrheal disease and indoor cooking pollution. The effort has included construction of 15 secure water sources and 1,200 clean cook stoves along with randomized controlled trials.

Last week, the young leaders from more than 40 nations produced a “Bangkok Statement” outlining their policy guidance and practical steps to guide volunteering work plans for the new Asia-Pacific alliance. Youth service initiatives undertaken in “collective impact” clusters will focus on the environment (including clean water and solar villages), health service, entrepreneurship, youth roles in disaster preparedness and positive peace. The forum was co-convened by ESCAP, UNESCO, the Global Peace Foundation and the Global Young Leaders Academy.

Suzy Khimm reports on a proposal from the Bipartisan Policy Center that would establish a framework for reaching a grand bargain on deficit reduction in 2013. In short, the BPC proposes that Congress and the president in the lame duck session would agree to a procedural framework for guiding enactment of major spending and tax reforms in 2013. In enacting the framework, Congress and the president would also avert going over the fiscal cliff. In exchange, Congress and the president would make a small down payment on deficit reduction in the lame duck, and would authorize a legislative “backstop” of entitlement cuts and elimination of tax expenditures that would become law if Congress and the president failed in 2013 to enact tax and spending reforms.

The procedural elements of the BPC’s proposal bear some attention. The BPC’s not-quite-yet-a-catchphrase is “accelerated regular order.” Although it sounds like a nasty procedural disease, it’s akin to the fast-track procedures established in the Congressional Budget Act and in several other statutes. In short, the framework proposed by the BPC would instruct the relevant standing committees in 2013 to suggest to the chamber budget committees entitlement and tax reforms that would sum to $4 trillion dollars in spending cuts and new revenues (assuming extension of the Bush tax cuts). The House and Senate budget panels would each report a grand bargain bill for their chamber’s consideration that would be considered (without amendment) by simple majority vote after twenty hours of debate. Failure to meet the framework’s legislated deadlines would empower the executive branch to impose entitlement savings and to eliminate tax expenditures to meet the framework’s target.

Loyal Monkey Cage readers will recognize that the BPC proposal resembles in many ways the procedural solution adopted in the Deficit Control Act in August of 2011. But there are at least two procedural differences from the 2011 deficit deal. First, rather than a super committee, the BPC envisions “regular order,” meaning that the standing committees—not a special panel hand-selected by party-leaders—would devise the legislative package. Like the August deficit deal, the BPC proposal then offers procedural protection for the package by banning the Senate filibuster and preventing changes on the chamber floors (hence, an accelerated regular order). Second, rather than a meat-axe of sequestration that imposes only spending cuts, the BPC offers a “backstop,” giving what I take to be statutory authority to the executive branch to determine which tax expenditures to eliminate and which entitlement programs to cut back.

These differences from 2011 are subtle, but the BPC believes that they would improve the odds of success compared to the failed Super-committee plus sequestration plan. As a BPC staffer noted:

"One of the reasons the Joint Select Committee on Deficit Reduction failed, in our view, was because only 12 lawmakers were setting policy for the entire Congress,” said Steve Bell, Senior Director of BPC’s Economic Policy Project. “The framework we propose today would both ensure an acceleration of regular budget order in the House and Senate, and it would involve all committees of relevant jurisdiction.”

This is an interesting argument worth considering. Still, I’m not so sure that accelerated regular order would improve the prospects for an agreement.

First, it strikes me that the real barrier to a grand bargain hasn’t been the Senate’s filibuster rule. The super committee was guaranteed a fast-track to passage, but that still didn’t motivate the parties to reach an agreement. The more relevant obstacle in 2011 and 2012 has been the bicameral chasm between a Republican House and a Democratic Senate. To be sure, eliminating the need for a sixty-vote cloture margin would smooth the way towards Senate passage. But we could easily imagine that the 60th senator (in 2013, perhaps a GOP senator like Lisa Murkowski) might be willing to sign onto a deal that would still be too moderate to secure the votes of House Republicans (assuming no change in party control of the two chambers). As we saw over the course of the 112th Congress, House passage required more than the consent of the House median (an ideologically moderate Republican) and more than the support of a majority of the GOP conference. The big deals in the 112th Congress only passed if they could attract the votes of roughly 90% of the House GOP conference. Expedited procedures can protect hard-fought compromises from being unraveled on the chamber floors but by themselves don’t seem sufficient to generate compromise in the first place.

Second, and related, I’m somewhat skeptical that the small size of the super committee precluded a viable agreement. By balancing parties and chambers, the group was (in theory) a microcosm of the full Congress. If true, then delegating to the super committee was more akin to delegating to a mini-Congress. Perhaps the BPC’s idea of allowing the standing committees to generate proposals would broaden legislators’ willingness to buy-in to a final agreement. More likely, I suspect that the framework would produce a House bill perched on the right and a Senate bill left of center (since the filibuster ban would reduce Democrats’ incentives to produce a bipartisan bill). That leaves the bicameral chasm still to be bridged, suggesting that accelerated regular order might not bring Congress all that much closer to a bipartisan agreement in 2013. Consent of party leaders remains critical for an agreement.

Third, the BPC proposal is unclear on the precise nature of the legislative backstop. But would either party agree in advance to the framework if they didn’t know whose ox would be gored by the administration when it exercised its power to reform entitlements and eliminate tax expenditures? Perhaps delegating such authority to the executive branch would allow legislators to avoid voters’ blame, making them more likely to vote for the framework. (That said, it’s somewhat ironic that the BPC’s embrace of accelerated regular order flows from its desire to broaden the set of legislators whose fingerprints are visible on the grand bargain.) Regardless, the prospects for cuts in entitlement programs could lead both parties to favor kicking the can down the road again before it actually explodes.

Fast-track procedures have a decent track record in facilitating congressional action. (Steve Smith and I have extolled their virtues elsewhere.) But the most successful of these episodes involve narrow policy areas (such as closing obsolete military bases) on which substantial bipartisan agreement on a preferred policy outcome is already in place. Expecting a procedural device to do the hard work of securing bipartisan agreement may be asking too much of Congress’s procedural tool kit in a period of divided and split party control.

As the clock runs out on the dysfunctional 112th Congress, few have been impressed by its paltry record and balky performance. But pardon my glee: December has been a great month for students of Congress. First, the House leadership was handed a blistering defeat on its “Plan B” to resolve the fiscal cliff. Next, while their leaders were meeting to negotiate an 11th hour of the 12th month fiscal cliff deal, eight senators unveiled a bipartisan proposal to head off a Democratic threat to change the rules by majority vote. When it rains, it pours!

The reform package—addressing “talking filibusters” and filibusters on procedural motions – deserves a bit more attention. And it deserves an appropriate historical illustration: To the right, a 1928 Chicago Tribune cartoon that features not the talking filibuster…but a sleeping one. Seems that talking filibusters might have been few and far between even back then.

Ezra Klein and Jon Bernstein have detailed the proposed changes and weighed in here and here, as has Steve Smith by tweet here and here. Since then, a coalition of nearly fifty liberal groups has rejected the proposal out of hand as watered down reform. To these several perspectives on the McCain-Levin plan, I would add the following thoughts:

First, these are at best incremental reforms. The majority leader would essentially gain the right to set the Senate’s agenda by majority vote, as a four-hour debate limit would be imposed on the motion to proceed. But the majority leader would pay a price for that new power: He would lose his power to block amendments (by “filling the tree”) and the minority bill manager and leader would be newly guaranteed an amendment each upon consideration of a legislative measure. (The majority leader, it seems, might still be able to fill the tree after the guaranteed amendments are dispensed with.) This change leaves untouched the sixty-vote threshold for invoking cloture on the measure or other amendments, similar to the plans of Democratic reformers. In short, the change tries to address the grievances of both the majority (by circumventing filibusters of the motion to proceed) and the minority (by creating and guaranteeing amendment opportunities).

Second, the incremental nature of the reforms is not accidental. Ezra has a point when he argues that this is “filibuster reform for people who don’t want to reform the filibuster.” Still, the incremental nature of the proposal strikes me as the price of negotiating procedural change in a legislative body whose rules already advantage the minority party: The majority gets a little only by giving a little. The barrier to reform is entrenched in the Senate’s cloture rule, given the supermajority required for ending filibusters of proposals that curtail minority rights. A Senate majority could circumvent that barrier by going nuclear with 51 votes, but that strategy is not cost-free. To be sure, reformers claim to have 51 votes for a reform-by-ruling move. But it’s not clear to me yet that the majority would be willing to pay the accompanying costs of weathering the minority’s response to going nuclear.

Third, the rules address leaders’ interests more so than those of the rank and file. Some of the proposed changes are aimed at time management. For example, with the consent of the majority and minority leaders and a bipartisan handful of senators , the cloture process is sped up markedly. Similarly, the three debatable steps required to get to conference are condensed to a single motion (albeit one still subject to sixty votes if the minority objects). Other proposed changes alleviate the minority leader from objecting on his colleagues’ behalf, undermining individual senators’ ability to threaten to filibuster without actually showing up. Then again, there’s no enforcement mechanism in the proposal: Senators would be counting on the minority leader to play by the new rules and to abandon his practice of lodging objections on behalf of his absent colleagues. It’s fair to be skeptical that such informal reforms would ever stick.

Fourth, I think there’s promise in the proposal’s directive to the presiding officer to put questions to a (majority) vote when opponents no longer seek to debate a bill. I share skeptics’ views that majorities might rarely want to hold the minority’s feet to the fire to wear down the opposition and that minorities might at times relish the spotlight while holding the floor. But the proposal strikes me as a potentially valuable chance to see if the change would make a difference. If approved, the McCain-Levin proposal would be adopted as a standing order of the Senate for just the upcoming Congress, providing a testing ground for this version of the talking filibuster. (Standing orders are typically approved opening day by unanimous consent; would there be such consent for McCain-Levin or another negotiated proposal?)

Finally, it may be that incremental procedural change is all that a polarized Senate can agree on—especially if some Democrats are skittish about changing the rules by majority vote. Granted, majority senators won’t agree to the plan if it’s perceived as empowering the minority, not the majority, as Senator Harkin has suggested. Nor should they. In that case, an incremental package may be more than a polarized Senate can agree on—leaving the nuclear option as the only avenue for Democrats seeking to rein in the excesses of the Senate minority’s parliamentary rights.

Announcements of new federal regulations on the use of program-related investments (PRIs) and the launch of a groundbreaking fund in Chicago are the latest signals that impact investing, once a marginal philanthropic and policy tool, is moving into the mainstream. They are also illustrative of two important and complementary paths to institutional change: fast-moving, collaborative local leadership creating innovative new instruments to meet funding demands; federal regulators updating policy to pave the way for change at scale.

Impact investing, referring to “investment strategies that generate financial returns while intentionally improving social and environmental conditions,” provides an important tier of higher-risk capital to fund socially beneficial projects with revenue-generating potential: affordable housing, early childhood and workforce development programs, and social enterprises. It is estimated that there are over $60 billion of impact investments globally and interest is growing—an annual JP Morgan study of impact investors from 2015 reports that the number of impact investing deals increased 13 percent between 2013 and 2014 following a 20 percent increase in the previous year.

Traditionally, foundations have split their impact investments into two pots, one for mission-related investments, designed to generate market-rate returns and maintain and grow the value of the endowment, and the other for program-related investments. PRIs can include loans, guarantees, or equity investments that advance a charitable purpose without expectation of market returns. PRIs are an attractive use of a foundation’s endowment as they allow foundations to recycle their limited grant funds and they count towards a foundation’s charitable distribution requirement of 5 percent of assets. However they have been underutilized to date due to perceived hurdles around their use–in fact among the thousands of foundations in the United States, currently only a few hundred make PRIs.

But this is changing, spurred on by both entrepreneurial local action and federal leadership. On April 21, the White House announced that the U.S. Department of the Treasury and Internal Revenue Service had finalized regulations that are expected to make it easier for private foundations to put their assets to work in innovative ways. While there is still room for improvement, by clarifying rules and signaling mainstream acceptance of impact investing practices these changes should lower the barriers to entry for some institutional investors.

This federal leadership is welcome, but is not by itself enough to meet the growing demand for capital investment in the civic sector. Local innovation, spurred by new philanthropic collaborations, can be transformative. On April 25 in Chicago, the Chicago Community Trust, the Calvert Foundation, and the John D. and Catherine T. MacArthur Foundation launched Benefit Chicago, a $100 million impact investment fund that aims to catalyze a new market by making it easier for individuals and institutions to put their dollars to work locally and help meet the estimated $100-400 million capital needs of the civic sector over the next five years.

A Next Street report found that the potential supply of patient capital from foundations and investors in the Chicago region was more than enough to meet the demand – if there were ways to more easily connect the two. Benefit Chicago addresses this market gap by making it possible for individuals to invest directly through a brokerage or a donor-advised fund and for the many foundations without dedicated impact investing programs to put their endowments to work at scale. All of the transactional details of deal flow, underwriting, and evaluation of results are handled by the intermediary, which should lead to greater efficiency and a significant increase in the size of the impact investing market in Chicago.

In the last few years, a new form of impact investing has made measurement of social return to investments even more concrete. Social impact bonds (SIBs), also known as pay for success (PFS) financing, are a way for private investors (including foundations) to provide capital to support social services with the promise of a return on their investment from a government agency if some agreed-upon social outcomes are achieved. These PFS transactions range from funding to support high-quality early childhood education programs in Chicago to reduction in chronic individual homelessness in the state of Massachusetts. Both the IRS and the Chicago announcements are bound to contribute to the growth of the impact bond market which to date represents a small segment of the impact investing market.

These examples illustrate a rare and wonderful convergence of leadership at the federal and local levels around an idea that makes sense. Beyond simply broadening the number of ways that foundations can deploy funds, growing the pool of impact investments can have a powerful market-making effect. Impact investments unlock other tiers of capital, reducing risk for private investors and making possible new types of deals with longer time horizons and lower expected market return.

In the near future, these federal and local moves together might radically change the philanthropic landscape. If every major city had a fund like Benefit Chicago, and all local investors had a simple on-ramp to impact investing, the pool of capital to help local organizations meet local needs could grow exponentially. This in turn could considerably improve funding for programs—like access to quality social services and affordable housing—that show impact over the long term.

Impact investing can be a bright spot in an otherwise somber fiscal environment if localities keep innovating and higher levels of government evolve to support, incentivize, and smooth its growth. These announcements from Washington and Chicago are examples of the multilevel leadership and creative institutional change we need to ensure that we tap every source of philanthropic capital, to feel some abundance in an era where scarcity is the dominant narrative.

Editor's Note: Alaina Harkness is a fellow at Brookings while on leave from the John D. and Catherine T. MacArthur Foundation, which is a donor to the Brookings Institution. The findings, interpretations and conclusions posted in this piece are solely those of the authors and not determined by any donation.

What are the greatest dangers to citizens of the world's cities, as well as its towns, villages, and rural areas? This is an important issue to understand as we approach the general election season in the United States, when candidates for the highest office in the land will have to help voters make sense of the state of violence around the world—and tell us what they would do about it.

Headlines can be deceiving. We hear about China's rise, Russia's adventures, North Korea's nuclear misbehavior, the Iran nuclear deal, Pakistan and Afghanistan, and of course ISIS and civil war in the Middle East all the time. But it is also worth taking a step back to understand the broader state of violence on the planet today. Do so, and you might be surprised.

As part of a Brookings-JPMorgan Chase project that we call Securing Global Cities, we have attempted to map these trends in violence, benefiting greatly from ongoing work at European think tanks like the Peace Research Institute Oslo (PRIO) and the Stockholm International Peace Research Institute (SIPRI), the University of Maryland, and the United Nations. Here are some of the most salient facts and figures:

• Even with Russian President Vladimir Putin's activities from Ukraine to Syria in recent years, interstate conflict remains low and mild in intensity by historical standards, thankfully. China's activities in the South China Sea, however concerning, do not presently broach the threshold of interstate war.
• Unfortunately, the picture is more muddled for civil war. It remains less prevalent and less deadly than in the worst periods of the Cold War and the 1990s. But it has ticked up considerably since the beginning of the Arab spring in 2011, especially in the broad arc from the Sahel in Africa through the Middle East and to South Asia. Worldwide, perhaps 100,000 people a year are dying in civil wars.
• Yet war and terrorism are not the primary security threats to most people on the planet today. Notably, each year, more than 400,000 people are murdered around the globe, according to the United Nations Office on Drugs and Crime.
• Murder rates are highest in the Americas and in Africa, at least twice the global average. They are greatest in central and southern Africa, and from Brazil and Venezuela/Colombia to Central America and the Caribbean and Mexico.
• The least violent parts of the world include most of East Asia and Western Europe, despite the terrorism threat afflicting the latter region of late. 
• The “most improved” regions in recent decades include Colombia, former war-torn African states like Angola, Mozambique, Liberia, and Sierra Leone, as well as parts of Southeast Asia and a number major U.S. cities.
• If one broadens the lens on the definition of violence, motor vehicle accidents constitute an even bigger threat. The World Health Organization estimates that 1.2 million people a year die in such accidents worldwide.
• As cities and countries think about future security, they must bear in mind not just these current realities but the potential for catastrophe—from earthquakes, droughts, pandemics, nuclear reactor disasters, and massive infrastructural failures. In a worst case, tens of millions could suddenly be put at acute risk.

There is much to celebrate about the human condition today. Despite the headlines, life has actually never been safer or more prosperous for a higher fraction of the world's population. But our progress is fragile, and it is of course incomplete. 

The next U.S. president needs a plan for Syria, Libya, and Yemen, to be sure. But he or she also needs to address the broader challenges of urban and global security for a planet that is getting healthier and more secure but which still has a very long ways to go. A good first step is to collect and study what works in key cities and countries around the world so that we can all learn from each other, on topics ranging from breaking up gangs to corralling drug traffickers to stopping terrorism. A great deal has been learned; it is time to spread the knowledge, and emulate the best practices worldwide.

Ranking U.S. metro areas, or counties, or even countries, by some fixed metric is a straightforward and often useful way to start a deeper dive into a larger body of research. For example, the top 10 counties by share of taxpayers claiming EITC, or the top 10 metro areas by change in prosperity. But what if the phenomenon being measured is more complex, has interacting characteristics that make a top 10 list less useful?

In new research, Brookings Senior Fellow Alan Berube, along with his colleagues at the Metropolitan Policy Program, and John Irons of the Rockefeller Foundation, ask “What makes an economy inclusive?” Inclusive economies, they say, “expand opportunities for more broadly shared prosperity, especially for those facing the greatest barriers to advancing their well-being.” A new Rockefeller Foundation framework identifies five characteristics of inclusive economies: equity, participation, stability, sustainability, and growth.

A typical ranking approach would list the top 10 inclusive economies (or the bottom 10) based on some score derived from data. It turns out, however, that understanding the “trends and relationships that might reveal the ‘big picture’ of what makes an economy inclusive” doesn’t lend itself to typical ranking techniques, and instead requires looking at relationships among the characteristics to ascertain that “big picture.”

Take, for example, equity, defined as: “More opportunities are available to enable upward mobility for more people.” For this analysis, Brookings researchers used 16 discrete indicators—such as the Gini coefficient, median income of less-educated workers as a share of overall median income, and transportation costs as a share of income—to come up with an equity score for each of the 100 largest U.S. metro areas. (Likewise, each of the other four inclusive economy indicators are composites of many discrete indicators, for a total of about 100 across the five.) Looking at equity alone, the top 10 metro areas are:

1. Allentown, PA-NJ
2. Harrisburg, PA
3. Ogden, UT
4. Scranton, PA
5. Des Moines, IA
6. Salt Lake City, UT
7. Wichita, KS
8. Grand Rapids, MI
9. Pittsburgh, PA
10. Worcester, MA-CT

Top 10 lists can also be fashioned for the other four dimensions in the inclusive economies research, each showing a different mix of U.S. metro areas. For example, the top three metro areas in the growth characteristic are San Jose, CA; Houston, TX; and Austin, TX. For participation: Madison, WI; Harrisburg, PA; and Des Moines. Stability: Madison; Minneapolis, MN-WI; and Provo, UT. And, sustainability: Seattle; Boston; and Portland, OR-WA. In fact, 30 different metropolitan areas are present in the combination of the five inclusive top 10 lists, spanning the country from Oxnard, to Omaha, to Raleigh. The individual top 10 lists for each inclusive economy characteristic look like this:

Because these rankings each impart useful and distinctive information about metro economies, Brookings researchers next combined the data into an overall ranking of the 100 metro areas “based on their average rankings on individual indicators for each of the five inclusive economy characteristics.” Instead of generating a ranking from 1 to 100, the analysis produces a grid-like chart that shows how metro areas fare not only in terms of inclusiveness (top to bottom), but also along a left-to-right spectrum that demonstrates the trade-offs between growth and equity. Here’s a sample from the chart (visit and study the chart here; note that wealth is depicted but by itself is not part of the inclusive economy score):

One thing that stands out when considering this colorful chart against the disaggregated top 10 lists is how unrelated they seem to be. San Jose sits at the upper right position of the chart, suggesting that it ranks as one of the most inclusive metro economies, and yet it ranks only 51st on equity. By contrast, Allentown, PA—on the left of the second row—ranked first in equity, but lower on other measures. However, taken as a whole, both Allentown and San Jose are in the top 20 metro areas overall for inclusiveness. Detroit sits along the bottom row of the inclusiveness chart. Among the five characteristics, it posts its highest rank in growth (37th overall), with much lower ranks in the other categories, even though it ranks 29th for wealth. Las Vegas, NV, is one of the least wealthy metro areas (91st), but ranks 19th in terms of equity.

Berube and Irons point to what they call “a few important insights” about the chart and these data:

• Judged across all five characteristics, the “most” and “least” inclusive metro economies are geographically and economically diverse.
• More equitable metropolitan economies also exhibit higher levels of participation and stability. 
• Growth and equity vary independently across metropolitan areas. 
• Metro areas with similar performance across the five characteristics may not possess the same capacity to improve their performance.

For more detailed discussion, and the complete inclusive economies chart, see “Measuring ‘inclusive economies’ in metropolitan America,’ by John Irons and Alan Berube.

See also “A metro map of inclusive economies,” showing metro areas that are similar to others in these outcomes.

Finally, download detailed information on the composition of the 100 indicators used to measure the five inclusive economies indicators.

Executive Summary

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

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

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

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

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

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

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

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

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

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

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

Why Do Banks Need More Capital?

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

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

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

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

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

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

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

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

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

Can the Asset Purchase Plan Succeed in Recapitalizing the Banks?

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

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

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

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

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

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

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

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

Recapitalizing the Financial System Directly

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

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

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

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

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

Conclusion

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

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

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ABSTRACT

In recent decades economists have turned their attention to data that asks people how happy or satisfied they are with their lives. Much of the early research concluded that the role of income in determining well-being was limited, and that only income relative to others was related to well-being. In this paper, we review the evidence to assess the importance of absolute and relative income in determining well-being. Our research suggests that absolute income plays a major role in determining well-being and that national comparisons offer little evidence to support theories of relative income. We find that well-being rises with income, whether we compare people in a single country and year, whether we look across countries, or whether we look at economic growth for a given country. Through these comparisons we show that richer people report higher well-being than poorer people; that people in richer countries, on average, experience greater well-being than people in poorer countries; and that economic growth and growth in well-being are clearly related. Moreover, the data show no evidence for a satiation point above which income and well-being are no longer related.

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Access to information and communication technology through cell phones, the internet, and electronic media has increased exponentially around the world. While a few decades ago cell phones were a luxury good in wealthy countries, our data show that today over half of respondents in Sub-Saharan Africa and about 80 percent of those in Latin America and Southeast Asia have access to cell phones. In addition to making phone calls and text messaging, cell phones are used for activities such as accessing the internet and social network sites. Meanwhile, the launch of mobile banking gives access to these technologies an entirely new dimension, providing access to financial services in addition to information and communication technology. It is estimated that in Kenya, where the mobile banking “revolution” originated, there are some 18 million mobile money users (roughly 75 percent of all adults). Given the expanding role of information technology in today’s global economy, in this paper we explore whether this new access also enhances well-being.

Neither of the authors is an expert on information technology. The real and potential effect of information technology on productivity, development, and other economic outcomes has been studied extensively by those who are. Building on past research on the economics of well-being and on the application of the well-being metrics to this particular question, we hope to contribute an understanding of how the changes brought about by information and communication technology affect well-being in general, including its non-income dimensions.

Our study has two related objectives. The first is to understand the effects of the worldwide increase in communications capacity and access to information technology on human well-being. The second is to contribute to our more general understanding of the relationship between well-being and capabilities and agency. Cell phones and information technology are giving people around the world – and particularly the poor – new capabilities for making financial transactions and accessing other services which were previously unavailable to them. We explore the extent to which the agency effect of having access to these capabilities manifests itself through both hedonic and evaluative aspects of well-being.

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Abstract

We explore the relationship between agency and hedonic and evaluative dimensions of well-being, using data from the Gallup World Poll. We posit that individuals emphasize one well-being dimension over the other, depending on their agency. We test four hypotheses including whether: (i) positive levels of well-being in one dimension coexist with negative ones in another;and (ii) individuals place a different value on agency depending on their positions in the well-being and income distributions. We find that: (i) agency is more important to the evaluative well-being of respondents with more means; (ii) negative levels of hedonic well-being coexist with positive levels of evaluative well-being as people acquire agency; and (iii)both income and agency are less important to well-being at highest levels of the well-being distribution. We hope to contribute insight into one of the most complex and important components of well-being, namely,people’s capacity to pursue fulfilling lives.

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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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Hillary Clinton isn’t often in the business of offering unsolicited advice to her Republican—or even Democratic—rivals in the presidential race. However, in a CNN interview with Alisyn Camerota on January 12, 2015, Hillary Clinton did just that. She did something quite taboo. She talked about the presidential transition.

Her comments did not flow from confidence that she would be elected president—a confidence she may indeed have. Her words came from experience, pragmatism and reality. They were words that did not simply reflect her own approach to a candidacy or a prospective administration. It was advice to everyone running for president about the right thing to do—not for themselves, but for the American public.

Clinton said:

I want to think hard—if I do get the nomination, right then and there—how we organize the White House, how we organize the Cabinet, what’s the legislative agenda. You know, the time between an election and an inauguration is short. You can’t wait. I mean, you can’t take anything for granted; you need to keep working as hard as you possibly can. But I think it’s important to start planning because we know what happens if you get behind in getting your agenda out, in getting your appointments made. You lose time, and you’re not doing the work the American people elected you to do.

Presidential candidates almost never speak of a transition until they are declared the president-elect in the late hours of the Tuesday following the first Monday in November. Candidates fear being accused of taking the election for granted, or “measuring the drapes.” They worry such planning will signal to voters an off-putting overconfidence.

Those fears may be legitimate, but acting on those concerns can be dangerous. If a voter believes a candidate should not prepare for a new administration until they are officially elected, that leaves the president-elect about 11 weeks to ready themselves for the busiest, most complicated, most important job in the world. In those 11 weeks, a president-elect would need to think not just about the 15 Cabinet secretaries who serve as the most visible political appointees in government, but literally hundreds and thousands of other posts. (One dirty little secret is that the President of the United States appoints over 3,000 people to his or her administration.)

Presidents have to think about the structure, order, and sequence of their legislative agenda. They need to communicate their intentions and plans to congressional leadership. They need to think about organizing a White House. The truth is from president to president, the White House looks the same from the outside, but is structured and functions dramatically differently on the inside. Presidents have myriad important decisions to make that will set the tone and agenda for the following four years and will affect every American in some way. Eleven weeks is not enough time. Clinton acknowledges this.

Clinton’s “bold” statement actually reflects a reality in American politics. As soon as an individual accepts his or her party’s presidential nomination, they are entitled to funding, office space, and government email and technology as part of the transition process. The Office of Personnel Management is involved, as is (of late) the Office of Presidential Personnel for the outgoing administration. The presidential transition is an essential part of democracy, policymaking, administration, and the continuity of government. Every four years, the government supports two transitions—one that comes to be and one that closes up shop.

In one way however, Hillary Clinton is entirely wrong. Waiting until you receive the nomination is too late to begin thinking about the transition. As I have written before, every presidential candidate should start thinking about a transition as soon as they announce their candidacy. They don’t need a full Cabinet chosen on Day 1 of the campaign, but they should designate one or two close advisers to organize for the process, begin considering names for posts, think through the types of policies to propose in the first 100 days, and begin what is one of the most complicated managerial tasks in the world.

Hillary Clinton is right “it is important to start planning,” and it’s also never too early to do so. I hope Clinton’s claim that one should start upon securing the nomination is a reflection of that fear of the “drape measuring” accusation. I hope she is planning her transition now. I hope Bernie Sanders and Ted Cruz and Donald Trump and John Kasich and everyone else is planning their transition right now. It’s essential. Clinton knows the challenges of setting up a White House and the complications that early disorganization can cause; she saw that dysfunction first hand in 1993. But most candidates have also worked in or around the White House or have been in politics long enough to know the importance of an effective transition. And candidates who haven’t, like Donald Trump and Carly Fiorina, should be more inclined to set up a transition early, as they have more managerial experience than anyone else in the race.

To this end, I have a modest proposal. It probably won’t happen. It’s likely one that candidates would fear, and it would likely only be effective if everyone is on board. Every current presidential candidate should sign a pledge committing to two things. First, by February 1, 2016, they will designate at least one staffer, adviser or confidante as a transition director.  Second, they will not publicly criticize another candidate—of either party—for having a transition staffer or team in place. Call it a “Transition Truce.” But the reality is that such a pledge—and the actions behind it—are essential for a better functioning, better prepared, more effective administration, no matter who it is who swears the oath exactly one year from today.

A months-long political crisis in Kiev came to an end on April 14, when Ukraine’s Rada (parliament) approved a new prime minister. Expectations that the government will move on needed reforms and anti-corruption measures, however, are low.

Kamikaze prime minister?

The previous prime minister, Arseniy Yatsenyuk, had served since the Maidan Revolution in February 2014. Early on, Yatsenyuk equated his tenure to a kamikaze mission, noting that the reforms the government would adopt would carry heavy political costs. He proved right. By early 2016, his National Front party, which won over 22 percent in the October 2014 party-list vote in the Rada elections, polled in the low single digits. 

Reports of a widening rift between Yatsenyuk and President Petro Poroshenko grew last autumn, though they still had reason to stay together. The National Front party and Poroshenko Bloc formed the core of the majority coalition in the Rada, and neither party could expect to fare well in early parliamentary elections.

Early on, Yatsenyuk equated his tenure to a kamikaze mission, noting that the reforms the government would adopt would carry heavy political costs.

The crisis took a twist in mid-February, when the Rada passed a resolution expressing disapproval of the work of Yatsenyuk and his cabinet…but then failed to pass a vote of no-confidence that would have led to Yatsenyuk’s dismissal.

Speculation nevertheless intensified over his looming replacement, with American-born Finance Minister Natalie Jaresko mooted as a possibility. Volodymyr Hroysman’s name also came into play. Hroysman, a member of the Poroshenko Bloc, is closely connected to the president. He had a reputation as a reformer and effective mayor of the city of Vinnytsia, though his performance as Rada speaker was mixed. For example, he opposed the finance ministry’s proposed tax reform, even though it was a requirement of Ukraine’s program with the International Monetary Fund. 

When Yatsenyuk announced his resignation on April 10, Hroysman appeared the front-runner to succeed him. His appointment took longer than expected, however, as he reportedly rejected some suggestions from the president’s camp for ministers, seeking to put in place his own people instead. Backroom negotiations and a fair amount of horse-trading as parties jockeyed for ministerial positions took place April 11 to 13. Finally, the Rada approved Hroysman on April 14.

Low reform expectations

At first glance, the composition of the new cabinet is a far more political group than its predecessor, which comprised many technocrats. It is devoid of names with established reputations for pressing reform or fighting corruption. My conversations on the margins of the Kiev Security Forum on April 14 to 15 turned up few expectations that the new cabinet will proceed with the kinds of reform actions and, in particular, measures to combat corruption that the country needs.

The International Monetary Fund will watch the cabinet’s actions before it considers releasing an additional tranche of funding for Ukraine. One unsettling sign: The incoming finance minister suggested that some adjustments might be sought in the IMF’s criteria. Historically, when Ukrainian finance ministers seek adjustments to IMF criteria and programs, they do not aim for changes that will accelerate reform.

At first glance, the composition of the new cabinet is a far more political group than its predecessor.

Some in Kiev worry about the close relationship between Hroysman and Poroshenko. But that relationship may have one upside: it ties Poroshenko more closely to the prime minister and his success or failure. Too often in the past, Ukrainian presidents have stood some distance from the prime minister, positioning themselves to escape responsibility for difficult government policies rather than throwing their full political weight behind the prime minister’s efforts.

Poroshenko did not fully back Yatsenyuk. As one Ukrainian observer put it, the president often seemed more interested in explaining or rationalizing the status quo rather than trying to change it. Now, if Hroysman and the new cabinet fail to deliver, it will reflect more directly on Poroshenko.

A friendly push

If my Ukrainian interlocutors are correct, the new government will pursue the needed reforms at best only half-heartedly. Among other things, that could leave in place the current system in which oligarchs exercise outsized and unhealthy political influence. That will impede Ukraine’s prospects of getting on the path to becoming a modern European state. 

The International Monetary Fund, United States, and European Union should help the Ukrainian president and prime minister make the right decisions: to press forward a program of genuine reform and, at long last, a real anti-corruption campaign. The West should make clear that further assistance will depend on such actions. 

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.

Editors’ Note: International relations almost never progress in a linear fashion. In this excerpt from a new Brookings India briefing book titled “India-U.S. Relations in Transition,” Tanvi Madan examines some of the high-impact but low-probability events that may affect the relationship in the future: so-called “black swans.”

U.S. Secretary of Defense Ashton Carter recently said that the U.S.-India defense partnership would become “an anchor of global security.” But in an increasingly uncertain world, the partnership between these two large and relatively stable democracies can also potentially be a critical anchor of stability more broadly. Here are some black swans—low-probability, high-impact and, in hindsight, predictable events—that could exacerbate regional and global uncertainty and instability, and affect both countries’ interests and, potentially, their relationship. 

• Regional Assertiveness: What might be the impact of greater Chinese or Russian assertiveness—even aggression? How might Russian actions against Ukraine, Georgia, or even a NATO member change not just U.S. calculations, but India’s as well? How will it affect their bilateral relationship? What about a China-U.S. confrontation over Taiwan or in the South China Sea? Or Chinese action against a country like Vietnam, with which India has close ties and which the United States is increasingly engaging? What if there is a sudden or serious deterioration of the situation in Tibet, perhaps in the context of a leadership transition? 
• Chaos in India’s West: What happens if there is political uncertainty in Saudi Arabia, a country with which the United States has close—albeit tense—ties, and which is India’s largest oil supplier and home to millions of Indian citizens? How will the United States and India react if Iran, after all, decides to acquire nuclear weapons? What about the chain reaction either of these scenarios would set off in the Middle East? Closer to India, what if Afghanistan relapses into a total civil war? Or if there is a sharp downturn in stability within Pakistan, with the establishment challenged, the threat of disintegration, and challenges posed by the presence of nuclear weapons? 
• Shocks to the Global Economy: What if a confluence of circumstance leads to a major spike in oil prices? What will the impact be of a major economic crisis in China, not just on the global economy or Chinese domestic stability, but also in terms of how Beijing might react externally? How will the United States and India deal with this scenario? And what if the eurozone collapses under the weight of refugee flows, Britain’s threatened exit, or national financial crises? 
• The Epoch-Defining Security Shock: Both the United States and India have suffered major attacks relatively recently—the United States on September 11, 2001 and India on November 26, 2008. But what if there is another major terrorist attack in either country or on the two countries’ interests or citizens elsewhere? Or a major cyber incident that takes down critical infrastructure? 
• Environmental Challenges: What if rising sea levels cause a catastrophe in Bangladesh resulting in thousands, if not hundreds of thousands, crossing over into India? And then there are the various climate change-related challenges that can perhaps be considered “white swans”—more-certain events, whose effects can be more easily estimated. 

In addition, one could think of domestic black swans in each country and some in the bilateral context. These might include dramatic domestic political developments, or a spark causing a major backlash against immigrants in the United States or American citizens in India. 

As the U.S.-India partnership has developed, and India’s regional and global involvements have increased, the U.S.-India conversation—and not just the official one—has assumed greater complexity. This will help the two countries tackle black swans in the future. So will the further institutionalization of discussions on global and regional issues of the sort already underway. Amid the day-to-day priorities, there should be room for discussing contingencies for black swans in dialogues between the U.S. Deputy Secretary of State and the Indian Foreign Secretary, in the two countries’ dialogue on East Asia, and in discussions between the two policy planning units.

Event Information

A conversation with USAID Administrator Gayle Smith

On March 30, Global Economy and Development at Brookings and the Modernizing Foreign Assistance Network (MFAN) hosted Gayle Smith, administrator of U.S. Agency for International Development (USAID) for an address on the fifth anniversary of the USAID policy on evaluation.

A principal recommendation of the Presidential Policy Determination on Global Development, signed by President Obama in 2010, was greater accountability for U.S. foreign assistance funds, including evaluation of development programs. In 2011, USAID adopted a formal policy on evaluation and since has average some 200 evaluations a year.

Among the issues that will be addressed during the event are the success and challenges in implementing the evaluation policy, the use of alternative evaluation methods, and building a system and process for turning evaluations into learning. Administrator Smith was introduced by Brookings Senior Fellow George Ingram. Following her address, he moderated a panel discussion of Ruth Levine, Wade Warren, and Jodi Nelson.

 Join the conversation on Twitter using #AIDeval

Video

• Assessing the impact of foreign assistance: The role of evaluation

Transcript

• Uncorrected Transcript (.pdf)

Event Materials

• 20160330_usaid_evaluation_transcript

Thursday, South Africa’s highest court found President Zuma guilty of violating the constitution as he refused to reimburse the large sum of money spent on improvements to his personal home. Between 2010 and 2014, the home located in the president’s rural hometown of Nkandla received improvement which cost an estimated $23 million. The improvements include a chicken coop, an amphitheater, a swimming pool, and a helipad. President Zuma has stated that the improvements were necessary to ensure his security and should consequently be paid for with taxpayers’ money. In 2014, public prosecutor Thuli Madonsela ruled that the president should repay part of the taxpayers’ money spent on the improvements of his personal home. In refusing to do so, he violated the country’s constitution “by not complying with a decision by the public protector, the national watchdog.” The court has given the National Treasury 60 days to determine the sum the president must repay. The opposition has stated that they will seek Zuma’s impeachment.

In other South African news, this week, the rand strengthen against the U.S. dollar and reached its highest value since December 8, 2015, the day before President Zuma fired former Finance Minister Nhlanla Nene. The strengthening of the rand was coupled with the strengthening of other Emerging Markets currencies. This hike follows the statement from Federal Reserve Chair Janey Yellen, reiterating the importance to raise U.S. interest rates cautiously, amid risks in the global economy. Investors—weighting prospects of higher U.S. borrowing costs—were holding off in acquiring emerging-market assets.

This week, 17 Angolan activists were sentenced to jail time for rebellion against the government of Jose Eduardo dos Santos. The sentences ranged from two years to eight and a half years. Last June, the activists were arrested during a book club meeting focusing on Gene Sharp’s book titled From Dictatorship to Democracy: A Conceptual Framework for Liberation—a book on nonviolence and resistance to repressive regimes. Monday, the activists were charged and sentenced with acts of rebellion, planning mass action of civil disobedience, and producing fake passports, among other charges. Amnesty International has accused the Angolan court of wrongfully convicting the activists and using the judicial system to “silence dissenting views.”

Later in the week, in response to the jailing of the young activists, the Portuguese branch of hacking group Anonymous claimed the shutdown of 20 government websites, including that of the Ministry of Education and the Ministry of Labor and Social Security, among others. In a Facebook post claiming the attack, the group states, “The real criminals are outside, defended by the capitalist system that increasingly spreads in the minds of the weak.” The functionality of the websites has been restored.  

On Monday, March 28, the U.S. Millennium Challenge Corporation (MCC) withdrew $472 million in aid from the government of Tanzania after the result of the last weekend’s disputed presidential election rerun in the semi-autonomous archipelago of Zanzibar was announced. Incumbent President Ali Mohamed Shein of the ruling Chama Cha Mapinduzi party was declared the winner with 91.4 percent of the vote. However, the rerun was boycotted by the opposition Civic United Front party over the cancellation of last October’s election by the Zanzibar Electoral Commission. The commission claimed the October poll was fraudulent, while the opposition says the allegations of fraud were fabricated to thwart a victory by their candidate.

The MCC was planning a number of power and infrastructure projects in Tanzania, but its development assistance programming is conditional upon beneficiaries meeting certain standards of good governance. The MCC’s board of directors held a vote on Monday, in which they determined that Tanzania was no longer eligible to partner with the MCC given the election outcome. Although the loss of the MCC partnership is a sizable blow to the Tanzanian government, the Tanzanian finance minister appeared optimistic that the power projects would continue despite the MCC’s decision, as he stated: “We weren’t surprised at all because we were prepared for whatever the outcome. We will implement those projects using local sources of fund and the support of from other development partners.” Meanwhile, 10 out of the country’s 14 key western donors withdrew general budget support to Tanzania over the contested election.

Publish What You Fund’s 2016 Aid Transparency Index is out. And as a result, today we can assess whether major donors met the commitments they made five years ago at Busan to make aid transparent by the end of 2015. The index is also a window into the state of foreign aid transparency and how the U.S.—the world’s largest bilateral donor—stacks up.

On the positive side, the index found that ten donors of varied types and sizes, accounting for 25 percent of total aid, have met the commitment to aid transparency. And more than half of the 46 organizations included in the 2016 index now publish data to the International Aid Transparency Initiative (IATI) registry at least quarterly.

At the same time, the index’s assessments show more than half of the organizations still fall into the lowest three categories, scoring below 60 percent in terms of the transparency of their information.

Continuing its leadership on transparency, the Millennium Challenge Corporation comes in second overall in the index, meeting its Busan commitment and once again demonstrating that the institutional commitment to publishing and using its data continues.

Otherwise, at first glance, U.S. progress seems disappointing. The five other U.S. donors included in the 2016 index are all in the “fair” category. Seen through a five-year lens, however, these same five U.S. donors were either in the “poor” or “very poor” categories in the 2011 index. So, all agencies have moved up, and three of them—U.S. Agency for International Development (USAID), Department of the Treasury, and the U.S. President's Emergency Plan for AIDS Relief—are on the cusp of “good.”

In the two biggest U.S. agencies that administer foreign assistance, USAID and the State Department, the commitment is being institutionalized and implemented through more systematic efforts to revamp their outdated information systems. Both have reviewed the gaps in their data reporting systems and developed a path forward. USAID’s Cost Management Plan identifies specific steps to be taken and is well under way. The State Department Foreign Assistance Data Review (FADR) involves further reviews that need to be executed promptly in order to lead to action. Both are signs of a heightened commitment to data transparency and both require continued agency leadership and staff implementation.

The Department of Defense, which slid backwards in the last three assessments (and began at the "very poor" category in 2011), has for the first time moved into the "fair" category.  It is still the lowest performing U.S. agency in the index, but it is now publishing 12 new IATI fields. It is moving in the right direction, but significant work remains to be done.

The third U.S. National Action Plan (NAP) announced last fall—the strongest issued by the U.S. to date—calls for improvements to quality and comprehensiveness of U.S. data and commits the U.S. to doing more to raise awareness, accessibility, and demand for foreign assistance data. This gives all U.S. agencies the imperative to do much more to make their aid information transparent and usable.  

The overall challenge has been laid out in the third NAP:

• Almost all of the U.S. agencies need to improve the breadth and depth of the information they are publishing to meet IATI standards. Far too often, basic information—such as titles—are either not published or are not useful.
• The Millennium Challenge Corporation should continue its leadership role, especially on data use. All agencies should be promoting the use of data among their own staff and by external stakeholders, especially at country level. Feedback will go a long way toward helping them improve the quality of the data they are publishing and thereby help them meet the IATI standards.
• USAID must finish the work on its Cost Management Plan, including putting IATI in the planned Development Information Solution. Additionally, more progress needs to be made on the follow-up to the Aid Transparency Country Pilot Assessment to meet the needs of partners.   
• The State Department needs to follow through on including IATI in the new integrated solution mapped out in its data review.

The leadership of all foreign affairs agencies needs to work harder to make the business case for compiling, publishing, and using data on foreign aid programs. Open data, particularly when it is comparable, timely, accessible, and comprehensive, is an extremely valuable management asset.  Agency leadership should be its champion. So far, we have not seen enough.

U.S. progress on aid transparency was slow to start. It is still not where it needs to be. But with a modest but concerted push, three additional agencies will be in the “good” category and that is a story we can start to be proud of.   

We look forward to continued progress and to the day when all U.S. foreign aid meets transparency standards—a day I believe will be an important one for the cause of greater development, better governance, democratic participation, and reduced poverty worldwide.

Once upon a time, long ago, the development industry was fixated on measuring aid from richer to poorer countries. They called it ODA, standing for Official Development Assistance. For decades this aid has been codified, reported, and tracked, mostly by the Development Assistance Committee of the Organisation for Economic Co-operation and Development (DAC/OECD), a club of advanced economies. In advance of the Spring Meetings of the IMF and World Bank, the DAC announced that ODA has risen by 6.9% over 2014 levels to 132 billion dollars, a record amount. Importantly, ODA increased even after stripping out funds spent on refugees.

The United Nations has established targets for ODA—like the famous 0.7 percent of national income—which have taken on legendary status as benchmarks of national generosity. Only six out of 28 DAC countries met this target last year: Denmark, Luxembourg, The Netherlands, Norway, Sweden and the United Kingdom.

Some institutions and lobby groups remain fixated on ODA, but many development actors now reject it as flawed. A major theme of the Spring Meetings is how to move beyond ODA and expand other forms of financing for development. ODA is, among other things, symptomatic of a charity perspective, rather than investment; inappropriate for South-South cooperation; and unable to capture the big new landscape of public-private links. What’s more, it is riddled with self-serving quirks like scoring numerous flows—the cost of university places in donor countries, and administrative costs of aid agencies—that never reach developing countries.

Perhaps the most telling weakness of ODA is that emerging powers like China and India see little merit (and arguably, some residual stigma) in this concept and, therefore, will not report on that basis to a club to which they do not belong. As their share of the world economy and their interactions with other “developing” countries continue to grow, this means ODA will inevitably start to represent an ever smaller share of official financing for development.

TOSSD stands for Total Official Support for Sustainable Development. The idea, still being fleshed out, is to have a universally accepted measure of the full array of public financial support for sustainable development. TOSSD should differ from ODA in at least three ways:

• First, it should take a developing country perspective rather than a donor country perspective. So it should cover the value of all funding for development that is officially supported, from pure grants to near-market loans and equity investments, as well as guarantees and insurance.
• Second, it should measure cross-border flows from all countries, not just the rich members of the OECD’s Development Assistance Committee.
• Third, it should include contributions to global public goods needed to support development, like U.N. peacekeeping and pandemic surveillance.

There are many complications behind any international attempt to define and track such a huge range of activities. Some are technical, but can probably be resolved with enough goodwill and professionalism. So, for example, we can debate how to establish whether and how official support to private investors changes their behaviour, delivering “additional” development results compared to a situation without that support. In the end, sensible solutions and workarounds will be found.

More difficult are a couple of politically sensitive challenges, which at the same time underlie the value of reaching consensus on a new measure. How far, for example, should the new measure recognise indirect spending on global public goods? Take for example public research on an AIDS vaccine that could lead to prevention of millions of deaths in developing countries. Right now, this would not count as ODA because the promotion of the economic development and welfare of developing countries is not its main objective.

We tend to think that consideration of globe-spanning benefits like these, which do not fit the simple mould of money crossing borders, is an essential feature of a new measure of development finance. However, it will need to be bounded sensibly, not least because of underlying suspicions that the countries that are today most likely to deploy such tools, and claim them as a large part of their distinctive contribution, are among the “old rich”—though that could change quickly. We suggest that spending on a defined list of global public goods should be included, perhaps those that support Agenda 2030, such as U.N. peacekeeping or a global research consortium like GAVI, the Vaccine Alliance.

A second potentially divisive issue, already alluded to, is how to value non-monetary flows, like technical assistance, and in a fair way across countries. We think it would be a powerful positive signal for international cooperation if even modest contributions by low- and middle-income countries are recognised, celebrated, and valued according to the contribution being made, not the cost of providing the assistance. The assistance provided by professionals from developing countries (think Cuban doctors) should be measured at the same prices as assistance provided by professionals from rich countries. Some form of purchasing power parity equivalence would need to be defined and used.

This is a hugely contentious question. Neither of the most obvious answers, the well-organised but globally unloved OECD and the legitimate but under-resourced U.N. secretariat, are likely to be acceptable without some changes. A preferred candidate has to have a sufficiently broad group of countries prepared to self-report on even a loose set of definitions in order to get momentum. At a minimum all the major economies of the world, for example members of the G-20, should be willing to participate. It should also have the technical capacity to help countries provide information in a consistent way.

The International Monetary Fund or World Bank could be candidates—most countries already report to them on a range of data, including financial flows. The Global Partnership for Effective Development Cooperation, with its membership of many development actors and technical support, could be another. Or a new group could be created in much the same way as the International Aid Transparency Initiative. This could even be a revamped Development Assistance Committee that operates with broader support in much the same way as the OECD’s tax work has many non-OECD members participating. What is important is that the guiding principle be to measure official cross-border financial resources that support the new universally-agreed Sustainable Development Goals, and to start now and learn by doing.  Such initiatives are too easily killed by subjecting them to endless external criticism that a perfect solution has not been found.

TOSSD may be one of the least attractive acronyms on offer today. Without disrespect to its OECD authors, it will anyway have to change to something that works for all the major stakeholders, and is not visibly invented in Paris and that also encourages players who are not strictly speaking “official,” like foundations, to sign up. We tend to favor a plainer, simpler wrapper like International Development Contributions (IDC), or Defined Development Contributions (DDC). 

As of last week, it has been a full year since the U.S. Export-Import (Ex-Im) Bank—the government export credit agency which lends money to foreign buyers of American exports—has been unable to approve loans over $10 million. This is because Senator Richard Shelby, Republican of Alabama, is single-handedly holding up the nomination of a third member to the Ex-Im Bank’s five person board; all transactions over $10 million require board approval, and short of its required quorum of three members, no major loans can get through. Looking beyond the immediate fight over Ex-Im, however, underlying trends in both American and international politics suggest commercial diplomacy is on the rise.

The Ex-Im Bank is but one of many instruments of American commercial diplomacy; there is a wide range of policies the government uses to actively help individual American companies compete abroad. Through the Overseas Private Investment Corporation (OPIC), the U.S. government sells political risk insurance to American firms investing in “risky” developing countries. Moreover, U.S. ambassadors frequently lobby foreign governments to award procurement contracts to American firms. Similarly, officials from the Department of State, Department of Commerce, and Office of the U.S. Trade Representative often advocate for U.S. companies involved in investment disputes with foreign governments. What distinguishes active commercial diplomacy from general foreign economic policy—such as signing trade agreements—is that in involves deploying the resources and reputation of the government to help specific firms in particular transactions, rather than broadly setting the rules of the road for all firms to follow. It represents a significantly greater co-mingling of interests and activities between public and private actors.

While both Secretary of State John Kerry and Secretary of Commerce Penny Pritzker have placed considerable emphasis on advancing commercial diplomacy, the long running struggle to keep Ex-Im operating underlines the political fault lines that cut through the issue. On the one hand, as highlighted in the Ex-Im fight, commercial diplomacy can be criticized as crony capitalism or corporate welfare. Government resources are being used to support private gains. Thus those who prefer free and unfettered markets may see commercial diplomacy as simply another form of unnecessary government intervention, akin to industrial policy. At the same time, as globalization has come under attack from both the left and the right in this election cycle, it is easy to see how encouraging further globalization through commercial diplomacy could face populist pushback. Those supporting commercial diplomacy tend to favor greater integration in the global economy—a view which has found little support in the 2016 campaigns to date.

And yet, the current trends in American political debates over globalization may ultimately presage more, not less, reliance on commercial diplomacy. If politicians increasingly view the global economy through a zero-sum, mercantilist lens, they may be more eager to use the power and purse of the U.S. government to help American firms “win” abroad. Indeed, Congress, which has historically been more protectionist than the executive branch, has also consistently pushed the State Department to do more to actively defend the interests of U.S. companies operating overseas (see, for example, here and here). Aggressively fighting to help U.S. companies win contracts and compete abroad could be one plank of an “America First” policy. Thus even if America, and the world, becomes more protectionist, foreign economic policy may become even more preoccupied with assertive commercial diplomacy, even as interest in seeking mutual benefits through economic liberalization subsides.

If the U.S. government does start to prioritize more actively helping American firms in their foreign operations, it will still have a ways to go to catch up to many other countries. China, of course, is well known for using state resources to advance the commercial goals of Chinese firms venturing abroad—which should not be surprising, given that many of these firms are state-owned enterprises. But a number of other advanced democracies—including Japan, Korea, Germany, and France—also have closer and more coordinated relationships between big business and government than the U.S. does. And most of these countries show no signs of slowing down. As a recent report (PDF) from the Ex-Im bank notes, “In the wake of slowing global growth, foreign export credit agencies are becoming more aggressive.” In fact, some of these agencies are capitalizing on Ex-Im’s current plight, offering American companies export financing in return for the promise of job creation. General Electric Co., for instance, recently announced it would expand production in France because Coface, the French equivalent of Ex-Im, will finance GE projects in a number of emerging markets—the type of financing that GE used to get from Ex-Im.

Looking forward, unilateral disarmament in the competitive world of commercial diplomacy—as the U.S. is currently doing with the Ex-Im Bank—is likely to become increasingly rare. The ultimate effects of this accelerating international competition, in both economic and political terms, remain to be seen.