An analysis of the growth and characteristics of the foreign-born in the Philadelphia metropolitan area between 1970 and 2006 finds:

• Among its peers, metropolitan Philadelphia has the largest and fastest growing immigrant population, which now stands at over 500,000, comprising 9 percent of the population. Between 2000 and 2006, greater Philadelphia’s immigrant population grew by 113,000, nearly as many as had arrived in the decade of the 1990s.
• Metropolitan Philadelphia has a diverse mix of immigrants and refugees from Asia (39 percent), Latin America and the Caribbean (28 percent), Europe (23 percent) and Africa (8 percent). The 10 largest source countries are India, Mexico, China, Vietnam, Korea, Italy, Ukraine, Philippines, Jamaica, and Germany.
• Immigrant growth in suburban Philadelphia has outpaced the city’s growth, but numerically, the city has the largest population of all local jurisdictions. Outside the city, Montgomery County had the earliest post- World War II suburban settlement of the foreign born and has the largest number of immigrants among jurisdictions, while Chester County saw the fastest growth during the 1970-2006 time period.
• Nearly 60 percent of the foreign-born living in metropolitan Philadelphia arrived in the United States after 1990. Although their naturalization rates and educational levels reflect their recentness of arrival, on the whole, greater Philadelphia’s immigrants are doing well on these measures as compared with some other U.S. metropolitan immigrant populations.
• Nearly 75 percent of greater Philadelphia’s labor force growth since 2000 is attributable to immigrants. Immigrants’ contributions to the labor force are considerably higher in this period than in the 1990s, when just 36 percent of the growth was due to immigrants.

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Bringing together the five counties of Southeastern Pennsylvania, the nonprofit Metropolitan Caucus, a new regional consortium there, is promoting a joint regional application for ARRA’s competitive Energy Efficiency and Conservation Block Grant dollars. Its four-part proposal, which will add and refine partners and programs over time, draws on the collaboration of multiple regional institutions to establish and operate a loan fund for green building and retrofits; support clean energy technology deployment; assist local governments with energy efficiency plans; and measure the energy performance of public facilities.

The newly created Metropolitan Caucus of southeastern Pennsylvania is leading the bold new regional energy efficiency strategy targeting for the competitive Energy Efficiency and Conservation Block Grants (EECBG) in the American Recovery and Reinvestment Act (ARRA). Unprecedented for the region, the Metropolitan Caucus has brought together five area counties—Bucks, Chester, Delaware, Montgomery, and Philadelphia—to make the most of the stimulus opportunity by coordinating their plans, goals, and assets to achieve maximum regional benefit. Their proposed joint EECBG competitive application for roughly $35 million calls for financing construction and retrofits, supporting clean energy companies, measuring building energy performance, and assisting local governments in implementing various sustainability solutions. To carry out each of these activities, the caucus intends to engage in broad cross-sector collaboration to leverage the strengths and unique assets of regional educational institutions, key nonprofits, and planning agencies.

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This week will bring a cornucopia of new data, an econo-nerd's dream. Unfortunately for some of us nerds, there won't be any releases on state and local government finances. (The Census Bureau generally has to wait for all states to report and, as you can imagine, some states are laggards.)

However, there will still be a lot in this week's numbers for those who follow state and local government finances, pay into state and local coffers, or consume predominantly state and local public services like education, roads, and health care. Here are a few trends worth watching:

First, Tuesday's March S&P/Case Shiller house price indexes will be important for states whose fortunes are tied to real estate, especially in the West and Southwest. Macroeconomic forecasters are predicting home prices will decline slightly compared to one year ago but continue to increase month-to-month, suggesting that perhaps the market has hit bottom.

That would be good news for the housing sector. However, research from Federal Reserve Board economists Byron Lutz, Raven Molloy, and Hui Shan suggests that any boon to state and local revenues would be minor. They calculate the housing bust per se generated only a $22 billion drop in taxes over three years, equivalent to roughly 3 percent of annual state and local revenues excluding federal funds.

Meanwhile, the latest Census data suggest that state taxes are growing, but at a pace that is slower than usual. More worrisome, the pace appears to be moderating. In recent weeks, California, New York, New Jersey, Pennsylvania, and Rhode Island have all reported taxes coming in below projections. Also, local property taxes are likely to remain in the doldrums for some time. They tend to respond to house price changes with a delay and thus just started showing the effects of the housing bust in late 2010. Property taxes recently turned positive again, but these gains are anemic by historical standards and likely caused by rate hikes in some jurisdictions rather than improving property values.

Next up this week are Bureau of Economic Analysis revisions to first quarter GDP. Macroeconomists will be attuned to how the revisions compare to advance estimates and what this portends for the recovery. They might also take note of whether these governments are detracting from growth - as they have done by an average of 0.2 percentage points in each quarter since 2008 - or contributing to it as usual. State and local watchers will be more focused on state and local spending, which unlike previous downturns, has declined in real per capita terms and not yet recovered.

That leads us to the biggest number to watch this week - Friday's jobs report. State and local employment is already down by 665,000 jobs or about 3.5 percent from its pre-recession peak. Recent trends suggest that cuts may be abating, but this total masks differences across subsectors - state education has been adding jobs while losses continue in all other subsectors, especially at the local level.

Ongoing state and local job losses also distinguish this recession from previous downturns in the modern era. This may be in keeping with the depths of this Great Recession. However, it's hard to imagine state and local residents aren't feeling the pinch of higher property tax burdens or lower services. To take one example, Governor Jerry Brown has proposed closing California's $16 billion budget gap by converting state employees to a four day work week and closing state parks. From a macro perspective, the fiscal tightening may be over. But that doesn't mean state and local governments aren't still a real drag.

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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Editor’s Note: An interactive feature, highlighting the key findings from this report, can be found here.

Over a billion people worldwide live on less than $1.25 a day. But that number is falling. This has given credence to the idea that extreme poverty can be eliminated in a generation. A new study by Brookings researchers examines the prospects for ending extreme poverty by 2030 and the factors that will determine progress toward this goal. Below are some of the key findings:

1. We are at a unique point in history where there are more people in the world living right around the $1.25 mark than at any other income level. This implies that equitable growth in the developing world will result in more movement of people across the poverty line than across any other level.

2. Sustaining the trend rate of global poverty reduction requires that each year a new set of individuals is primed to cross the international poverty line. This will become increasingly difficult as some of the poorest of the poor struggle to make enough progress to approach the $1.25 threshold over the next twenty years.

3. The period from 1990 to 2030 resembles a relay race in which responsibility for leading the charge on global poverty reduction passes between China, India and sub-Saharan Africa. China has driven progress over the last twenty years, but with its poverty rate now down in the single digits, the baton is being passed to India. India has the capacity to deliver sustained progress on global poverty reduction over the next decade based on modest assumptions of equitable growth. Once India’s poverty is largely exhausted, it will be up to sub-Saharan Africa to run the final relay leg and bring the baton home. This poses a significant challenge as most of Africa’s poor people start a long way behind the poverty line.

4. As global poverty approaches zero, it becomes increasingly concentrated in countries where the record of and prospects for poverty reduction are weakest. Today, a third of the world’s poor live in fragile states but this share could rise to half in 2018 and nearly two-thirds in 2030.

5. The World Bank has recently set a goal to reduce extreme poverty around the world to under 3 percent by 2030. It is unlikely that this goal can be achieved by stronger than expected growth across the developing world, or greater income equality within each developing country, alone. Both factors are needed simultaneously.

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In July 2013, the World Bank decided to phase-out lending for new coal-fired power plants in middle-income countries, except in rare circumstances where no financially feasible alternatives to coal exist. This decision was made for a combination of reasons including concerns about local air pollution and global climate change, as well as evidence that these projects have little trouble attracting private capital without World Bank involvement. Now, policymakers are considering whether the World Bank’s policy should also cover projects designed to retrofit existing coal-fired power plants in middle-income countries by adding scrubbers and other technologies that increase efficiency and reduce air pollution. 

There are several fundamental questions underlying this debate: Is financing coal power plant retrofits a good use of World Bank resources? If so, should the World Bank insist on the use of best available technologies when it finances these retrofits? These questions are vitally important, as retrofit technologies are designed to minimize toxic air pollutants, including soot and smog, which are both dangerous for human health and the world’s climate. Older coal plants without retrofit technologies are less efficient, and emit more pollutants per unit of coal burned than those with retrofits applied. Evidence shows that soot and smog can cause respiratory illness and asthma, especially in children and elderly people, and can diminish local agricultural production by reducing sunlight. Furthermore, in many countries coal plants are the single largest source of carbon dioxide emissions driving climate change. 

To help inform the policy debate, this analysis surveys the technologies in use in more than 2,000 coal-fired power plants currently in operation, under construction, or planned in middle-income countries. The findings reveal that roughly 70 percent of these power plants rely on old, inefficient technologies. Retrofitting these plants would reduce pollution, increase efficiency and save lives. In middle-income countries that do not mandate coal retrofits, the World Bank could play a helpful role in financing those improvements, particularly as part of broader policy reforms designed to reduce climate pollution and increase efficiency across the power sector.

Importantly, however, the data also show that important qualifications should be made. First, because coal is a major source of greenhouse gas emissions and retrofits are likely to keep coal plants operating longer, the World Bank should insist that retrofit projects occur within a context of national and local policy reforms designed to abate greenhouse gas pollution. Toward this end, the World Bank should continue to help countries build capacity to adopt and enforce climate pollution controls and other offsetting actions and policies. Second, the World Bank should insist that projects it finances use best available pollution control technologies. Already, the substantial majority of coal retrofits completed to date in middle-income countries have used best available technologies. These retrofits were almost universally financed exclusively by private capital. The World Bank should not use its capital to support inferior retrofit technologies that are below the standards already adopted by the private sector in middle-income countries.

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It has been nearly three years since the New Deal for Engagement in Fragile States (“the New Deal”) was endorsed at the Fourth High-Level Forum on Aid Effectiveness in Busan in 2011. Given the minimal progress of fragile states in achieving the Millennium Development Goals1 (MDGs) and that conflict and fragility are part of the deliberations on the post-2015 global development agenda, it is appropriate to assess New Deal implementation to date and see what early lessons can be learned. This review is intended to provide insights on current efforts and provoke thought and discussion on how implementation could be improved.

Since the New Deal was endorsed in Busan, a group of fragile states known as the g7+ has emerged to champion support for fragile states. The group started in 2010 with seven members but by May, 2014, its membership spanned 20 countries from four continents. The g7+ represents the first time a genuine constituency of fragile states has begun to engage with one other and with the international community about the causes of fragility and how to address it. Despite the modest progress that has been made and the enthusiasm of New Deal focal points among donors, civil society, and g7+ pilot countries, implementation of the New Deal to date is characterized by unmet conditions, unrealistic expectations about timeframes, and a lack of sustained dialogue about the causes of conflict and fragility. Overall, the Peacebuilding and Statebuilding Goals (PSGs) are being adopted into national development plans (Figure 1), but donors and civil society have concerns about the g7+ pilot countries’ commitment to use these goals as the basis for an inclusive and sustained dialogue about the causes of conflict and fragility. Conversely, although some elements of the TRUST component (Figure 1) are being implemented, g7+ pilot country governments have concerns about donors’ commitments to share risk and increase the use of country systems. Progress has been made in the implementation of the FOCUS elements (Figure 1), in terms of the number of fragility assessments conducted and compacts or mutual accountability frameworks established, but concern exists at the global level that there has been an overemphasis on the technical exercises and insufficient effort put toward political dialogue at the country level. The effort put into technical processes should not overshadow sustained political dialogue, and the tendency to rely on conditionality as the basis for New Deal partnership should be consciously avoided.

Greater investment should be made in rolling out the New Deal to reduce the amount of confusion surrounding it at the country level. This would perhaps best be accomplished by building the capacity within the different stakeholder groups, and especially by bolstering dedicated staffing for the New Deal. Donors and the g7+ should increase their domestic advocacy and educate stakeholders about the expectations inherent to New Deal participation, the potential risk-benefit tradeoffs, and the underlying assumptions about their willingness to do things differently. A combination of fewer conditions, increased investment, more inclusive political dialogue, and better domestic advocacy could render the New Deal a transformative approach to addressing the challenges and opportunities that exist in fragile and conflict-affected states.

This paper is an independent assessment of New Deal implementation. It is based on a review of New Deal documentation and interviews with focal points in g7+ pilot countries, lead donor agencies, and civil society. The interviews were conducted during April, May, and June 2014. This review focuses on the original seven pilot countries that volunteered to implement the New Deal: Afghanistan, the Central African Republic, the Democratic Republic of Congo (DRC), Liberia, South Sudan, Sierra Leone and Timor Leste. The review also includes Somalia, given that a compact was developed there in 2013.

In the United States, the official poverty rate for 2012 stood at 15 percent based on the national poverty line which is equivalent to around $16 per person per day. Of the 46.5 million Americans living in poverty, 20.4 million live under half the poverty line. This begs the question of just how poor America’s poorest people are.

Poverty, in one form or other, exists in every country. But the most acute, absolute manifestations of poverty are assumed to be limited to the developing world. This is reflected in the fact that rich countries tend to set higher poverty lines than poor countries, and that global poverty estimates have traditionally excluded industrialized countries and their populations altogether.

An important study on U.S. poverty by Luke Shaefer and Kathryn Edin gently challenges this assumption. Using an alternative dataset from the one employed for the official U.S. poverty measure, Shaefer and Edin show that millions of Americans live on less than $2 a day—a threshold commonly used to measure poverty in the developing world. Depending on the exact definitions used, they find that up to 5 percent of American households with children are shown to fall under this parsimonious poverty line.

Methodologies for measuring poverty differ wildly both within and across countries, so comparisons and their interpretation demand extreme care.

These numbers are intended to shock—and they succeed. The United States is known for having higher inequality and a less generous social safety net than many affluent countries in Europe, but the acute deprivations that flow from this are less understood. A crude comparison of Shaefer and Edin’s estimates with the World Bank’s official $2 a day poverty estimates for developing economies would place the United States level with or behind a large set of countries, including Russia (0.1 percent), the West Bank and Gaza (0.3 percent), Jordan (1.6 percent), Albania (1.7 percent), urban Argentina (1.9 percent), urban China (3.5 percent), and Thailand (4.1 percent). Many of these countries are recipients of American foreign aid. However, methodologies for measuring poverty differ wildly both within and across countries, so such comparisons and their interpretation demand extreme care.

This brief is organized into two parts. In the first part, we examine the welfare of America’s poorest people using a variety of different data sources and definitions. These generate estimates of the number of Americans living under $2 a day that range from 12 million all the way down to zero. This wide spectrum reflects not only a lack of agreement on how poverty can most reliably be measured, but the particular ways in which poverty is, and isn’t, manifested in the U.S.. In the second part, we reexamine America’s $2 a day poverty in the context of global poverty. We begin by identifying the source and definition of poverty that most faithfully replicates the World Bank’s official poverty measure for the developing world to allow a fairer comparison between the U.S. and developing nations. We then compare the characteristics of poverty in the U.S. and the developing world to provide a more complete picture of the nature of poverty in these different settings. Finally, we explain why comparisons of poverty in the U.S. and the developing world, despite their limitations and pitfalls, are likely to become more common.

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The Girls’ Education Imperative

In 1948, the world’s nations came together and agreed that “everyone has a right to education,” boys and girls and rich and poor alike. This vision set forth in the Universal Declaration of Human Rights has been reinforced over the decades and today the girls who still fight to be educated are not cases for charity but actively pursuing what is rightfully theirs. In recent years, girls’ education has also received attention because, in the words of the United Nations, “education is not only a right but a passport to human development.” Evidence has been mounting on the pivotal role that educating a girl or a woman plays in improving health, social, and economic outcomes, not only for herself but her children, family, and community. Educating girls helps improve health: one study published in The Lancet, the world’s leading medical journal, found that increasing girls’ education was responsible for more than half of the reduction in child mortality between 1970 and 2009. The economic benefits are clear: former chief economist at the World Bank and United States Secretary of the Treasury Lawrence Summers concluded that girls’ education “may well be the highest-return investment available in the developing world” due to the benefits women, their families and societies reap. And because women make up a large share of the world’s farmers, improvements in girls’ education also lead to increased agricultural output and productivity.

Progress in Girls’ Education

Given the importance of girls’ education, for girls’ own dignity and rights and for a broad sweep of development outcomes, it is no surprise that global agendas have focused heavily on it. For more than two decades, girls’ education has been recognized as a global priority and incorporated into development targets, which has rallied governments, nongovernmental organizations (NGOs), foundations and international organizations. From the 1990 Education for All (EFA) Goals to the 1995 Fourth World Conference on Women in Beijing and to the 2000 Millennium Development Goals (MDGs), girls’ education has been a priority, particularly in international development communities. Perhaps the most influential of these has been the MDGs, which reinforce parts of the EFA goals by focusing two of their eight goals on education, namely on achieving universal primary education and achieving gender parity in both primary and secondary school.

Progress in enrolling children, especially girls, into primary school is seen by many as a development success story. Indeed there is much to celebrate. Since 1990, the number of girls in low-income countries enrolling in primary school has increased two-and-a-half times, from 23.6 million to nearly 63 million in 2012. This has translated into a large increase in the girl-boy ratio in low-income countries, from 82 to 95 girls per 100 boys in primary school. For low- and lower-middle-income countries combined, the number of girls enrolled reached over 200 million girls in 2012, an almost 80 percent increase, and globally two-thirds of countries have near-equal numbers of boys and girls enrolled at the primary level. 

In 1990, in South and West Asia, there were only 74 girls enrolled in primary school for every 100 boys, but by 2012 the region had achieved equal numbers of boys and girls in school.

This progress was largely made by the leadership of developing country governments that prioritized expansion of primary schooling opportunities and by the global community’s support of governments focused on reaching the MDGs. Some of the biggest gains have been in regions struggling the most. In 1990, in South and West Asia, there were only 74 girls enrolled in primary school for every 100 boys, but by 2012 the region had achieved equal numbers of boys and girls in school. Similarly, sub-Saharan Africa, which had the lowest levels of girls in school in 1990, has experienced marked improvement, with the girl-boy ratio increasing from 83 to 92 girls per 100 boys in primary school.

The focus on getting girls into school has helped close gender gaps in relation to other factors too, such as wealth and location of residence. The fact that family income and urban or rural locality are now the most likely indicators of school enrollment is a big victory for girls’ education. The World Inequality Database on Education (WIDE) shows that in India, for example, 38 percent of girls and 25 percent of boys of primary school age were not in school in 1992. By 2005, that gap had narrowed to 24 percent of girls and 22 percent of boys. However, today the gap between the richest and poorest children’s attendance is much starker—37 percent of children from the poorest 20 percent of families versus just 11 percent of the richest 20 percent are out of school. And in many areas, girls actually outpace boys, especially at higher levels of education. In one third of countries, there are now more girls than boys enrolled in secondary school. Also, girls often do better once in school, with boys making up 75 percent of grade-repeaters in primary school.

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Strong Growth and Changing Composition 

External financial flows to sub-Saharan Africa (defined as the sum of gross private capital flows, official development assistance (ODA), and remittances to the region) have not only grown rapidly since 1990, but their composition has also changed significantly. The volume of external flows to the region increased from $20 billion in 1990 to above $120 billion in 2012. Most of this increase in external flows to sub-Saharan Africa can be attributed to the increase in private capital flows and the growth of remittances, especially since 2005 (see Figure 1).

Figure 1. Sub-Saharan Africa: External Flows (1990-2012, in USD billions)

As also displayed in Figure 1, in 1990 the composition of external flows to sub-Saharan Africa was about 62 percent ODA, 31 percent gross inflows from the private sector, and about 7 percent remittances. However, by 2012, ODA accounted for about 22 percent of external flows to Africa, a share comparable to that of remittances (24 percent) and less than half the share of gross private capital flows (54 percent). Also notably, in 1990, FDI flows were greater than ODA flows in only two countries (Liberia and Nigeria) in sub-Saharan Africa excluding South Africa, but 22 years later, 17 countries received more FDI than ODA in 2012—suggesting that sub-Saharan African countries are increasingly becoming less aid dependent (see Figure 2).

Figure 2. Sub-Saharan Africa: Number of Countries Where FDI is Greater than ODA (1990-2012)

But to what extent have these changes in the scale and composition of external flows to sub-Saharan Africa equally benefited countries in the region? Did the rising tide lift all boats? Is aid really dying? Are all countries attracting private capital flows and benefiting from remittances to the same degree? Finally, how does external finance compare with domestic finance? 

The False Demise of ODA

A closer look at the data indicates that, clearly, ODA is not dead, though its role is changing. For instance, middle-income countries (MICs) are experiencing the sharpest decline in ODA as a share of total external flows to the region, while aid flows account for more than half of external flows in fragile as well as low-income countries (LICs) and resource-poor landlocked countries (see Figure 3 and Appendix).

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In December over 190 countries will converge in Paris to finalize a new global agreement on climate change that is scheduled to come into force in 2020. A central part of it will be countries’ national pledges, or “intended nationally determined contributions” (INDCs), to be submitted this year which will serve as countries’ national climate change action plans. For Latin American countries, the INDCs present an unprecedented opportunity. They can be used as a strategic tool to set countries or at least some sectors on a cleaner path toward low-carbon sustainable development, while building resilience to climate impacts. The manner in which governments define their plans will determine the level of political buy-in from civil society and business. The implementation of ambitious contributions is more likely if constituencies consider them beneficial, credible, and legitimate.

This paper aims to better understand the link between Latin American countries’ proposed climate actions before 2020 and their post-2020 targets under a Paris agreement. We look at why Latin American climate policies and pledges merit attention, and review how Latin American nations are preparing their INDCs. We then examine the context in which five Latin American nations (Mexico, Brazil, Peru, Costa Rica, and Venezuela) are developing their INDCs—what pledges and efforts have already been made and what this context tells us about the likely success of the INDCs. In doing so, we focus on flagship national policies in the areas of energy, forests, cities, and transportation. We address what factors are likely to increase or restrain efforts on climate policy in the region this decade and the next.

Latin American countries are playing an active role at the U.N. climate change talks and some are taking steps to reduce their emissions as part of their pre-2020 voluntary pledges.

Latin American countries are playing an active role at the U.N. climate change talks and some are taking steps to reduce their emissions as part of their pre-2020 voluntary pledges. However, despite some progress there are worrying examples suggesting that some countries’ climate policies are not being implemented effectively, or are being undermined by other policies. Whether their climate policies are successful or not will have significant consequences on the likely trajectory of the INDCs and their outcomes. The imperative for climate action is not only based on Latin America’s contribution to global carbon emissions. Rather, a focus on adaptation, increasing the deployment of renewable energy and construction of sustainable transport, reducing fossil fuel subsidies, and protecting biodiversity is essential to build prosperity for all Latin Americans to achieve a more sustainable and resilient development.

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The Central African Republic (CAR), a landlocked country roughly the size of Texas, has endured a nearly constant state of political crisis since its independence from France in 1960. In fact, in the post-colonial era, the CAR has experienced only 10 years of rule under a democratically elected leader, Ange-Félix Patassé, from 1993 to 2003. Four of the CAR’s past five presidents have been removed from power through unconstitutional means, and each of these transitions has been marred by political instability and violence. Fragile attempts to build democratic political institutions and establish the rule of law have been undermined by coups, mutinies, and further lawlessness, making cycles of violence tragically the norm in the CAR.

The country’s current crisis (2012–present) stems from political tensions and competition for power between the predominantly Muslim Séléka rebel coalition and the government of President Francois Bozizé, as well as unresolved grievances from the CAR’s last conflict (2006–2007). Since the Séléka’s overthrow of the government in March 2013 and concurrent occupation of large areas of the country, the conflict has evolved to encompass an ethno-religious dimension: So-called Christian defense militias named the anti-balaka emerged to counter the Séléka alliance, but in effect sought revenge against the CAR’s Muslim minority (about 15 percent of the population), including civilians. During a March 2014 trip to the Central African Republic, United Nations High Commissioner for Human Rights Navi Pillay remarked that “the inter-communal hatred remains at a terrifying level,” as reports of atrocities and pre-genocidal indicators continued to surface. Even today, horrific crimes against civilians are still being committed at a frightening frequency in one of the poorest countries in the world: The CAR has a per capita GNI of $588 and a ranking of 185 out of 187 on 2013’s United Nations Human Development Index.

Amid the escalating insecurity in 2013, African Union (AU), French, and European forces were deployed under the auspices of the African-led International Support Mission in Central Africa (MISCA) to disarm militant groups and protect civilians at a critical juncture in December, and their efforts contributed to the relative stabilization of the capital in early 2014. Meanwhile, in January 2014, Séléka leaders relinquished power to a transitional government led by former mayor of Bangui, Catherine Samba-Panza, who was then tasked with preparing for national elections and establishing security throughout the country. In September 2014, the United Nations incorporated the MISCA forces into the larger Multidimensional Integrated Stabilization Mission in the Central African Republic (MINUSCA) and then in 2015 extended and reinforced its presence through 2016, in response to the ongoing violence. Despite the international military intervention and efforts of the transitional authorities to address the pervasive insecurity, reprisal killings continue and mobile armed groups still freely attack particularly remote, rural areas in the central and western regions of the country. The unguarded, porous borders have also allowed rebel forces and criminal elements to flee into distant areas of neighboring countries, including Chad and South Sudan, in order to prepare their attacks and return to the CAR.

This paper will explore the origins of the complex emergency affecting the CAR, with a particular focus on the economic causes and potential economic strategies for its resolution. It will begin by providing an overview of the core issues at stake and enumerating the driving and sustaining factors perpetuating the violence. Then it will discuss the consequences of the conflict on the humanitarian, security, political, and economic landscape of the CAR. Finally, it will highlight strategies for addressing the underlying issues and persisting tensions in the CAR to begin building a durable peace, arguing that the national authorities and international partners adopt a holistic approach to peace building that prioritizes inclusive economic recovery given the economic roots of the crisis.

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Executive Summary

Cities are creations of their states. Their boundaries, their powers, and their responsibilities are all substantially prescribed by state law. With the advent of the new federalism—beginning in the 1970s and resurgent today—the devolution of power from Washington to state capitals has increased the importance of state decision making for cities.

Yet, this shift occurred precisely as cities were losing political clout in state legislatures due to population decline within city limits and rampant growth in suburban jurisdictions.

This paper argues that in response to shifting population distributions within states, cities need to build new coalitions to effectively achieve their legislative goals within state legislatures. Case studies—New York City, Chicago, Detroit, and the three largest cities in Ohio (Cincinnati, Cleveland, and Columbus)—are used to more closely examine coalition-building methods.

Overall, the authors find:

• Cities' dependence on state government has increased as the federal government has ceded more power to the states. As cities' populations have declined, they have become weaker in state legislatures that have grown more powerful due to federal policy. In the peak year of 1978, about 15 percent of city revenues came from the federal government. By 1999 that had decreased to 3 percent. Concurrently, the federal government has shifted a number of programs to the states, which control the rules and revenue mechanisms cities operate under.

• Traditional political coalitions cities have used to achieve their state legislative goals are no longer as effective. Partisan (usually Democratic) coalitions are less reliable as focus has shifted to suburban swing districts. Moreover, as their power has decreased, cities' agendas have become more reactive, aiming to preserve the status quo in funding, infrastructure projects, and autonomy.

• Older, inner-ring suburbs are a logical new partner for cities in state legislatures. Increasingly, these suburbs, and some outer ones, have common interests with central cities as they address immigration, fiscal stress, and infrastructure woes. Such alliances would also better address metropolitan-wide issues on a metropolitan basis.

There remain many obstacles to forging such coalitions, however, including longtime distrust among big cities and their neighbors, racial disparities, and in some cases, growing investment in central cities while surrounding suburbs languish. Nonetheless, for cities to effectively influence their state governments more creative approaches to coalition building must be found.

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Before the City Club in Cleveland, Bruce Katz emphasized the importance of Ohio's older industrial cities for the state's overall prosperity and outlined, despite seemingly grim statistics, why now is the time for a rebirth of those places and how it can be achieved.

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China’s economic rise is one of the factors creating strains in the international financial order. China is already the largest trading nation and the second largest economy. It is likely to emerge in the next few years as the world’s largest net creditor. It is already #2 behind Japan. Until recently, China’s main foreign asset has been central bank reserves, mostly invested in U.S. Treasury bonds and similar instruments.

In the last couple of years, however, this pattern has started to change. China’s reserves peaked at about $4 trillion at the end of 2014. Since then, the People’s Bank of China has sold some reserves, but the country as a whole is still accumulating net foreign assets as evidenced by the large current account surplus. What is new is that the overseas asset purchases are coming from the private sector and state enterprises, not from the official sector. The Institute for International Finance estimated that the net private capital outflow from China was $676 billion in 2015. (That estimate includes outward investments by China’s state enterprises, which strictly speaking are not “private”; the point is to distinguish between official holding of foreign assets at the central bank and more commercial transactions.) As investment opportunities diminish in China owing to excess capacity and declining profitability, this commercial outflow of capital from China is likely to continue at a high level.

Tilted playing field

Most of the major investing countries in the world are developed economies; in addition to making direct investments elsewhere, they tend to be very open to inward investment. China is unusual in that it is a developing country that has emerged as a major investor. China itself is an important destination for foreign direct investment (FDI), and opening to the outside world has been an important part of its reform program since 1978. However, China’s policy is to steer FDI to particular sectors. In general, it has welcomed FDI into most but not all of manufacturing. However, other sectors of the economy are relatively closed to FDI, including mining, construction, and most modern services. It is not surprising that China is less open to FDI than developed economies such as the United States. But it is also the case that China is relatively closed among developing countries.

The OECD calculates an index of FDI restrictiveness for OECD countries and major emerging markets. The index is for overall FDI restrictiveness, and also for restrictiveness by sector. China in 2014 was more restrictive than the other BRICS countries (Brazil, Russia, India, and South Africa). Brazil and South Africa are highly open, similar to advanced economies with measures around 0.1 (on a scale of 0=open and 1=closed). India and Russia are less open with overall measures around 0.2. China is the most closed with an index above 0.4. Some of the key sectors in which China is investing abroad, such as mining, infrastructure, and finance, are relatively closed at home.

This lack of reciprocity creates problems for China’s partners. China has the second largest market in the world. In these protected sectors, Chinese firms can grow unfettered by competition, and then use their domestic financial strength to develop overseas operations. In finance, for example, China’s four state-owned commercial banks operate in a domestic market in which foreign investors have been restricted to about 1 percent of the market. The four banks are now among the largest in the world and are expanding overseas. China’s monopoly credit card company, Union Pay, is similarly a world leader based on its protected domestic market. A similar strategy applies in mining and telecommunications.

China is unusual in that it is a developing country that has emerged as a major investor.

This lack of reciprocity creates an unlevel playing field. A concrete example is the acquisition of the U.S. firm Smithfield by the Chinese firm Shuanghui. In a truly open market, Smithfield, with its superior technology and food-safety procedures, may well have taken over Shuanghui and expanded into the rapidly growing Chinese pork market. However, investment restrictions prevented such an option, so the best way for Smithfield to expand into China was to be acquired by the Chinese firm. Smithfield CEO Larry Pope stated the deal would preserve "the same old Smithfield, only with more opportunities and new markets and new frontiers." No Chinese pork would be imported to the United States, he stated, but rather Shuanghui desired to export American pork to take advantage of growing demand for foreign food products in China due to recent food scandals. Smithfield's existing management team is expected to remain intact, as is its U.S. workforce. 

The United States does not have much leverage to level the playing field. It does have a review process for acquisitions of U.S. firms by foreign ones. The Committee on Foreign Investment in the United States (CFIUS) is chaired by Treasury and includes economic agencies (Commerce, Trade Representative) as well as the Departments of Defense and Homeland Security. By statute, CFIUS can only examine national security issues involved in an acquisition. It reviewed the Smithfield deal and let it proceed because there was no obvious national security issue. CFIUS only reviews about 100 transactions per year and the vast majority of them proceed. This system reflects the U.S. philosophy of being very open to foreign investment.

A thorn in the relationship

Chinese policies create a dilemma for its partners. Taking those policies as given, it would be irrational for economies such as the United States to limit Chinese investments. In the Shuanghui-Smithfield example, the access to the Chinese market gained through the takeover makes the assets of the U.S. firm more valuable and benefits its shareholders. Assuming that the firm really does expand into China, the deal will benefit the workers of the firm as well. It would be even better, however, if China opened up its protected markets so that such expansions could take place in the most efficient way possible. In some cases, that will be Chinese firms acquiring U.S. ones, but in many other cases it would involve U.S. firms expanding into China. 

This issue of getting China to open up its protected markets is high on the policy agenda of the United States and other major economies. The United States has been negotiating with China over a Bilateral Investment Treaty (BIT) that would be based on a small negative list; that is, there would be a small number of agreed sectors that remain closed on each side, but otherwise investment would be open in both directions. So far, however, negotiations on the BIT have been slow. It is difficult for China to come up with an offer that includes only a small number of protected sectors. And there are questions as to whether the U.S. Congress would approve an investment treaty with China in the current political environment, even if a good one were negotiated.

The issue of lack of reciprocity between China’s investment openness and the U.S. system is one of the thorniest issues in the bilateral relationship.

The issue of lack of reciprocity between China’s investment openness and the U.S. system is one of the thorniest issues in the bilateral relationship. A new president will have to take a serious look at the CFIUS process and the enabling legislation and consider what combination of carrots and sticks would accelerate the opening of China’s markets. In terms of sticks, the United States could consider an amendment to the CFIUS legislation that would limit acquisitions by state enterprises from countries with which the United States does not have a bilateral investment treaty. In terms of carrots, the best move for the United States is to approve the Trans-Pacific Partnership and implement it well so that there is deeper integration among like-minded countries in Asia-Pacific. Success in this will encourage China to open up further and eventually meet the high standards set by TPP. Greater investment openness is part of China’s own reform plan but it clearly needs incentives to make real progress. 

For more on this and related topics, please see David Dollar's new paper, "China as a global investor."

Event Information

On May 24, the John L. Thornton China Center at Brookings hosted U.S. Undersecretary of the Treasury for International Affairs Nathan Sheets for a discussion on the U.S.-China economic relationship and engagement in preparation for the economic track of the upcoming eighth U.S.-China Strategic & Economic Dialogue (S&ED), to be held in Beijing in early June. Senior Fellow and Director of the Brookings China Center Cheng Li provided opening remarks and Senior Fellow David Dollar moderated the discussion.

Undersecretary Sheets was confirmed by the U.S. Senate as the Treasury Department’s undersecretary for international affairs in September 2014. In this position, he serves as the senior official responsible for advising the secretary of the Treasury on international economic issues. Previously, Sheets worked as global head of international economics at Citigroup, and at the Federal Reserve Board in a number of positions, including as director of the division of international finance.

Following the discussion, panelists took questions from the audience.

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Video

• Introduction by Cheng Li, and remarks by Nathan Sheets
• Discussion between Nathan Sheets and David Dollar

Audio

• A preview of the eighth U.S.-China Strategic and Economic Dialogue

Transcript

• Transcript (.pdf)

Event Materials

• 20160524_us_china_sheets_transcript

The eighth and final Strategic and Economic Dialogue (S&ED) of the Obama administration will take place in Beijing next week. On the economic side, it will be difficult this year to make progress on specific outcomes; but it’s an important year for having a frank conversation about macroeconomic and financial policies.

One reason that it will be hard to get specific outcomes is that the Chinese leadership has shown that economic reform doesn’t rank very high on its list of priorities. After laying out an ambitious reform agenda in its Third Plenum resolution in 2013, implementation of reform has been slow, except in some aspects of financial reform. Recent speeches have emphasized the need to close zombie firms and clean up non-performing loans in the banking system, but specific plans have been modest. 

In terms of the agenda between China and the United States, the most important issue is negotiating a Bilateral Investment Treaty (BIT). Many important sectors are still closed to inward direct investment in China. It would help China’s transition to a new growth model to open up these sectors to competition and to private investment, and a BIT is a smart way to commit to these reforms. However, China has been slow to produce a credible offer on the BIT because enterprises and ministries with vested interests have opposed opening up and the leadership is apparently not willing to take them on.

Another factor affecting this S&ED is that it is the last for the Obama administration. I would argue that this is a good time for China and the United States to demonstrate that regular, high-level exchange produces results, increasing the likelihood that whatever administration comes next will want to maintain something similar. However, it is more likely that Chinese leaders will want to wait and see what administration they will be dealing with and to save deliverables for those future negotiations.

S&ED is an opportunity for the top economic officials in the two countries to frankly discuss their policy choices and to avoid mistakes that can come from miscommunication.

My experience with the first four S&EDs was that the conversation was more important than the deliverables, which have often been modest, incremental steps. This year, China will be very interested in hearing what the Federal Reserve thinks. May labor market data will be published on June 3, just in advance of the S&ED, so there may be more clarity about when the Fed is likely to raise interest rates. Regardless of when the Fed moves, both China and the United States have an interest in seeing a relatively stable exchange rate for the yuan. China’s central bank officials have emphasized that the country still has a large current account surplus, so depreciation of the trade-weighted exchange rate is not warranted. Depreciation would exacerbate imbalances and would work against the transformation of China’s growth model because it favors industry at the expense of services. 

But if the Fed continues to normalize interest rates and the dollar rises against other major currencies, China does not want to follow the dollar up. Hence, its emphasis on stable value of the currency relative to a basket. S&ED is an opportunity for the top economic officials in the two countries to frankly discuss their policy choices and to avoid mistakes that can come from miscommunication. The most important outcome of the S&ED may well be avoidance of policy mistakes, a subtle outcome that will not be reflected in headlines.