We will likely look back on 2015 as a consequential year in China’s evolving global strategy. The September crash of the stock market in Shanghai marks the first contemporary occasion when China’s internal difficulties have had global consequences. In November, China will take over the leadership of the G-20 and have an opportunity to put its stamp on the evolving tools of global governance. And on September 28, President Xi Jinping will address the world during the 70th anniversary of the only global body in which China already has full powers—the United Nations.

A rising power, cut from different cloth

But with greater consequence comes greater responsibility. President Xi’s job at the U.N. in 2015 will be harder than in recent years. For the past several years the international community has been transfixed by the narrative of the rising powers, and of American, or at least Western, decline. Now, America’s economic recovery, its energy revolution, its leadership on Ebola, and its re-engagement around the Islamic State (or ISIS)—however partial—has gutted the “American decline” narrative. 

And Xi’s putative allies in the forging of a post-American order—Russia, Brazil, and India—won’t be nearly the help to China they have often been presumed to be. President Vladimir Putin will speak against the backdrop of Russia’s aggressive strategy in Ukraine and now Syria; Brazil’s President Dilma Roussef against the backdrop of a deep recession and a huge corruption scandal; and while President Narendra Modi is still riding relatively high internationally, he’s hardly riding in a pro-China direction. 

China is more consequential than any of these other three, of course. But it faces its own challenge to its narrative as it doubles down on its assertive posture in the South China Sea and as its handling of the stock market collapse shows serious cracks in the narrative of the “Beijing model.” As Chinese growth has slowed, especially in the manufacturing sector, so has its consumption of global commodities—and the knock-on effect has been slower growth in dozens of developing countries that had ridden China’s boom. China isn’t quite the alternative “pole” to the West it has been hyped to be. 

Still, China is now clearly the number two economy in the world; the number two defense spender; the dominant force in politics and economic integration in East Asia; and an increasingly important voice on global issues. So hype and narrative aside, the world will be listening closely to what President Xi has to say at the U.N.—as they will when he takes the reigns of the G-20. 

In what direction is Chinese leadership heading?

At a 700-person-strong gala dinner in Seattle on Tuesday, President Xi rehearsed the arguments. China is committed to a peaceful rise. China has learned the lesson of the Second World War, and recognizes that military hegemony is not an option. China is committed to the multilateral order, and the U.N. Charter. He even teased the international relations scholarly community: “There is no Thucydides trap,” he said, referring to the idea that the growth of Chinese power will cause fear in the United States and lead to war. He stressed his theme about forging a “new kind of great power relations” that eschewed military competition for more creative approaches to cooperation on win/win issues. 

All these would be welcome messages at the U.N., and if he means it, they are profoundly important messages. But if Xi wants these messages to be believed, if he wants to gain credibility at the global level, he’s going to have to do more than just talk a good game. 

First, China is going to have to start acknowledging that leadership is less about abusing the privileges of power and more about absorbing costs. The world may be hungry for leadership, but it’s not hungry for leadership of the abusive kind. It’s hungry for actors capable and willing to set a direction and bear the lion’s share of the costs of action—because that’s the only thing that’s ever overcome the collective action challenges that otherwise bedevil cooperation at the international level. 

China is going to have to start acknowledging that leadership is less about abusing the privileges of power and more about absorbing costs.

Second, he has to put his strategy where his principles are. He could start with the U.N. Charter. It’s an essential document of the international order, but only if the great powers abide by its essential principles (not by every detail.) The most essential of these are the prohibition against the acquisition of territory by force and the assertion of non-interference in sovereign affairs (except with the backing of the Security Council). The United States has violated these principles, notably in Iraq—its violation was of a temporary nature, of course, but had huge consequences. Russia has violated these principles—its violation in Crimea is modest in scale but notionally permanent and a fundamental violation of the foundational principles of the U.N.

China’s actions in the South China Sea have been more subtle than these, but no less invidious or injurious to the notion of a stable international order. If China wants others to believe that it still intends for its rise to be peaceful, it needs urgently to shift strategy in the South China Sea—and it would be in a strong position, then, to call on the other great powers to recommit themselves to the principle of the non-use of force and respect for sovereignty. 

[Xi] has to put his strategy where his principles are. He could start with the U.N. Charter.

I’m reasonably optimistic about the first idea. China was among the most neuralgic of countries when it came to the global response to SARS a decade ago; it’s learned its lesson and was far more forward leaning on Ebola. It chipped in, albeit not to scale, on the eurocrisis. It’s made financial contributions to the counter-ISIS campaign. And it’s made commitments that, if kept, will make a vital difference on the climate. These efforts represent a serious start, and if President Xi expands China’s role in this kind of leadership it could position him well on global issues—especially during his G-20 presidency. 

I’m not so optimistic about the second. China shows every sign of being locked in an assertive-tilting-to-aggressive strategy in the South China Sea, consequences be damned. And with Russia also seemingly locked into a “wrong-foot the West” strategy, the United States and its allies will increasingly be pulled into an escalatory response—creating exactly the kind of Thucydidean trap President Xi ostensibly wants to avoid. (The United States bears responsibility here too, and it can also take steps to lower tensions in Asia.) 

The problem is, the further out we go along the pathway of security tensions in Asia, the more we undermine the prospects for win-win cooperation on global challenges like terrorism and climate. For now, these twin strands of strategy are in roughly equal balance—both rivalry and restraint are leitmotifs of Xi’s worldview, and of America’s. But 2015 is going to be an important testing time for the viability of this dual-strand approach. If Xi wants to start tilting the balance to win/win approaches, his speech at the U.N. is a good place to start. But even that would only be a beginning.

       

The tragic and deadly attacks in Paris, the day before leaders were set to arrive in Antalya, Turkey, for the G-20 summit, underlined the divisions that Syria, its fleeing population, and the terrorists of ISIS have created, as fear and short-term political calculations seem to shove aside policies aimed at sustainable solutions to the unprecedented refugee challenge.

It had started on a more hopeful note. Turkey, which chairs the G-20 this year, had placed the refugee issue on the agenda, hoping for a substantive global dialogue while looking for broad-based solutions to the crisis in Syria and the terrorism challenge. No doubt the 2 million refugees in Turkey played a big role, as President Erdogan and other officials tried to rally support for this unusual situation in a variety of G-20 and other venues.

Turkey was supported by another full member of the G-20, the EU, the only non-nation state member of the group, which shrugged off its complacency when hundreds of thousands turned up on its shores in 2015. European Council President Donald Tusk and Jean-Claude Juncker, European Commission president, echoed the Turkish President in calling for a global response: “Meeting in Turkey in the midst of a refugee crisis in Syria and elsewhere, the G-20 must rise to the challenge and lead a coordinated and innovative response… recognizing its global nature and economic consequences and promote greater international solidarity in protecting refugees.”

The G-20 is an imposing group, consisting of the world’s 20 largest economies, accounting for 85 percent of its GDP, 76 percent of its trade, and two-thirds of its population. Established in 1999 and growing in reach since the 2008 financial crisis, it should be a body that carries weight beyond the economic, with effective mechanisms to have impact on the global agenda. Yet, while Syria and the refugee crisis was the first time the G-20 stepped outside its usual narrower economic mandate, the agenda was quickly overtaken.     

The tragedy in Paris highlighted deep divisions over the refugees. Poland’s new government was the first to announce that it would stop participating in the EU resettlement plan whereby it would have accepted 5,000 refugees. Politicians from Hungary, the Czech Republic, Slovakia as well as those with a nativist message from the Nordic countries, France, Germany, and others saw an opening for tighter border controls and a much less welcoming approach to the more than 800,000 refugees that have already made their way into Europe, not to mention the many more on the way. Such views linking refugees to terrorism are not restricted to Europe but can be seen on the other side of the Atlantic, as U.S. presidential candidates and some 27 State Governors declared that Syrian refugees were not welcome.

At this early date, except for a single Syria passport “holder”—a document easily acquired these days, and found near one of the suicide bombing sites in Paris—all those who died or are being sought as suspects are citizens of either France or Belgium. Clearly, there could be some who get into Europe by using the refugees as a cover but with literally thousands of Europeans fighting in Syria, the real threat emanates from the small number of home-grown extremists in Europe who have easy access to the West and a cultural and linguistic familiarity that will elude newcomers for years. This was the same scenario one saw in the Madrid, London, Copenhagen, and the Charlie Hebdo attacks in Paris earlier this year. 

Fear is winning out over policy

The EU also appears in disarray on aiding the 4 million refugees in Jordan, Lebanon, and Turkey. This is significant since it is reduced funding and aid that is leading to the worsening of conditions in Jordan, Lebanon, and Syria, and driving many to Europe. Turkey too is reaching its limits and may potentially face a million or more new refugees if Aleppo falls. Yet funds pledged to these countries remain largely unfulfilled—of the 2.3 billion euros pledged by EU governments, only 486 million are firm government offers. The discussions between the EU and Turkey for additional aid to refugees of 3 billion euros also remain less-than-certain since such aid requires that EU countries agree to receiving and distributing asylum-seekers from Turkey. It also underlines the lack of funding for Jordan and Lebanon.    

In the end, the G-20 yielded little by way of concrete actions on refugees, though additional border controls, enhanced airport security, and intelligence sharing were promised. There was a call for broader burden sharing and greater funding of humanitarian efforts, as well as a search for political solutions. The G-20 also added little to the broad outlines of a potential settlement on Syria discussed in Vienna, Austria, on November 14, 2015, a day before the start of the G-20 summit.

Unfortunately, these are the very things that separate G-20 members among and within themselves. The growing danger is that fear and political opportunism rather than well-thought-out polices will guide the global response to the greatest human displacement tragedy since World War II. It is precisely this fearful and exclusive reaction that ISIS seeks. Indeed, that legacy may live long after ISIS is gone.                           

       

       

       

Event Information

On July 30-31, 2004, more than 40 preeminent international leaders from the public, private, and non-profit sectors came together at the Aspen Institute to discuss "America's Role in the Fight Against Global Poverty" and to set out a forward-looking strategy for the United States.

Co-hosted by Richard C. Blum of Blum Capital Partners LP, the Brookings Institution's Poverty and Global Economy Initiative, the Aspen Institute, and Realizing Rights: The Ethical Globalization Initiative, the group's aim was to explore the dilemma of global poverty from different perspectives, to disaggregate the seemingly intractable problem into more manageable challenges, and to identify key elements of an effective U.S. policy agenda.

With roundtable participants hailing from around the world and representing diverse experiences and approaches, the dialogue was as multifaceted as the challenge of poverty itself. Rather than simply summarize conference proceedings, this essay attempts to weave together the thoughtful exchanges, impassioned calls to action, fresh insights, and innovative ideas that characterized the discussion, and to set the stage for ongoing collaboration in the struggle for human dignity.

Helping to define the issues, share and encourage what works, and build the intellectual framework for such an enterprise will be the guiding mission of the Richard C. Blum Roundtable in the years ahead.


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From August 3 to 6, 2005, fifty preeminent international leaders from the public, private, and nonprofit sectors came together at the Aspen Institute for a roundtable, "The Private Sector in the Fight against Global Poverty."

The roundtable was hosted by Richard C. Blum of Blum Capital Partners and Strobe Talbott and Lael Brainard of the Brookings Institution, with the active support of honorary cochairs Walter Isaacson of the Aspen Institute and Mary Robinson of Realizing Rights: The Ethical Globalization Initiative. By highlighting the power of the market to help achieve social and economic progress in the world's poorest nations, the roundtable's organizers hoped to galvanize the private, public, and nonprofit sectors to move beyond argument and analysis to action. Put simply, as Brookings president Strobe Talbott explained, the roundtable's work was "brainstorming with a purpose."

With experts hailing from around the world and representing diverse sectors and approaches, the dialogue was as multilayered as the challenge of poverty itself. Rather than summarize the conference proceedings, this essay weaves together the thoughtful observations, fresh insights, and innovative ideas that characterized the discussion. A companion volume, Transforming the Development Landscape: The Role of the Private Sector, contains papers by conference participants, providing in-depth analysis of each conference topic.

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Lifting an estimated 1.2 billion people from extreme poverty over the next generation will require robust and broadly-shared economic growth throughout the developing world that is sufficient to generate decent jobs for an ever-expanding global labor force. Innovative but affordable solutions must also be found to meet people’s demand for basic needs like food, housing, a quality education and access to energy resources. And major investments will still be required to effectively address global development challenges, such as climate change and child and maternal health.  On all these fronts, the private sector, from small- and medium-sized enterprises to major global corporations, must play a significant and expanded role.

On August 4-6, 2013, Brookings Global Economy and Development is hosting the tenth annual Brookings Blum Roundtable on Global Poverty in Aspen, Colorado. This year’s roundtable theme, “The Private Sector in the New Global Development Agenda,” brings together global leaders, entrepreneurs, practitioners and public intellectuals to discuss how the contribution of the private sector be enhanced in the push to end poverty over the next generation and how government work more effectively with the private sector to leverage its investments in developing countries. 

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Roundtable Agenda

Sunday, August 4, 2013

Welcome: 8:40AM - 9:00AM MST
Brookings Welcome
• Strobe Talbott, Brookings

Opening Remarks
• Richard C. Blum, Blum Capital Partners, LP and Founder of 
the Blum Center for Developing Economies at UC Berkeley
• Julie Sunderland, Bill and Melinda Gates Foundation
• Kemal Derviş, Global Economy and Development, Brookings

Session I: 9:00AM - 10:30AM MST
Framing Session: Reimagining the Role of the Private Sector
In this opening discussion, participants will explore the overarching questions for the roundtable: How can the contribution of the private sector be enhanced in the push to end poverty over the next generation? What are the most effective mechanisms for strengthening private sector accountability? How can business practices and norms be encouraged that support sustainable development and job creation? How can business build trust in its contributions to sustainable development?

Moderator
• Nancy Birdsall, Center for Global Development

Introductory Remarks
• Homi Kharas, Brookings Institution
• Viswanathan Shankar, Standard Chartered Bank
• Shannon May, Bridge International Academies


Session II: 10:50AM - 12:20PM MST
Private Equity
Participants will explore the following questions for the roundtable: What are the constraints to higher levels of private equity in the developing world, including in non-traditional sectors? How can early-stage investments be promoted to improve deal flow? How can transaction costs and technical assistance costs be lowered?

Moderator
• Laura Tyson, University of California, Berkeley

Introductory Remarks
• Robert van Zwieten, Emerging Markets Private Equity Association
• Runa Alam, Development Partners International
• Vineet Rai, Aavishkaar

Dinner Program: 6:45PM - 9:15PM MST
Aspen Institute Madeleine K. Albright Global Development Lecture

Featuring
• Dr. Paul Farmer, Chief Strategist and Co-Founder, Partners in Health

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Monday, August 5, 2013

Session III: 9:00AM - 10:30AM MST
Goods, Services and Jobs for the Poor
Participants will explore the following questions for the roundtable: In what areas are the most promising emerging business models that serve the poor arising? What are the major obstacles in creating and selling profitable, quality, and beneficial products to the poor and how can they be overcome? What common features distinguish successful and replicable solutions?

Moderator
• Mary Robinson, Mary Robinson Foundation

Introductory Remarks
• Ashish Karamchandani, Monitor Deloitte
• Chris Locke, GSMA
• Ajaita Shah, Frontier Markets
• Hubertus van der Vaart, SEAF

Session IV: 10:50AM - 12:20PM MST
Blended Finance
Participants will explore the following questions for the roundtable: Can standard models of blended finance deliver projects at a large enough scale? How can leverage be measured and incorporated into aid effectiveness measures? Should governments have explicit leverage targets to force change more rapidly and systematically?

Moderator
• Henrietta Fore, Holsman International

Introductory Remarks
• Elizabeth Littlefield, OPIC
• Ewen McDonald, AusAID
• Laurie Spengler, ShoreBank International 

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Tuesday, August 6, 2013 

Session V: 9:00AM - 10:30AM MST
Unlocking Female Entrepreneurship
Participants will explore the following questions for the roundtable: How is the global landscape for female entrepreneurship changing? What types of interventions have the greatest ability to overturn barriers to female entrepreneurship in the developing world? Who, or what institutions, should lead efforts to advance this agenda? Can progress be made without a broader effort to end economic discrimination against women?

Moderator
• Smita Singh, Independent

Introductory Remarks
• Dina Powell, Goldman Sachs
• Carmen Niethammer, IFC
• Randall Kempner, ANDE

Session VI: 10:50AM - 12:20PM MST
U.S. Leadership and Resources to Engage The Private Sector
Participants will explore the following questions for the roundtable: How can U.S. foreign assistance be strengthened to more effectively promote the role of the private sector? How can U.S. diplomacy support private sector development in the emerging economies and multinational enterprises investing in the developing world? What can the US do to promote open innovation platforms?

Moderator
• George Ingram, Brookings

Introductory Remarks
• Sam Worthington, InterAction
• John Podesta, Center for American Progress
• Rajiv Shah, USAID

Closing Remarks
• Richard C. Blum, Blum Capital Partners, LP and Founder of the Blum Center for Developing Economies at Berkeley
• Kemal Derviş, Global Economy and Development, Brookings

Public Event: 4:30PM - 6:00PM MST
Brookings and the Aspen Institute Present: "America's Fiscal Health and its Implications for International Engagement"
Global Economy and Development at Brookings and the Aspen Institute will host the 66th U.S. Secretary of State Condoleezza Rice and Administrator of the U.S. Agency for International Development Rajiv Shah for a discussion on the current state of the U.S.'s fiscal health and its impact on American diplomatic and development priorities. Moderated by Ambassador Nicholas Burns, Director, Aspen Strategy Group.

Moderator
• Nicholas Burns, Director, Aspen Strategy Group

Panelists
• Condoleezza Rice, 66th United States Secretary of State
• Rajiv Shah, Administrator of the United States Agency for International Development

 

Event Materials

• BBR Participant List 2013_FINAL

       

       

It is estimated that there are 95 mobile phone subscriptions per 100 inhabitants worldwide, and this boom has not been lost on the developing world, where the number of mobile users has also grown at rocket speed. In fact, in recent years the information communication technology (ICT) revolution has provided opportunities leading to “death of distance,” allowing many obstacles to better livelihoods, especially for those in remote regions, to disappear. Remarkably, though, the huge proportion of poverty-stricken populations in so many of those same regions persists.

How might, then, we think differently on the relationship between these two ideas? Can and how might ICTs act as an engine for eradicating poverty and improving the quality of life in terms of better livelihoods, strong education outcomes, and quality health? Do today's communication technologies hold such potential?

In particular, the mobile phone’s accessibility and use creates and provides us with an unprecedented volume of data on social interactions, mobility, and more. So, we ask: Can this data help us better understand, characterize, and alleviate poverty?

Mapping call data records, mobility, and economic activity

The first step towards alleviating poverty is to generate poverty maps. Currently, poverty maps are created using nationally representative household surveys, which require manpower and time. Such maps are generated at a coarse regional resolution and continue to lag for countries in sub-Saharan Africa compared to the rest of the world.

As call data records (CDRs) allow a view of the communication and mobility patterns of people at an unprecedented scale, we show how this data can be used to create much more detailed poverty maps efficiently and at a finer spatial resolution. Such maps will facilitate improved diagnosis of poverty and will assist public policy planners in initiating appropriate interventions, specifically at the decentralized level, to eradicate human poverty and ensure a higher quality of life.

How can we get such high resolution poverty maps from CDR data?

In order to create these detailed poverty maps, we first define the virtual network of a country as a “who-calls-whom” network. This signifies the macro-level view of connections or social ties between people, dissemination of information or knowledge, or dispersal of services. As calls are placed for a variety of reasons, including request for resources, information dissemination, personal etc., CDRs provide an interesting way to construct a virtual network for Senegal.

We start by quantifying the accessibility of mobile connectivity in Senegal, both spatially and across the population, using the CDR data. This quantification measures the amount of communication across various regions in Senegal. The result is a virtual network for Senegal, which is depicted in Figure 1. The circles in the map correspond to regional capitals, and the edges correspond to volume of mobile communication between them. Thicker edges mean higher volume of communication. Bigger circles mean heavier incoming and outgoing communication for that region.

Figure 1: Virtual network for Senegal with MPI as an overlay

Source: Author’s rendering of the virtual network of Senegal based on the dataset of CDRs provided as a part of D4D Senegal Challenge 2015

Figure 1 also shows the regional poverty index[1] as an overlay. A high poverty index corresponds to very poor regions, which are shown lighter green on the map. It is evident that regions with plenty of strong edges have lower poverty, while most poor regions appear isolated. 

Now, how can we give a more detailed look at the distribution of poverty? Using the virtual network, we extract quantitative metrics indicating the centrality of each region in Senegal. We then calculate centrality measures of all the arrondissements[2] within a region. We then correlate these regional centrality measures with the poverty index to build a regression model. Using the regression model, we predict the poverty index for each arrondissement.

Figure 2 shows the poverty map generated by our model for Senegal at an arrondissement level. It is interesting to see finer disaggregation of poverty to identify pockets of arrondissement, which are most in need of sustained growth. The poorer arrondissements are shown lighter green in color with high values for the poverty index.

Figure 2: Predicted poverty map at the arrondissement level for Senegal with MPI as an overlay

Source: Author’s rendering of the virtual network of Senegal based on the dataset of CDRs provided as a part of D4D Senegal Challenge 2015.

What is next for call data records and other Big Data in relation to eradicating poverty and improving the human development?

This investigation is only the beginning. Since poverty is a complex phenomenon, poverty maps showcasing multiple perspectives, such as ours, provide policymakers with better insights for effective responses for poverty eradication. As noted above, these maps can be used for decomposing information on deprivation of health, education, and living standards—the main indicators of human development index.

Even more particularly, we believe that this Big Data and our models can generate disaggregated poverty maps for Senegal based on gender, the urban/rural gap, or ethnic/social divisions. Such poverty maps will assist in policy planning for inclusive and sustained growth of all sections of society. Our methodology is generic and can be used to study other socio-economic indicators of the society.

Like many uses of Big Data, our model is in its nascent stages. Currently, we are working towards testing our methodology at the ground level in Senegal, so that it can be further updated based on the needs of the people and developmental interventions can be planned. The pilot project will help to "replicate" our methodology in other underdeveloped countries.

In the forthcoming post-2015 development agenda intergovernmental negotiations, the United Nations would like to ensure the “measurability, achievability of the targets” along with identification of 'technically rigorous indicators' for development. It is in this context that Big Data can be extremely helpful in tackling extreme poverty.

Note: This examination was part of the "Data for Development Senegal" Challenge, which focused on how to use Big Data for grass-root development. We took part in the Data Challenge, which was held in conjunction with NetMob 2015 at MIT from April 7-10, 2015. Our team received the National Statistics prize for our project titled, "Virtual Network and Poverty Analysis in Senegal.” This blog reflects the views of the authors only and does not reflect the views of the Africa Growth Initiative.

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[1] As a measure of poverty, we have used the Multidimensional Poverty Index (MPI), which is a composite of 10 indicators across the three areas: education (years of schooling, school enrollment), health (malnutrition, child mortality), and living conditions.

[2] Senegal is divided into 14 administrative regions, which are further divided into 123 arrondissements.

      

Last month, we experienced yet another breakthrough in the epic battle of man against machine. Google’s AlphaGo won against the reigning Go champion Lee Sedol. This success, however, was different than that of IBM’s Deep Blue against Gary Kasparov in 1987. While Deep Blue still applied “brute force” to calculate all possible options ahead, AlphaGo was learning as the game progressed. And through this computing breakthrough that we can learn how to better leverage the data revolution.

In the game of Go, brute-force strategies don’t help because the total number of possible combinations exceeds the number of atoms in the universe. Some games, including some we played since childhood, were immune to computing “firepower” for a long time. For example, Connect Four wasn’t solved until 1995 with the conclusion being the first player can force a win. And checkers wasn’t until 2007, when Jonathan Schaeffer determined that in a perfect game, both sides could force a draw. For chess, a safe strategy has yet to be developed, meaning that we don’t know yet if white could force a win or, like in checkers, black could manage to hold on to a draw.

But most real-life situations are more complicated than chess, precisely because the universe of options is unlimited and solving them requires learning. If computers are to help, beyond their use as glorified calculators, they need to be able to learn. This is the starting point of the artificial intelligence movement.  In a world where perfection is impossible, you need well-informed intuition in order to advance. The first breakthrough in this space occurred when IBM’s Watson beat America’s Jeopardy! champions in 2011. These new intelligent machines operate in probabilities, not in certainty.

That being said, perfection remains important, especially when it comes to matters of life and death such as flying airplanes, constructing houses, or conducting heart surgery, as these areas require as much attention to detail as possible. At the same time, in many realms of life and policymaking we fall into a perfection trap. We often generate obsolete knowledge by attempting to explain things perfectly, when effective problem solving would have been better served by real-time estimates. We strive for exactitude when rough results, more often than not, are good enough.

By contrast, some of today’s breakthroughs are based on approximation. Think of Google Translate and Google’s search engine itself. The results are typically quite bad, but compared to the alternative of not having them at all, or spending hours leafing through an encyclopedia, they are wonderful. Moreover, once these imperfect breakthroughs are available, one can improve them iteratively. Only once the first IBM and Apple PCs were put on the market in the 1980s did the cycle of upgrading start, which still continues today.

In the realm of social and economic data, we have yet to reach this stage of “managed imperfection” and continuous upgrading. We are producing social and economic forecasts with solid 20th century methods. With extreme care we conduct poverty assessments and maps, usually taking at least a year to produce as they involve hundreds of enumerators, lengthy interviews and laborious data entry. Through these methods we are able to perfectly explain past events, but we fail to estimate current trends—even imperfectly.

The paradox of today’s big data era is that most of that data is poor and messy, even though the possibilities for improving it are unlimited. Almost every report from development institutions starts with a disclaimer highlighting “severe data limitations.” This is because only 0.5 percent of all the available data is actually being curated to be made usable. If data is the oil of the 21st century, we need data refineries to convert the raw product into something that can be consumed by the average person.

Thanks to the prevalence of mobile device and rapid advances in satellite technology, it is possible to produce more data faster, better, and cheaper. High-frequency data also makes it possible to make big data personal, which also increases the likelihood that people act on it. Ultimately, the breakthroughs in big data for development will be driven by managerial cultures, as has been the case with other successful ventures. Risk averse cultures pay great attention to perfection. They nurture the fear of mistakes and losing. Modern management accepts failure, encourages trial and error, and reaches progress through interaction and continuous upgrading.

       

       

Harsh geopolitical realities and historic legacies have pushed the South Caucasus states of Armenia, Azerbaijan, and Georgia back onto the foreign policy agendas of the United States, the European Union (EU), and Turkey, at a time when all three have pulled back from more activist roles in regional affairs. The South Caucasus states have now become, at best, second-tier issues for the West, but they remain closely connected to first-tier problems. To head off the prospect that festering crises in the Caucasus will lead to or feed into broader conflagrations, the United States, EU, and Turkey have to muster sufficient political will to re-engage to some degree in high-level regional diplomacy. In “Retracing the Caucasian Circle Considerations and Constraints for U.S., EU, and Turkish Engagement in the South Caucasus,” authors Fiona Hill, Kemal Kirişci, and Andrew Moffatt explore the rationale and assess the options for Western reengagement with Armenia, Azerbaijan, and Georgia given the current challenges and limitations on all sides. Based on a series of study trips to the South Caucasus and Turkey in 2014 and 2015, and numerous other interviews, the authors review some of the current factors that should be considered by Western policymakers and analysts.

Constraints and considerations for U.S., EU, and Turkish engagement in the South Caucasus:

• Divergent trends in the South Caucasus
• Russia’s influence in the South Caucasus
• Regional conflicts
• The United States’ diminishing role in the South Caucasus
• Failure to integrate the South Caucasus into the EU
• Foundering relations with Turkey
• Dashed expectations in the South Caucasus of Western engagement

Despite the challenges that have beset the West’s relations with the South Caucasus and the growing disillusionment in Armenia, Azerbaijan, and Georgia, giving up on engagement is not an option.

Policy options for the future:

• The United States, EU, and Turkey must work together, rather than separately
• “Under the radar” coordination on creative interim solutions and working with other mediators
• Focus on the development of “soft regionalism”
• Work with Georgia as the hub for furthering soft regionalism
• Devise adaptable policies as relations with Iran and China develop in the region

Downloads

• Retracing the Caucasian Circle: Considerations and constraints for U.S., EU, and Turkish engagement in the South Caucasus

       

       

Event Information

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President Barack Obama has established a broad policy of engagement as a central feature of his administration’s foreign policy agenda. From the earliest days of his presidency, the president has reached out to Iran, Russia and other nations around the world, marking not only a turning of the page but possibly a whole new chapter in U.S. foreign policy. While Europeans have advocated for increased bi-lateral and multi-lateral dialogue for some time, several important questions remain. With which nations or groups should the United States and Europe engage and should there be limits to dialogue in some cases? What are the consequences if dialogue fails? Do Europeans and Americans now have the same agenda and goals for engagement?

On May 29, the Center on the United States and Europe at Brookings (CUSE) will host experts and officials from both sides of the Atlantic for the 2009 CUSE Annual Conference to address these issues. Panelists will examine the prospect of engagement with Iran and Russia, and how to deal with groups such as Hamas and the Taliban. After each panel, participants will take audience questions.

Transcript

• Uncorrected Transcript (.pdf)

Event Materials

• 20090529_cuse

       

       

       

As the income inequality discussion continues to simmer across the country, municipal minimum wage ordinances have become hot topics of conversation in many cities. In January 2016, Seattle will implement its second step-up in the local minimum wage in 9 months, reaching $13 for many employers in the city and edging closer to a $15 an hour minimum that will apply to most firms by 2019. San Francisco will reach a $15 an hour minimum by July 2018. Yet cities as diverse as Birmingham, Chicago, Los Angeles, and Louisville have enacted or proposed similar minimum wage laws. It is too early to discern true impact of these local wage ordinances, but speculation abounds regarding whether or how the higher wage will affect firms and the earnings of low-wage workers.

Less prominent in debate and discussion about the minimum wage is the potential impact that higher minimum wage rates may have for nonprofit organizations. Nonprofits perform many critical functions in our communities—often serving the most at-risk and disadvantaged. Yet, fiscal constraints often place a low ceiling on what many nonprofits can pay frontline staff. As a result, many different types of nonprofit organizations—child care centers, home health care organizations, senior care providers—pay staff at rates near or below the targets set by the recent crop of local minimum wage laws. Our popular image of a minimum wage worker is the teen-age cashier at a drive-through window or the sales clerk at a retail store in the local strip mall, but many workers in these “helping professions” are being paid low wages.

Increases in the minimum wage are occurring at the same time that many nonprofit service organizations are confronted with fixed or declining revenue streams. Facing fiscal pressure, nonprofit service organizations may pursue one or more coping strategies. In addition to reductions in staffing or hours, commonly expected responses, nonprofits may cut back services offered, scale back service areas, or favor clients that can afford higher fees.

Such responses could reduce the amount and quality of the services provided to vulnerable populations. For example, elderly populations on fixed incomes may have fewer options for home care. Working poor parents may find higher child care costs prohibitively expensive. Employment service organizations may find it harder to place hard-to-serve jobseekers in jobs due to more competitive applicant pools.

At the same time, higher minimum wages could have positive consequences for nonprofit staffing and capacity. Higher wages could reduce employee turnover and increase staff morale and productivity. Organizations may not have to grapple with the contradiction of serving low-income persons, but paying modest wages.

The most recent set of wage ordinances take cities to unknown territory. Anticipating potential negative effects, Chicago has exempted individuals in subsidized employment programs from its recent minimum wage ordinance. The city of Seattle has set aside funds to help nonprofits meet the higher local minimum wage, but many nonprofit funding streams are beyond the city’s control and are not seeing similar adjustments.

In the coming years, more research on how local nonprofits are affected by local minimum wage laws needs to occur. We should expect there to be a mix of positive and negative effects within a particular nonprofit organization and across different types of organizations. Nonprofit organizations should be engaged as stakeholders in debates around higher local minimum wages. And, nonprofits should actively engage in research efforts to document the impact of higher wages. In particular, nonprofits should work to compile data that can compare staffing, service delivery, and program outcomes before and after wage laws phase-in. Such data could provide important insight into the impact of local wage ordinances.

We also should be careful not to confuse other challenges confronting the nonprofit sector with the impact of higher minimum wages. For example, private philanthropy to human service nonprofits has failed to keep up with rising need and declining public sector revenue streams in most communities—realities that may pose more serious challenges than minimum wage laws, but ones without an obvious scapegoat.

In the end, ongoing debate around local minimum wage ordinances should provide us with the opportunity to re-examine how we support community-based nonprofits as a society and assess whether that support fits with all that we expect the nonprofit sector to accomplish for children and families in our communities. 

      

The rise of SuperPACs, the decision in Citizens United, and intensified polarization in Congress has ignited a flame under the already robust academic debate over the role of money in elections. Last week, Lee Drutman wrote an article for Vox outlining the recent contribution of Raymond J. La Raja and Brian Schaffner made to the debate with their book, Campaign Finance and Political Polarization: When Purists Prevail.

The crux of the book argues that allowing political parties to control more money, not less, is the key to reducing polarization. This runs counter to many pro-reform writings, focused chiefly on empowering small donors in order to counter big-money politics. La Raja and Schaffner counter this narrative, suggesting parties channel money to create moderation, rather than small donors, which are polarizing.

Drutman pushes back on both accounts by taking issue with some of the underlying assumptions in When Purists Prevail, including the weight they place on median voter theory and the extent parties will spend money on moderate candidates in primary elections. He marshals a host of recent research to support the critique, including: a recent Brookings paper on the strength of political parties, data on the power of outside money in congressional elections, and research showing moderate districts do not necessarily produce moderate candidates.

Click here to read the full article on Vox.

       

      

In his state of the union and his budget, the President spoke of the stagnation of middle class incomes. Whatever growth we have had has not been broadly shared.  More than 78% of the growth in GDP between 1979 and 2013 has gone to the top one percent. Even Republicans are beginning to worry about this issue although they have yet to develop concrete proposals to address it.

Slow Growth in Incomes

Middle class incomes were growing slowly before the recession and have actually declined over the past decade.   In addition, according to the New York Times, the proportion of the population with incomes between $35,000 and $100,000 in inflation-adjusted terms fell from 53% in 1967 to 43% in 2013.  During the first four decades this was primarily because more people were moving into higher income groups, but more recently it was because they have moved down the ladder, not up.  One can define the middle class in many different ways or torture the data in various ways, but there is plenty of evidence that we have a problem.

What to Do

The most promising approach is what I call “the second earner solution.”  For many decades now, the labor force participation rate of prime age men has been falling while that of women has been rising.  The entry of so many women into the labor force was the major force propelling whatever growth in middle class incomes occurred up until about 2000. That growth in women’s work has now levelled off.  Getting it back on an upward track would do more than any policy I can think of to help the middle class.

Imagine a household with one earner making the average wage of today’s worker and spending full-time in the job market.  That household will have an income of around $34,000. But if he (or she) has a spouse making a similar amount, the household’s income will double to $68,000. That is why the President’s focus on a second-earner credit of $500, a tripling of the child care tax credit, expanding the Earned Income Tax Credit, and providing paid leave are so important. These policies are all pro-work and research shows they would increase employment.

No Marriage = No Second Earner

One problem, of course, is that fewer and fewer households contain two potential workers.  So it would also help to bring back marriage or at least its first cousin, a stable cohabiting relationship.  My ideas on this front are spelled out in my new book, Generation Unbound. In a nutshell, we need to empower women to not have children before they have found a committed partner with whom to raise children in a stable, two-parent family. Whatever the other benefits of two parents, they have twice as much time and potentially twice as much income.    

Other Needed Responses

Shouldn’t we also worry about the wages or the employment of men?  Of course.  But an increase in, say, the minimum wage or a better collective bargaining environment or more job training will have far smaller effects than “the second earner solution.”  In addition, the decline in male employment is related to still more difficult problems such as high rates of incarceration and the failure of men to take advantage of postsecondary education as much as women have. 

Still the two-earner solution should not be pursued in isolation. In the short-term, a stronger recovery from the recession is needed and in the longer-term, more effective investments in education, research, infrastructure, and in labor market institutions that produce more widely-shared growth, as argued by the Commission on Inclusive Prosperity. But do we really expect families to wait for these long-term policies to pay off?  It could be decades. 

In the meantime, the President’s proposals to make work more appealing to existing or potential second earners deserves more attention.  

      

Executive Summary

At the invitation of President George W. Bush, the G20 leaders met on November 15, 2008, in Washington, DC, in response to the worldwide financial and economic crisis. With this summit meeting the reality of global governance shifted surprisingly quickly. Previously, major global economic, social and environmental issues were debated in the small, increasingly unrepresentative and often times ineffectual circle of G8 leaders. Now, there is a larger, much more legitimate summit group which can speak for over two-thirds of the world’s population and controls 90% of the world’s economy.

The successful first G20 Summit provides a platform on which President-elect Obama can build in forging an inclusive and cooperative approach for resolving the current financial and economic crisis. Rather than get embroiled in a debate about which country is in and which country is out of the summit, the new U.S. administration should take a lead in accepting the new summit framework for now and focus on the substantive issues. Aside from tackling the current crisis, future G20 summits should also drive the reform of the international financial institutions and address other major global concerns—climate change, poverty and health, and energy among others. With its diverse and representative membership of key countries and with a well-managed process of summit preparation and follow-up the new G20 governance structure would allow for a more inclusive deliberation and more effective response to today’s complex global challenges and opportunities.

Policy Brief #168

A Successful G20 Summit—A Giant Step Forward

Once announced, there was speculation that the G20 Summit would be at best a distraction and at worst a costly failure, with a lame duck U.S. president hobbled by a crisis-wracked economy and a president-elect impotently waiting at the sidelines, with European leaders bickering over seemingly arcane matters, and with the leaders of the emerging economies sitting on the fence, unwilling or unprepared to take responsibility for fixing problems not of their making.

As it turned out, the first G20 Summit was by most standards a success. It served as a platform for heads of state to address the current financial turmoil and the threats of the emerging economic crisis facing not only the U.S. and Europeans, but increasingly also the rest of the world. The communiqué unmistakably attributes blame for the crisis where it belongs—to the advanced countries. It lays out a set of principles and priorities for crisis management and an action plan for the next four months and beyond, and it promises to address the longer-term agenda of reform of the global financial system. Very importantly, it also commits the leaders to meet again in April 2009 under the G20 umbrella. This assures that the November G20 Summit was not a one-off event, but signified the beginning of a new way of managing the world economy. The U.S. Treasury, which apparently drove the decision to hold the G20 rather than a G8 summit and which led the brief preparation process, deserves credit for this outcome.

A Long Debate over Global Governance Reform Short-circuited

With this successful summit a number of unresolved issues in global governance were pushed aside virtually overnight:

• The embarrassing efforts of past G8 summits to reach out to the leaders of emerging market economies with ad hoc invitations to join as part-time guests or through the well-meaning expedient of the “Heiligendamm Process”—under which a G8+5 process was to be institutionalized—were overtaken by the fact of the G20 summit.
• A seemingly endless debate among experts about what is the optimal size and composition for an expanded summit—G13, G14, G16, G20, etc. —was pragmatically resolved by accepting the format of the already existing G20 of finance ministers and central bank presidents, which has functioned well since 1999. With this, the Pandora’s Box of country selection remained mercifully closed. This is a major accomplishment, which is vitally important to preserve at this time.
• The idea of a “League of Democracies” as an alternative to the G8 and G20 summits, which had been debated in the U.S. election, was pushed aside by the hard reality of a financial crisis that made it clear that all the key economic players had to sit at the table, irrespective of political regime.
• Finally, the debate about whether the leaders of the industrial world would ever be willing to sit down with their peers from the emerging market economies as equals was short circuited by the picture of the U.S. president at lunch during the G20 Summit, flanked by the presidents of two of the major emerging economies, Brazil and China. This photograph perhaps best defines the new reality of global governance in the 21st Century.

Is the G20 Summit Here to Stay?

The communiqué of the November 15, 2008 Summit locked in the next G20 summit and hence ordained a sequel that appears to have enshrined the G20 as the new format to address the current global financial and economic crisis over the coming months and perhaps years. Much, of course, depends on the views of the new U.S. administration, but the November 2008 Summit has paved the way for President Obama and his team to move swiftly beyond the traditional G8 and to continue the G20 format.

In principle there is nothing wrong with exploring options for further change. However at this juncture, we strongly believe that it is best for the new U.S. administration to focus its attention on making the G20 summit format work, in terms of its ability to address the immediate crisis, and in terms of subsequently dealing with other pressing problems, such as global warming and global poverty. There may be a need to fine-tune size and composition, but more fundamental changes, in our view, can and should wait for later since arguments about composition and size—who is in and who is out—could quickly overwhelm a serious discussion of pressing substantive issues. Instead, the next G20 Summit in the United Kingdom on April 2, 2009 should stay with the standard G20 membership and get on with the important business of solving the world’s huge financial and economic problems.

One change, however, would be desirable: At the Washington Summit in November 2008 two representatives for each country were seated at the table, usually the country’s leader and finance minister. There may have been good reasons for this practice under the current circumstances, since leaders may have felt more comfortable with having the experts at their side during intense discussions of how to respond to the financial and economic crisis. In general, however, a table of 40 chairs undoubtedly is less conducive to an open and informal discussion than a table half that size. From our experience, a table of 20 can support a solid debate as long as the format is one of open give and take, rather than a delivery of scripted speeches. This is not the case for a table with 40 participants. The G8 format of leaders only at the table, with prior preparation by ministers who do not then participate in the leaders level summits, should definitely be preserved. To do otherwise would dilute the opportunity for informal discussion among leaders, which is the vital core of summit dynamics.

What Will Happen to the G8 Summit and to the G7 and G20 Meetings of Finance Ministers?

As the world’s financial storm gathered speed and intensity in recent months, the inadequacy of the traditional forums of industrial countries—the G8 group of leaders and the G7 group of finance ministers—became obvious. Does this mean that the G8 and G7 are a matter of the past? Most likely not. We would expect these forums to continue to meet for some time to come, playing a role as caucus for industrial countries. In any event, the G20 finance ministers will take on an enhanced role, since it will be the forum at which minister-level experts will lay the ground on key issues of global financial and economic management to ensure that they are effectively addressed at summit level by their leaders. The G20 Summit of November 15 was prepared by a meeting of G20 finance ministers in this fashion.

It may well be that the dynamics of interactions within the G20 will cause coalitions to be formed, shifting over time as issues and interests change. This could at times and on some issues involve a coalition of traditional G7 members. However, with increasing frequency, we would expect that some industrial countries would temporarily team-up with emerging market country members, for example on agricultural trade policies, where a coalition of Argentina, Australia, Brazil and Canada might align itself to challenge the agricultural protection policies of Europe, Japan and the United States. Or in the area of energy, a coalition among producer states, such as Indonesia, Mexico, Russia and Saudi Arabia might debate the merits of a stable energy supply and demand regime with an alliance among energy users, such as China, Europe, Japan, South Africa and the United States. It is this potential for multiple, overlapping and shifting alliances, which creates the opportunities for building trust, forcing trade-offs and forging cross-issue compromises that makes the G20 summit such an exciting opportunity.

What Should Be the Agenda of Future G20 Summits?

The communiqué of the November 2008 G20 Summit identified three main agenda items for the April 2009 follow-up summit: (1) A list of key issues for the containment of the current global financial and economic crisis; (2) a set of issues for the prevention of future global financial crises, including the reform of the international financial institutions, especially the IMF and World Bank; and (3) a push toward the successful conclusion of the Doha Round of WTO trade negotiations.

The first item is obviously a critical one if the G20 is to demonstrate its ability to help address the current crisis in a meaningful way. The second item is also important and timely. The experience with reform of the global financial institutions in the last few years has demonstrated that serious governance changes in these institutions will have to be driven by a summit-level group that is as inclusive as the G20. We would hope that Prime Minister Gordon Brown, as chair—with his exceptional economic expertise and experience in the international institutions, especially the IMF—will be able to forge a consensus at the April 2 summit in regard to reform of the international financial institutions. The third agenda item is also important, since the Doha Round is at a critical stage and its successful conclusion would send a powerful signal that the world community recognizes the importance of open trade relations in a time of crisis, when the natural tendency may be to revert to a protectionist stance.

However, we believe three additional topics should be added to the agenda for the April 2009 G20 Summit:

• First, there should be an explicit commitment to make the G20 forum a long-term feature of global governance, even as the group may wish to note that its size and composition is not written in stone, but subject to change as circumstances change.
• Second, the communiqué of the November summit stated that the G20 countries are “committed to addressing other critical challenges such as energy security and climate change, food security, the rule of law, and the fight against terrorism, poverty and disease”. This needs to be acted upon. These issues cannot be left off the table, even as the global financial and economic crisis rages. If anything, the crisis reinforces some of the key challenges which arise in these other areas and offers opportunities for a timely response. The U.K.-hosted summit should launch a G20 initiative to develop framework ideas for the post-Kyoto climate change agreement at Copenhagen.
• Third, assuming the April 2009 summit commits itself—as it should—to a continuation of the G20 summit format into the future, it must begin to address the question of how the summit process should be managed. We explore some of the possible options next.

How Should the G20 Summit Process Be Managed?

So far the G7, G8 and G20 forums have been supported by a loose organizational infrastructure. For each group the country holding the rotating year-long presidency of the forum takes over the secretariat function while a team of senior officials (the so-called “sherpas”) from each country meets during the course of the year to prepare the agenda and the communiqué for leaders and ministers. This organization has the advantage of avoiding a costly and rigid bureaucracy. It also fosters a growing level of trust and mutual understanding among the sherpas.

The problem with this approach has been two-fold: First, it led to discontinuities in focus and organization and in the monitoring of implementation. For the G20 of finance ministers, this problem was addressed in part by the introduction of a “troika” system, under with the immediate past and future G20 presidencies would work systematically with the current G20 presidency to shape the agenda and manage the preparation process. Second, particularly for the countries in the G20 with lesser administrative capacity, the responsibility for running the secretariat for a year during their country’s presidency imposed a heavy burden.

For the G20 summit, these problems will be amplified, not least because these summits will require first-rate preparation for very visible and high-level events. In addition, as the agenda of the G20 summit broadens over time, the burden of preparing a consistent multi-year agenda based on strong technical work will be such that it cannot be effectively handled when passed on year to year from one secretariat in one country to another secretariat in another country, especially when multiple ministries have to be engaged in each country. It is for this reason that the time may have come to explore setting up a very small permanent secretariat in support of the G20 summit.

The secretariat should only provide technical and logistical support for the political leadership of the troika of presidencies and for the sherpa process, but should not run the summit. That is the job of the host member governments. They must continue to run the summits, lead the preparations and drive the follow-up. The troika process will help strengthen the capacity of national governments to shoulder these burdens. Summits are the creatures of national government authorities where they have primacy, and this must remain so, even as the new summits become larger, more complex and more important.

Implications for the Obama Administration

The November 2008 G20 Summit opened a welcome and long-overdue opportunity for a dramatic and lasting change in global governance. It will be critical that the leaders of the G20 countries make the most of this opportunity at the next G20 Summit on April 2. The presence of U.S. President Obama will be a powerful signal that the United States is ready to push and where necessary lead the movement for global change. President-elect Obama’s vision of inclusion and openness and his approach to governing, which favors innovative and far-reaching pragmatic responses to key national and global challenges, make him a great candidate for this role.

We would hope that President Obama would make clear early on that:

• He supports the G20 summit as the appropriate apex institution of global governance for now;
• He may wish to discuss how to fine-tune the summit’s composition for enhanced credibility and effectiveness but without fundamentally questioning the G20 framework;
• He supports cooperative solutions to the current financial crisis along with a serious restructuring of the global financial institutions;
• He will look to the G20 summit as the right forum to address other pressing global issues, such as climate change, energy, poverty and health; and
• He is ready to explore an innovative approach to effectively manage the G20 summit process.

These steps would help ensure that the great promise of the November 2008 G20 Summit is translated into a deep and essential change in global governance. This change will allow the world to move from a governance system that continues to be dominated by the transatlantic powers of the 20th century to one which reflects the fundamentally different global economic and political realities of the 21st century. It would usher in a framework of deliberation, consultation and decision making that would make it possible to address the great global challenges and opportunities that we face today in a more effective and legitimate manner.

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Policy Brief #172

Why Institutions Matter

When experts and pundits are asked what the president and Congress should do to promote economic growth, they typically respond with a list of policies, often mixed with stylistic and political suggestions. Few focus on institutional change, which is too easy to conflate with yawn-inducing “governmental reorganization.”

This neglect of institutions is always a mistake, never more than in times of crisis. Throughout American history, profound challenges have summoned bursts of institutional creativity, with enduring effects. The dangerous inadequacies of the Articles of Confederation set the stage for a new Constitution. The Civil War resulted in three amendments that resolved—at least in principle—our founding ambivalence between the people and the states as the source of national authority, between the states and the nation as the locus of citizenship, and between slavery and the equality the Declaration of Independence had proclaimed and promised. Similarly, the Federal Reserve Board, Bretton Woods international economic system, Department of Defense, National Security Council, CIA, Congressional Budget Office and Department of Homeland Security all arose through changes occasioned by great challenges to the nation.

Today’s economic crisis is reflected in three distinct but linked deficits—the fiscal deficit, the savings deficit and the investment deficit. Meeting these challenges and laying the foundation for sustained economic growth will require institutional as well as policy changes. 

	RECOMMENDATIONS
	Today’s economic crisis is characterized by three distinct but linked deficits—the fiscal deficit, the savings deficit and the investment deficit. Meeting these challenges and laying the foundation for sustained economic growth will require institutional as well as policy changes. The following institution-based recommendations would help the nation meet the current economic crisis and could help prevent future crises of similar destructiveness. To promote fiscal sustainability, change longterm budget procedures and create empowered commissions—answerable to Congress but largely insulated from day-to-day politics. To boost savings, consider new mandatory individual retirement accounts as a supplement to Social Security. To improve public investment, create a National Infrastructure Bank with public seed capital—this entity would mobilize private investment and force proposed projects to pass rigorous cost-benefit analysis as well as a market test. Today’s polarized political system is an obstacle to reform in every area, including the economy. A multi-year collaboration between Brookings and the Hoover Institution produced a series of suggestions. At least two of those suggestions are worth adopting: Alter redistricting authority, so state legislatures can no longer practice gerrymandering. Experiment, in a few willing states, with compulsory voting—to move politicians away from the red-meat politics of appealing only to their bases, which now dominate elections, and toward a more moderate and consensual politics.

Institutional reform

Promoting fiscal sustainability

Setting the federal budget on a sustainable course is an enormous challenge. If we do nothing, we will add an average of nearly $1 trillion to the national debt every year between now and 2020, raising the debt/ GDP ratio to a level not seen since the early 1950s and sending the annual cost of servicing the debt sky-high. Restoring pay-as-you-go budgeting and putting some teeth in it are a start, but not nearly enough. We need radical changes in rules and procedures.

One option, recently proposed by a bipartisan group that includes three former directors of the Congressional Budget Office, would change the giant entitlement programs: Social Security, Medicare and Medicaid. The new rules would require a review every five years to determine whether projected revenues and outlays are in balance. If not, Congress would be required to restore balance through dedicated revenue increases, benefits cuts or a combination. After a financial crisis in the early 1990s, Sweden introduced a variant of this plan, which has worked reasonably well.A number of Brookings scholars—including Henry Aaron, Gary Burtless, William Gale, Alice Rivlin and Isabel Sawhill—have suggested a Value Added Tax (VAT) as part of a program of fiscal and tax reform. Burtless offers an intriguing proposal that would link a VAT to health care finance. Revenue from the VAT would be dedicated to—and would cover—the federal share of health care programs. If the federal cost rises faster than proceeds from the VAT, Congress would have to either raise the VAT rate or cut back programs to fit the flow of funds. The system would become much more transparent and accountable: because the VAT rate would appear on every purchase, citizens could see for themselves the cost of federal support for health care, and they could tell their representatives what balance they prefer between increased rates and reduced health care funding.

Another option draws on the experience of the Base Realignment and Closure Commission, which enables the military to surmount NIMBY politics and shut down unneeded bases. The basic idea is straightforward: once the independent commission settles on a list of proposed closures, Congress has the option of voting it up or down without amendment. A similar idea undergirds the president’s “fast-track” authority to negotiate proposed trade treaties, which Congress can reject but cannot modify.

Suitably adapted, this concept could help break longstanding fiscal logjams. Here is one way it might work. Independent commissions with members from both political parties could submit proposals in designated areas of fiscal policy. To increase bipartisan appeal, each proposal would require a super-majority of the commission. In the House and Senate, both the majority and the minority would have the opportunity to offer only a single amendment. This strategy of “empowered commissions” changes the incentive structure in Congress, reducing negative logrolling to undermine the prospects of proposals that would otherwise gain majority support.

Empowered commissions represent a broader strategy—using institutional design to insulate certain activities from regular and direct political pressure. For example, the Constitution mandates that federal judges, once confirmed, hold office during “good behavior” and receive salaries that Congress may not reduce during their term of service. (By contrast, many states subject judges to regular election and possible recall.) In another striking example, members of the Board of Governors of the Federal Reserve Board are appointed to 14-year non-renewable terms, limiting the ability of the executive branch to change its membership rapidly and removing governors’ incentives to trim their policy sails in hopes of reappointment. Additionally, action by neither the president nor any other entity in the executive branch is required to implement the Fed’s decisions, and Fed chairmen have been known to take steps that vex the Oval Office.

This strategy is controversial. Officials with populist leanings often argue that fundamental decisions affecting the economy should be made through transparent democratic processes. The counterargument: experience dating back to the founding of the republic suggests that when interest rates and the money supply are set at the whim of transient majorities, economic growth and stability are at risk.

Boosting savings

An adequate supply of capital is a precondition of long-term economic growth, and household saving is an important source of capital. During the 1960s, U.S. households saved 12 percent of their income; as recently as the 1980s, that figure stood at 8 percent. By 2005–2006, the savings rate dipped into negative territory, and today it stands at a meager 3 percent. In recent years, funds from abroad—principally Asia— filled the capital gap. But evidence is accumulating that foreign governments have reached the limit of their appetite (or tolerance) for U.S. debt. To avert a capital shortage and soaring interest rates, which would choke off growth, we must boost private savings as we reduce public deficits.

For a long time, tax incentives for saving have been the tool of choice. But as evidence mounts that these incentives are less effective than hoped, policy experts are turning to alternatives. One rests on a key finding of behavioral economics: default settings have a large impact on individual conduct and collective outcomes. If you require people to opt in to enter a program, such as 401(k) retirement plans, even a modest inconvenience will deter many of them from participating. But if you reverse the procedure— automatically enrolling them unless they affirmatively opt out—you can boost participation.

To achieve an adequate rate of private saving, we may need to go even further. One option is a mandatory retirement savings program to supplement Social Security. Workers would be required to set aside a fixed percentage of earnings and invest them in generic funds—equities, public debt, private debt, real estate, commodities and cash. For those who fail to designate a percentage allocation for each fund, a default program would take effect. (Participants always would have the option of regaining control.) As workers near retirement age, their holdings would be automatically rebalanced in a more conservative direction. One version of this proposal calls for “progressive matching,” in which low-earning individuals receive a subsidy equal to half their payroll contributions; those making more would get a smaller match along a sliding scale, and those at the top would receive no match at all.

This strategy requires careful institutional and programmatic design. To ensure maximum benefits to wage earners, the private sector would be allowed to offer only funds with very low costs and fees. To ensure that the program actually boosts net savings, individuals would be prohibited from withdrawing funds from their accounts prior to retirement; except in emergencies, they would not be allowed to borrow against their accounts; and they would be prohibited from using them as collateral. And a clear line would be drawn to prevent government interference in the private sector: while government-administered automatic default investments would be permitted, government officials could not direct the flow of capital to specific firms.

Improving public investment

The investment deficit has a public face as well. Since the early 19th century, government has financed and helped build major infrastructure projects—roads, bridges, ports and canals, among others, have spurred economic growth and opened new domestic and international markets. Recently, however, public infrastructure investment has fallen well short of national needs, and often has been poorly targeted. Americans travelling and working abroad are noticing that U.S. infrastructure is falling behind not only advanced countries’ but rapidly developing countries’ as well. A study by Emilia Istrate and Robert Puentes of Brookings’s Metropolitan Policy Program, presented in a December 2009 report entitled “Investing for Success,” documents three key shortcomings of federal infrastructure investment: it lacks long-term planning, fails to provide adequately for maintenance costs, and suffers from a flawed project selection process as benefits are not weighed rigorously against costs.

Istrate and Puentes explore several strategies for correcting these deficiencies. One of the most promising is a National Infrastructure Bank (NIB), to require benefit-cost analyses of proposed projects, break down financial barriers between related types of investment (facilitating inter-modal transportation, for example), and improve coordination across jurisdictional lines. The NIB could be funded through a modest initial infusion of federal capital designed to attract private capital. Projects receiving loans from the NIB would have to provide for depreciation and document the sources of funds to repay the face amount of each loan, plus interest. In short, the NIB would be more than a conduit for the flow of federal funds; it would function as a real bank, imposing market discipline on projects and making infrastructure investments attractive to private capital, partly by providing flexible subordinated debt.

Istrate and Puentes identify diverse problems that designers of an NIB would confront. Insulating the selection process from political interference would pose serious difficulties, as would providing federal seed capital without increasing the federal deficit and debt. Requiring the repayment of loans could skew project awards away from projects that cannot easily charge user fees—wastewater and environmental infrastructure projects, for example. Despite these challenges, a properly designed bank could increase the quantity of infrastructure investment while improving its effectiveness, reducing bottlenecks and promoting economic efficiency. The potential benefits for long-term growth would be considerable.

Creating the Political Conditions for Reform

The rise of political polarization in recent decades has made effective action much more difficult for the U.S. government. Polarization has impeded efforts to enact even the progrowth reforms sketched in this paper. A multiyear collaboration between the Brookings and Hoover Institutions—resulting in a two-volume report, Red and Blue Nation?, with Volume One published in 2006 and Volume Two in 2008— has mapped the scope of the phenomenon. This effort has shown that, while political elites are more sharply divided than citizens in general, citizens are more likely now to place themselves at the ends of the ideological spectrum than they were as recently as the 1980s. With a smaller political center to work with, even leaders committed to bipartisan compromise have been stymied. The fate of President Bush’s 2005 Social Security proposal illustrates the difficulty of addressing tough issues in these circumstances.

It might seem that the only cure for polarization is a shift of public sentiment back toward moderation. The Brookings-Hoover project found, however, that changes in institutional design could reduce polarization and might, over time, lower the partisan temperature. Here are two ideas, culled from a much longer list.

Congressional redistricting

While population flows account for much of the growth in safe seats dominated by strong partisans, recent studies indicate that gerrymanders account for 10 to 36 percent of the reduction in competitive congressional districts since 1982. This is not a trivial effect.

Few Western democracies draw up their parliamentary districts in so patently politicized a fashion as do U.S. state legislatures. Parliamentary electoral commissions, operating independently and charged with making reasonably objective determinations, are the preferred model abroad.

Given the Supreme Court’s reluctance to enter the thicket of redistricting controversies, any changes will be up to state governments. In recent years, voter initiatives and referenda in four states—Washington, Idaho, Alaska and Arizona—have established nonpartisan or bipartisan redistricting commissions. These commissions struggle with a complicated riddle: how to enhance competitiveness while respecting other parameters, such as geographic compactness, jurisdictional boundaries, and the desire to consolidate “communities of interest.” Iowa’s approach, where a nonpartisan legislative staff has the last word, is often cited as a model but may be hard to export to states with more demographic diversity and complex political cultures. Arizona has managed to fashion some workable, empirically based standards that are yielding more heterogeneous districts and more competitive elections.

Incentives to participate

Another depolarizing reform would promote the participation of less ideologically committed voters in the electoral process. Some observers do not view the asymmetric power of passionate partisans in U.S. elections as a cause for concern: Why shouldn’t political decisions be made by the citizens who care most about them? Aren’t those who care also better informed? And isn’t their intensive involvement an indication that the outcome of the election affects their interests more than it affects the interests of the non-voters? While this argument has surface plausibility, it is not compelling. Although passionate partisanship infuses the system with energy, it erects road-blocks to problem-solving. Many committed partisans prefer gridlock to compromise, and gridlock is no formula for effective governance.

To broaden the political participation of less partisan citizens, who tend to be more weakly connected to the political system, several major democracies have made voting mandatory. Australia, for one, has compulsory voting; it sets small fines for non-voting that escalate for recidivism, with remarkable results. The turnout rate in Australia tops 95 percent, and citizens regard voting as a civic obligation. Near-universal voting raises the possibility that a bulge of casual voters, with little understanding of the issues and candidates, can muddy the waters by voting on non-substantive criteria, such as the order in which candidates’ names appear on the ballot. The inevitable presence of some such “donkey voters,” as they are called in Australia, does not appear to have badly marred the democratic process in that country.

Indeed, the civic benefits of higher turnouts appear to outweigh the “donkey” effect. Candidates for the Australian Parliament have gained an added incentive to appeal broadly beyond their partisan bases. One wonders whether members of Congress here in the United States, if subjected to wider suffrage, might also spend less time transfixed by symbolic issues that are primarily objects of partisan fascination, and more time coming to terms with the nation’s larger needs. At least campaigns continually tossing red meat to the party faithful might become a little less pervasive.

The United States is not Australia, of course. Although both are federal systems, the U.S. Constitution confers on state governments much more extensive control over voting procedures. While it might not be flatly unconstitutional to mandate voting nationwide, it would surely chafe with American custom and provoke opposition in many states. Federalism American-style also has some unique advantages, including its tradition of using states as “laboratories of democracy” that test reform proposals before they are elevated to consideration at the national level. If a few states experiment with compulsory voting and demonstrate its democracy- enriching potential, they might, in this way, smooth the path to national consideration.  

Conclusion

In challenging times, political leaders undertake institutional reform, not because they want to, but because they must. Our own era—a period of profound economic crisis—is no exception. Even in circumstances of deep political polarization, both political parties have accepted the need to restructure our system of financial regulation.

As well, recognition is growing that we face three key challenges—a fiscal deficit, a savings deficit and an investment deficit—that have eluded control by existing institutions and, unless checked, will impede long-term economic growth. The question is whether we will be able to adopt the needed changes in an atmosphere of reflection and deliberation, or whether we will delay until a worse crisis compels us to act.

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Policy Brief #173

America needs to transform its energy system, and the Great Lakes region (including Minnesota, Wisconsin, Iowa, Missouri, Illinois, Indiana, Ohio, Michigan, Kentucky, West Virginia, western Pennsylvania and western New York) possesses many of the needed innovation assets. For that reason, the federal government should leverage this troubled region’s research and engineering strengths by launching a region-wide network of collaborative, high intensity energy research and innovation centers.

Currently, U.S. energy innovation efforts remain insufficient to ensure the development and deployment of clean energy technologies and processes. Such deployment is impeded by multiple market problems that lead private firms to under-invest and to focus on short-term, low-risk research and product development. Federal energy efforts—let alone state and local ones—remain too small and too poorly organized to deliver the needed breakthroughs. A new approach is essential.

	RECOMMENDATIONS
	The federal government should systematically accelerate national clean energy innovation by launching a series of “themed” research and commercialization centers strategically situated to draw on the Midwest’s rich complex of strong public universities, national and corporate research laboratories, and top-flight science and engineering talent. Organized around existing capacities in a hub-spoke structure that links fundamental science with innovation and commercialization, these research centers would engage universities, industries and labs to work on specific issues that would enable rapid deployment of new technologies to the marketplace. Along the way, they might well begin to transform a struggling region’s ailing economy. Roughly six compelling innovation centers could reasonably be organized in the Great Lakes states with total annual funding between $1 billion and $2 billion. To achieve this broad goal, the federal government should: Increase energy research funding overall. Adopt more comprehensive approaches to research and development (R&D) that address and link multiple aspects of a specific problem, such as transportation. Leverage existing regional research, workforce, entrepreneurial and industrial assets.

America needs to transform its energy system in order to create a more competitive “next economy” that is at once export-oriented, lower-carbon and innovation-driven. Meanwhile, the Great Lakes region possesses what may be the nation’s richest complex of innovation strengths—research universities, national and corporate research labs, and top-flight science and engineering talent. Given those realities, a partnership should be forged between the nation’s needs and a struggling region’s assets.

To that end, we propose that the federal government launch a distributed network of federally funded, commercialization-oriented, sustainable energy research and innovation centers, to be located in the Great Lakes region. These regional centers would combine aspects of the “discovery innovation institutes” proposed by the National Academy of Engineering and the Metropolitan Policy Program (as articulated in “Energy Discovery-Innovation Institutes: A Step toward America’s Energy Sustainability”); the “energy innovation hubs” created by the Department of Energy (DOE); and the agricultural experiment station/cooperative extension model of the land-grant universities.

In the spirit of the earlier land-grant paradigm, this network would involve the region’s research universities and national labs and engage strong participation by industry, entrepreneurs and investors, as well as by state and local governments. In response to local needs and capacities, each center could have a different theme, though all would conduct the kinds of focused translational research necessary to move fundamental scientific discoveries toward commercialization and deployment.

The impact could be transformational. If built out, university-industry-government partnerships would emerge at an unprecedented scale. At a minimum, populating auto country with an array of breakthrough-seeking, high-intensity research centers would stage a useful experiment in linking national leadership and local capacities to lead the region—and the nation—toward a more prosperous future.

The Great Lakes Energy System: Predicaments and Possibilities

The Great Lakes region lies at the center of the nation’s industrial and energy system trials and possibilities. No region has suffered more from the struggles of America’s manufacturing sector and faltering auto and steel industries, as indicated in a new Metropolitan Policy Program report entitled “The Next Economy: Rebuilding Auto Communities and Older Industrial Metros in the Great Lakes Region.”

The region also lies at ground zero of the nation’s need to “green” U.S. industry to boost national economic competitiveness, tackle climate change and improve energy security. Heavily invested in manufacturing metals, chemicals, glass and automobiles, as well as in petroleum refining, the Great Lakes states account for nearly one-third of all U.S. industrial carbon emissions.

And yet, the Great Lakes region possesses significant assets and capacities that hold promise for regional renewal as the “next economy” comes into view. The Midwest’s manufacturing communities retain the strong educational and medical institutions, advanced manufacturing prowess, skills base and other assets essential to helping the nation move toward and successfully compete in the 21st century’s export-oriented, lower-carbon, innovation-fueled economy.

Most notably, the region has an impressive array of innovation-related strengths in the one field essential to our nation’s future—energy. These include:

• Recognized leadership in R&D. The Great Lakes region accounts for 33 percent of all academic and 30 percent of all industry R&D performed in the United States.
• Strength and specialization in energy, science and engineering. In FY 2006, the Department of Energy sent 26 percent of its federal R&D obligations to the Great Lakes states and is the second largest federal funder of industrial R&D in the region. Also in 2006, the National Science Foundation sent 30 percent of its R&D obligations there.
• Existing clean energy research investments and assets. The University of Illinois is a key research partner in the BP-funded, $500 million Energy Biosciences Institute, which aims to prototype new plants as alternative fuel sources. Toledo already boasts a growing solar industry cluster; Dow Corning’s Michigan facilities produce leading silicon and silicone-based technology innovations; and the Solar Energy Laboratory at the University of Wisconsin-Madison, the oldest of its kind in the world, has significant proficiency in developing practical uses for solar energy. Finally, the region is home to the largest U.S. nuclear utility (Exelon), the nation’s largest concentration of nuclear plants and some of the country’s leading university programs in nuclear engineering.
• Industry potential relevant to clean energy. Given their existing technological specializations, Midwestern industries have the potential to excel in the research and manufacture of sophisticated components required for clean energy, such as those used in advanced nuclear technologies, precision wind turbines and complex photovoltaics.
• Breadth in energy innovation endeavors and resources. In addition to universities and industry, the region’s research laboratories specialize in areas of great relevance to our national energy challenges, including the work on energy storage systems and fuel and engine efficiency taking place at Argonne National Laboratory, research in high-energy physics at the Fermi National Accelerator Laboratory, and the work on bioenergy feedstocks, processing technologies and fuels occurring at the DOE-funded Great Lakes BioEnergy Research Center (GLBRC).
• Regional culture of collaboration. Finally, the universities of the Great Lakes area have a strong history of collaboration both among themselves and with industry, given their origins in the federal land-grant compact of market and social engagement. GLBRC—one of the nation’s three competitively awarded DOE Bioenergy Centers—epitomizes the region’s ability to align academia, industry and government around a single mission. Another example is the NSF-supported Blue Waters Project. This partnership between IBM and the universities and research institutions in the Great Lakes Consortium for Petascale Computation is building the world’s fastest computer for scientific work—a critical tool for advancing smart energy grids and transportation systems.

In short, the Great Lakes states and metropolitan areas—economically troubled and carbon-reliant as they are—have capabilities that could contribute to their own transformation and that of the nation, if the right policies and investments were in place.

Remaking America’s Energy System within a Federal Policy Framework

America as a whole, meanwhile, needs to overcome the massive sustainability and security challenges that plague the nation’s energy production and delivery system. Transformational innovation and commercialization will be required to address these challenges and accelerate the process of reducing the economy’s carbon intensity.

Despite the urgency of these challenges, however, a welter of market problems currently impedes decarbonization and limits innovation. First, energy prices have generally remained too low to provide incentives for companies to commit to clean and efficient energy technologies and processes over the long haul. Second, many of the benefits of longrange innovative activity accrue to parties other than those who make investments. As a result, individual firms tend to under-invest and to focus on short-term, low-risk research and product development. Third, uncertainty and lack of information about relevant market and policy conditions and the potential benefits of new energy technologies and processes may be further delaying innovation. Fourth, the innovation benefits that derive from geographically clustering related industries (which for many years worked so well for the auto industry) have yet to be fully realized for next-generation energy enterprises. Instead, these innovations often are isolated in secure laboratories. Finally, state and local governments—burdened with budgetary pressures—are not likely to fill gaps in energy innovation investment any time soon.

As a result, the research intensity—and so the innovation intensity—of the energy sector remains woefully insufficient, as pointed out in the earlier Metropolitan Policy Program paper on discovery innovation institutes. Currently, the sector devotes no more than 0.3 percent of its revenues to R&D. Such a figure lags far behind the 2.0 percent of sales committed to federal and large industrial R&D found in the health care sector, the 2.4 percent in agriculture, and the 10 percent in the information technology and pharmaceutical industries.

As to the national government’s efforts to respond to the nation’s energy research shortfalls, these remain equally inadequate. Three major problems loom:

The scale of federal energy research funding is insufficient. To begin with, the current federal appropriation of around $3 billion a year for nondefense energy-related R&D is simply too small. Such a figure remains well below the $8 billion (in real 2008 dollars) recorded in 1980, and represents less than a quarter of the 1980 level when measured as a share of GDP. If the federal government were to fund next-generation energy at the pace it supports advances in health care, national defense, or space exploration, the level of investment would be in the neighborhood of $20 billion to $30 billion a year.

Nor do the nation’s recent efforts to catalyze energy innovation appear sufficient. To be sure, the American Recovery and Reinvestment Act (ARRA) provided nearly $13 billion for DOE investments in advanced technology research and innovation. To date, Great Lakes states are slated to receive some 42 percent of all ARRA awards from the fossil energy R&D program and 39 percent from the Office of Science (a basic research agency widely regarded as critical for the nation’s energy future). However, ARRA was a one-time injection of monies that cannot sustain adequate federal energy R&D.

Relatedly, the Great Lakes region has done well in tapping two other relatively recent DOE programs: the Advanced Research Projects Agency–Energy (ARPA-E) and Energy Frontier Research Centers (EFRCs). Currently, Great Lakes states account for 44 and 50 percent of ARPA-E and EFRC funding. Yet, with ARPA-E focused solely on individual signature projects and EFRC on basic research, neither initiative has the scope to fully engage all of the region's innovation assets.

The character and format of federal energy R&D remain inadequate. Notwithstanding the question of scale, the character of U.S. energy innovation also remains inadequate. In this respect, the DOE national laboratories—which anchor the nation’s present energy research efforts—are poorly utilized resources. Many of these laboratories’ activities are fragmented and isolated from the private sector and its market, legal and social realities. This prevents them from successfully developing and deploying cost-competitive, multidisciplinary new energy technologies that can be easily adopted on a large scale.

For example, DOE activities continue to focus on discrete fuel sources (such as coal, oil, gas or nuclear), rather than on fully integrated end use approaches needed to realize affordable, reliable, sustainable energy. Siloed approaches simply do not work well when it comes to tackling the complexity of the nation’s real-world energy challenges. A perfect example of a complicated energy problem requiring an integrated end-use approach is transportation. Moving the nation’s transportation industry toward a clean energy infrastructure will require a multi-pronged, full systems approach. It will depend not only upon R&D in such technologies as alternative propulsion (biofuels, hydrogen, electrification) and vehicle design (power trains, robust materials, advanced computer controls) but also on far broader technology development, including that related to primary energy sources, electricity generation and transmission, and energy-efficient applications that ultimately will determine the economic viability of this important industry.

Federal programming fails to fully realize regional potential. Related to the structural problems of U.S. energy innovation efforts, finally, is a failure to fully tap or leverage critical preexisting assets within regions that could accelerate technology development and deployment. In the Great Lakes, for example, current federal policy does little to tie together the billions of dollars in science and engineering R&D conducted or available annually. This wealth is produced by the region’s academic institutions, all of the available private- and public-sector clean energy activities and financing, abundant natural resources in wind and biomass, and robust, pre-existing industrial platforms for research, next-generation manufacturing, and technology adoption and deployment. In this region and elsewhere, federal policy has yet to effectively connect researchers at different organizations, break down stovepipes between research and industry, bridge the commercialization “valley of death,” or establish mechanisms to bring federally-sponsored R&D to the marketplace quickly and smoothly.

A New Approach to Regional, Federally Supported Energy Research and Innovation

And so the federal government should systematically accelerate clean energy innovation by launching a series of regionally based Great Lakes research centers. Originally introduced in the Metropolitan Policy Program policy proposal for energy discovery-innovation institutes (or e-DIIs), a nationwide network of regional centers would link universities, research laboratories and industry to conduct translational R&D that at once addresses national energy sustainability priorities, while stimulating regional economies.

In the Great Lakes, specifically, a federal effort to “flood the zone” with a series of roughly six of these high-powered, market-focused energy centers would create a critical mass of innovation through their number, size, variety, linkages and orientation to pre-existing research institutions and industry clusters.

As envisioned here, the Great Lakes network of energy research centers would organize individual centers around themes largely determined by the private market. Based on local industry research priorities, university capabilities and the market and commercialization dynamics of various technologies, each Great Lakes research and innovation center would focus on a different problem, such as renewable energy technologies, biofuels, transportation energy, carbon-free electrical power generation, and distribution and energy efficiency. This network would accomplish several goals at once:

• Foster multidisciplinary and collaborative research partnerships. The regional centers or institutes would align the nonlinear flow of knowledge and activity across science and non-science disciplines and among companies, entrepreneurs, commercialization specialists and investors, as well as government agencies (federal, state and local) and research universities. For example, a southeastern Michigan collaboration involving the University of Michigan, Michigan State University, the University of Wisconsin and Ford, General Motors, and Dow Chemical could address the development of sustainable transportation technologies. A Chicago partnership involving Northwestern and Purdue Universities, the University of Chicago, the University of Illinois, Argonne National Lab, Exelon and Boeing could focus on sustainable electricity generation and distribution. A Columbus group including Ohio State University and Battelle Memorial Institute could address technologies for energy efficiency. Regional industry representatives would be involved from the earliest stages to define needed research, so that technology advances are relevant and any ensuing commercialization process is as successful as possible.
• Serve as a distributed “hub-spoke” network linking together campus-based, industry-based and federal laboratory-based scientists and engineers. The central “hubs” would interact with other R&D programs, centers and facilities (the “spokes”) through exchanges of participants, meetings and workshops, and advanced information and communications technology. The goals would be to limit unnecessary duplication of effort and cumbersome management bureaucracy and to enhance the coordinated pursuit of larger national goals.
• Develop and rapidly deploy highly innovative technologies to the market. Rather than aim for revenue maximization through technology transfer, the regional energy centers would be structured to maximize the volume, speed and positive societal impact of commercialization. As much as possible, the centers would work out in advance patenting and licensing rights and other intellectual property issues.Stimulate regional economic development. Like academic medical centers and agricultural experiment stations—both of which combine research, education and professional practice—these energy centers could facilitate cross-sector knowledge spillovers and innovation exchange and propel technology transfer to support clusters of start-up firms, private research organizations, suppliers, and other complementary groups and businesses—the true regional seedbeds of greater economic productivity, competitiveness and job creation.
• Build the knowledge base necessary to address the nation’s energy challenges. The regional centers would collaborate with K-12 schools, community colleges, regional universities, and workplace training initiatives to educate future scientists, engineers, innovators, and entrepreneurs and to motivate the region’s graduating students to contribute to the region’s emerging green economy.
• Complement efforts at universities and across the DOE innovation infrastructure, but be organizationally and managerially separate from either group. The regional energy centers would focus rather heavily on commercialization and deployment, adopting a collaborative translational research paradigm. Within DOE, the centers would occupy a special niche for bottom-up translational research in a suite of new, largely top-down innovation-oriented programs that aim to advance fundamental science (EFRCs), bring energy R&D to scale (Energy Innovation Hubs) and find ways to break the cost barriers of new technology (ARPA-E).

To establish and build out the institute network across the Great Lakes region, the new regional energy initiative would:

• Utilize a tiered organization and management structure. Each regional center would have a strong external advisory board representing the participating partners. In some cases, partners might play direct management roles with executive authority.
• Adopt a competitive award process with specific selection criteria. Centers would receive support through a competitive award process, with proposals evaluated by an interagency panel of peer reviewers.
• Receive as much federal funding as major DOE labs outside the Great Lakes region. Given the massive responsibilities of the proposed Great Lakes energy research centers, total federal funding for the whole network should be comparable to that of comprehensive DOE labs, such as Los Alamos, Oak Ridge and others, which have FY2010 budgets between $1 and $2 billion. Based on existing industry-university concentrations, one can envision as many as six compelling research centers in the Great Lakes region.

Conclusion

In sum, America’s national energy infrastructure—based primarily upon fossil fuels—must be updated and replaced with new technologies. At the same time, no region in the nation is better equipped to deliver the necessary innovations than is the Great Lakes area. And so this strong need and this existing capacity should be joined through an aggressive initiative to build a network of regional energy research and innovation centers. Through this intervention, the federal government could catalyze a dynamic new partnership of Midwestern businesses, research universities, federal laboratories, entrepreneurs and state and local governments to transform the nation’s carbon dependent economy, while renewing a flagging regional economy.

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• Research Strength in the Great Lakes
• Pursuing Large Scale Innovation

      

Policy Brief #176

Recommendations
India's remarkable economic growth and newfound access to arms from abroad have raised the prospect of a major rearmament of the country. But without several policy and organizational changes, India's efforts to modernize its armed forces will not alter the country's ability to deal with critical security threats. Our research suggests that India's military modernization needs a transparent, legitimate and efficient procurement process. Further, a chief of defense staff could reconcile the competing priorities across the three military services. Finally, India's defense research agencies need to be subjected to greater oversight.

Introduction

India’s rapid economic growth and newfound access to military technology, especially by way of its rapprochement with the United States, have raised hopes of a military revival in the country. Against this optimism about the rise of Indian military power stands the reality that India has not been able to alter its military-strategic position despite being one of the world’s largest importers of advanced conventional weapons for three decades.

We believe that civil-military relations in India have focused too heavily on one side of the problem – how to ensure civilian control over the armed forces, while neglecting the other – how to build and field an effective military force. This imbalance in civil-military relations has caused military modernization and reforms to suffer from a lack of political guidance, disunity of purpose and effort and material and intellectual corruption.

The Effects of Strategic Restraint

Sixty years after embarking on a rivalry with Pakistan, India has not been able to alter its strategic relationship with a country less than one-fifth its size. India’s many counterinsurgencies have lasted twenty years on an average, double the worldwide average. Since the 1998 nuclear tests, reports of a growing missile gap with Pakistan have called into question the quality of India’s nuclear deterrent. The high point of Indian military history – the liberation of Bangladesh in 1971– therefore, stands in sharp contrast to the persistent inability of the country to raise effective military forces.

No factor more accounts for the haphazard nature of Indian military modernization than the lack of political leadership on defense, stemming from the doctrine of strategic restraint. Key political leaders rejected the use of force as an instrument of politics in favor of a policy of strategic restraint that minimized the importance of the military.

The Government of India held to its strong anti-militarism despite the reality of conflict and war that followed independence. Much has been made of the downgrading of the service chiefs in the protocol rank, but of greater consequence was the elevation of military science and research as essential to the long-term defense of India over the armed forces themselves. Nehru invited British physicist P.M.S. Blackett to examine the relationship between science and defense. Blackett came back with a report that called for capping Indian defense spending at 2 percent of GDP and limited military modernization. He also recommended state funding and ownership of military research laboratories and established his protégé, Daulat Singh Kothari, as the head of the labs.

Indian defense spending decreased during the 1950s. Of the three services, the Indian Navy received greater attention with negotiations for the acquisition of India’s first aircraft carrier. The Indian Air Force acquired World War II surplus Canberra transport. The Indian Army, the biggest service by a wide margin, went to Congo on a UN peacekeeping mission, but was neglected overall. India had its first defense procurement scandal when buying old jeeps and experienced its first civil-military crisis when an army chief threatened to resign protesting political interference in military matters. The decade culminated in the government’s ‘forward policy’ against China, which Nehru foisted on an unprepared army, and led to the war of 1962 with China that ended in a humiliating Indian defeat.

The foremost lesson of 1962 was that India could not afford further military retrenchment. The Indian government launched a significant military expansion program that doubled the size of the army and raised a fighting air force. With the focus shifting North, the Indian Navy received less attention. A less recognized lesson of the war was that political interference in military matters ought to be limited. The military – and especially the army – asked for and received operational and institutional autonomy, a fact most visible in the wars of 1965 and 1971.

The problem, however, was that the political leadership did not suddenly become more comfortable with the military as an institution; they remained wary of the possibility of a coup d’etat and militarism more generally.

The Indian civil-military relations landscape has changed marginally since. In the eighties, there was a degree of political-military confluence in the Rajiv Gandhi government: Rajiv appointed a military buff, Arun Singh, as the minister of state for defense. At the same time, Krishnaswami Sundarji, an exceptional officer, became the army chief. Together they launched an ambitious program of military modernization in response to Pakistani rearmament and nuclearization. Pakistan’s nuclearization allowed that country to escalate the subconventional conflict in Kashmir while stemming Indian ability to escalate to a general war, where it had superiority. India is yet to emerge from this stability-instability paradox.

We do not know why Rajiv Gandhi agreed to the specific kind of military modernization that occurred in the mid-eighties, but then stepped back from using this capacity in 1987 during the Brasstacks crisis. Sundarji later wrote in a veiled work of fiction and told his many friends that Brasstacks was the last chance India had to dominate a non-nuclear Pakistan.

The puzzle of Brasstacks stands in a line of similar decisions. In 1971, India did not push the advantage of its victory in the eastern theatre to the West. Instead, New Delhi, under uberrealist Prime Minister Indira Gandhi, signed on to an equivocal agreement at Simla that committed both sides to peaceful resolution of future disputes without any enforcement measures. India’s decision to wait 24 years between its first nuclear test in 1974 and the second set of tests in 1998 is equally puzzling. Why did it not follow through after the 1974 test, and why did it test in 1998?

Underlying these puzzles is a remarkable preference for strategic restraint. Indian leaders simply have not seen the use of force as a useful instrument of politics. This foundation of ambivalence informs Indian defense policy, and consequently its military modernization and reform efforts.

To be sure, military restraint in a region as volatile as South Asia is wise and has helped persuade the great powers to accommodate India’s rise, but it does not help military planning. Together with the separation of the armed forces from the government, divisions among the services and between the services and other related agencies, and the inability of the military to seek formal support for policies it deems important, India’s strategic restraint has served to deny political guidance to the efforts of the armed forces to modernize. As wise as strategic restraint may be, Pakistan, India’s primary rival, hardly believes it to be true. Islamabad prepares as if India were an aggressive power and this has a real impact on India’s security.

Imbalance in Civil-Military Relations

What suffices for a military modernization plan is a wish list of weapon systems amounting to as much as $100 billion from the three services and hollow announcements of coming breakthroughs from the Defense Research and Development Organization (DRDO), the premier agency for military research in India.

The process is illustrative. The armed forces propose to acquire certain weapon systems. The political leadership and the civilian bureaucracy, especially the Ministry of Finance, react to these requests, agreeing on some and rejecting others. A number of dysfunctions ensue.

First, the services see things differently and their plans are essentially uncoordinated. Coming off the experience of the Kargil war and Operation Parakram, the Indian Army seems to have arrived at a Cold Start doctrine, seeking to find some fighting space between subconventional conflict and nuclear exchange in the standoff with Pakistan. The doctrine may not be official policy, but it informs the army’s wish list, where attack helicopters, tanks and long-range artillery stand out as marquee items. The Indian Air Force (IAF), meanwhile, is the primary instrument of the country’s nuclear deterrent. The IAF’s close second role is air superiority and air defense. Close air support, to which the IAF has belatedly agreed and which is essential to the army’s Cold Start doctrine, is a distant fourth.

The Indian Navy wants to secure the country’s sea-lanes of communications, protect its energy supplies and guard its trade routes. It wants further to be the vehicle of Indian naval diplomacy and sees a role in the anti-piracy efforts in the Malacca Straits and the Horn of Africa. What is less clear is how the Indian Navy might contribute in the event of a war with Pakistan. The navy would like simply to brush past the problem of Pakistan and reach for the grander projects. Accordingly, the Indian Navy’s biggest procurement order is a retrofitted aircraft carrier from Russia.

India’s three services have dramatically different views of what their role in India’s security should be, and there is no political effort to ensure this coordination. Cold Start remains an iffy proposition. India’s nuclear deterrent remains tethered to a single delivery system: fighter aircraft. Meanwhile, the Indian Army’s energies are dissipated with counterinsurgency duties, which might increase manifold if the army is told to fight the rising leftist insurgency, the Naxalites. And all this at a time when the primary security threat to the country has been terrorism. After the Mumbai attacks, the Indian government and the people of India are said to have resolved to tackle the problem headlong, but today the government’s minister in charge of internal security, Palaniappan Chidambaram, is more under siege himself than seizing the hidden enemy.

Second, despite repeated calls for and commissions into reforms in the higher defense structure, planning, intelligence, defense production and procurement, the Indian national security establishment remains fragmented and uncoordinated. The government and armed forces have succeeded in reforms primed by additions to the defense budget but failed to institute reforms that require changes in organization and priorities.

The Kargil Review Committee, and the Group of Ministers report that followed, for example, recommended a slew of reforms. The changes most readily implemented were those that created new commands, agencies and task forces, essentially linear expansion backed by new budgetary allocations. The changes least likely to occur were those required changes in the hierarchy.

The most common example of tough reform is the long-standing recommendation for a chief of defense staff. A military chief, as opposed to the service chiefs, could be a solution to the problem that causes the three services not to reconcile their priorities. However, political leaders have rejected the creation of the position of military commander-in-chief, mainly for fear of giving a military officer too much power. Instead of a chief of defense staff, the government has tried to install an integrated defense staff that is supposed to undertake reconciliation between the services, but which really is a toothless body with little influence.

Lastly, the Ministry of Defense has a finance section deputed by the Ministry of Finance. This section oversees all defense expenditures, even after they have been authorized. Once the cabinet has approved a spending item, what authority does the section have to turn down requests? However, the finance section raises questions of propriety, wisdom and policy that should under normal circumstances be under the purview of the defense minister.

No Legitimate Procurement Process

Corruption in weapons procurement has been a political issue since the mid-1980s, when allegations of a series of paybacks in the purchase of Bofors artillery, HDW submarines and other items mobilized an opposition that removed Rajiv Gandhi from power in 1989. Since then, Indian political leaders have tried hard not to appear to be corrupt, going out of their way to slow down new purchases.

However, corruption is still a problem, as shown in the 2001 Tehelka expose of political leaders accepting bribes in return for defense contracts. Recently, Uday Bhaskar, the Indian Navy officer and defense analyst, wrote bitingly that for a number of years now the armed forces, which desperately need modernization, have been returning unspent funds to the treasury.

There is widespread recognition that corruption is morally venal and detrimental to the cause of Indian security. We believe, however, that the second- and third-order problems of corruption have unacknowledged impact on military modernization and capacity. The Defense Procurement Manual and Procedures on the Ministry of Defense’s website are the first steps in the right direction, but the Indian government has generally failed to build a transparent and legitimate procurement process.

The deep roots of corruption extend to military research and development and to the heart of India’s foreign relations. Since the mid-1970s, however, the DRDO embarked on a number of ambitious and well-funded projects to build a fighter aircraft, a tank, and missiles. All three projects floundered.

While the aircraft and tank projects have largely failed, the missile program is considered successful. The reputation of the success carried the director of the missile program, A.P.J. Abdul Kalam, to the presidency. Yet in 2010, no Indian missile in the arsenal of the armed forces has managed to alter the strategic equation with Pakistan or China. The Prithvi short-range missile is not useful because of its range and liquid fuel needs. The longer-range Agni models have gone through numerous tests without entering the army’s arsenal. Other variations, such as Nag and Akash, have limited strategic purpose.

The virtual monopoly over military research in state-owned labs has meant that the abundant energies of the Indian private sector have remained outside the defense industry. Where in the United States, small and medium-sized defense contractors form the backbone of the research complex, India is far from thinking along those lines. Despite recent efforts to include the private sector through various schemes, there continues to be distrust of private industry in the Indian defense establishment. We believe it is easier for a private foreign supplier to win a contract with the Ministry of Defense than it is for a small private Indian company to do so.

For decades, the Indian government has accepted dishonest promises made by DRDO as the basis for providing billions of dollars of support because of the persisting ideology of autarky. The greatest success of military research in India comes not from the DRDO, but from the Atomic Energy Commission, which built the nuclear devices. But the government has been unwilling to subject DRDO to public accountability. Instead, the head of DRDO serves as the defense minister’s scientific adviser. The two positions – of supplier and adviser – bring inherent conflict of interest, but this has not been an issue in India at all.

The second pattern of systemic corruption comes from the inability of the Indian defense system to wean itself from the supply of Soviet/Russian equipment. The reasons why India initially went to the Soviet Union for weapons are well-known. The United States chose Pakistan, India went to the Soviet Union. But that political decision was reinforced by ideas about the corruption-free nature of the state-owned Soviet defense industry and the profit-mindedness of western, and especially American, firms.

This characterization has always been untrue. Soviet/Russian suppliers have engaged in as much corruption as western firms, but because the Soviet Union was a closed system, the corruption – which was reported first in the press in the supplier countries – was never really reported in the Soviet Union. This tradition continues, though the Russian free press has been more critical of the country’s defense deals. Indeed, those who served as Indian ‘agents’ for the Soviet firms have highlighted the better business practice of Russians, a laughable matter in light of India’s recent travails with the retrofit and sale of the Russian aircraft carrier Admiral Gorshkov.

The tendency is reiterated in Indian preferences in dealing with the West as well. Western firms have always been seen as money-grubbing, an opinion that exists across the political spectrum and is prevalent in the civilian bureaucracy. New Delhi seems to prefer government-to-government foreign military sales, which are in turn causing some degree of protest from users who want longer-term maintenance arrangements with suppliers.

The political rapprochement between India and the United States has not yet filtered into the system for attitudes to change dramatically. India’s growing military supply relationship with Israel is instructive. The most successful Israeli firm in the Indian market is Israel Aerospace Industries (IAI), a state-owned company. IAI was quick to adopt the Russian model of operation in India: offering the DRDO co-development opportunities to win contracts. In contrast, American firms are reluctant to work with, let alone transfer high-end technology to a state owned enterprise. They would prefer to set up a subsidiary in India, which could retain control of the technology.

India has been one of the biggest importers of advanced conventional weapons in the last thirty years, but this sustained rearmament has not altered India’s strategic position. The armed forces push for modernization, but do not have the authority to mount the national campaign necessary for transforming the security condition of the country. Budget increases delivered by a rapidly expanding economy and access to western technology previously denied to India have led to optimism about Indian military power, but the dysfunction in India’s civil-military relations reduces the impact of rearmament. Arming without aiming has some purpose in persuading other great powers of India’s benign rise, but it cannot be the basis of military planning.

This Policy Brief is based on an earlier paper published by Seminar, New Delhi. Stephen Cohen is a senior fellow at the Brookings Institution. Sunil Dasgupta is director of UMBC’s Political Science Program at the Universities at Shady Grove and a nonresident fellow at Brookings. They are the co-authors of Arming without Aiming: India’s Military Modernization, published in September 2010 by the Brookings Institution Press.

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The full story of the killing of Michael Brown, a young, black, unarmed man shot by a policeman in Ferguson, Missouri, is still unfolding—and the truth will not be known for some time. It is only after full investigations are completed that an objective evaluation of the incident can be made. Nonetheless, there is no doubt that the killing of the young man was unfortunate and has generated a serious debate about race relations in America, and on the relations between police and the communities that they are supposed to protect. The riots and massive looting portrayed not only the extent of criminality in America’s inner cities, but also the economic marginalization of the minority communities.

Coming not long after the successful U.S.-Africa Leaders Summit held in Washington, the Ferguson incident and the follow-up demonstrations have been rather unfortunate in as far as how Africans view America—in a way questioning America’s standing as a protector of human rights. The hostility towards the United States in regard to its treatment of African-Americans has dominated social media with claims that the incident shows that America should not claim leadership when it comes to human rights. Such criticisms by many other countries, including Russia and China, are widespread.

I was particularly surprised by the comments in the Kenyan media coverage of this topic. Here are some statements on the topic by readers of the most popular paper there—the Daily Nation:

(This is an apparent reference to the fact that the United States government issues travel advisories to countries like Kenya when such incidents occur and there are riots.)

(This statement is in reference to the U.S. government’s actions following the 2007-2008 post-election violence in Kenya.)

       

Municipal elections in Ferguson, Mo. are fast approaching. Amid the backdrop of the US Department of Justice identifying systemic racial bias by law enforcement and an over-reliance on traffic fines and court fees for revenue, there are great challenges to overcome.

It would be one thing if Ferguson was unique. It is not.

Ferguson (containing just over 21,000 people) is one of 91 jurisdictions in St. Louis County, each with its own governments to run, services to provide, and budgets to balance. This kind of governmental fragmentation, a product of state law, is repeated in many metropolitan areas across the country. Suburban fragmentation makes providing public services inefficient; complicates regional planning; and, according to a recent OECD report  diminishes economic growth, productivity, and social mobility.

The problems wrought by fragmentation have only been compounded in recent years by rapid economic and demographic changes. In the 2000s, suburbs in the nation’s largest metro areas became home to more poor residents and more African Americans than cities for the first time. Since 2000, the number of high-poverty neighborhoods (with poverty rates above 20 percent) more than doubled in the suburbs, while the number of majority-minority neighborhoods grew by almost half.

Many suburban communities dealing with rising poverty and new populations are ill-equipped to address growing and changing needs. That’s particularly true in places like Ferguson, where population and jobs have declined over the years. According to new Brookings research, residents of Ferguson lived near 14 percent fewer jobs in 2012 than they did in 2000. The resulting strains on local tax bases amount to one reason that local governments throughout the St. Louis region came to rely heavily on revenue-raising tactics like traffic fines and court fees.

Part of the mandate of the Ferguson Commission convened by Missouri Governor Nixon is to address the issue of governance, which will require confronting the region’s fragmented landscape. The commission can learn from states that have encouraged the sharing of services across municipalities or regions that are pursuing more collaborative approaches to respond to shared challenges around issues like housing, transportation, or community development.

But while these strategies can reduce the typically competitive approaches employed by neighboring suburbs, they still come up against deeper structural limitations that collaboration alone cannot overcome. The commission should consider a bolder response to the region’s fragmentation and fiscal challenges.

One model the commission can learn from is Minneapolis-St. Paul’s regional revenue sharing structure.

Established in 1971 by the Minnesota Fiscal Disparities Act, Minneapolis-St. Paul’s regional tax base sharing mechanism gives residents access to adequate resources for local services like public safety, irrespective of where they live. According to a study by Myron Orfield and Nicolas Wallace, the law has dramatically reduced tax disparities between high and low-income areas, allowing for reinvestment in the central cities and in fiscally challenged communities. And it has reduced the incentive for municipalities to “steal” revenue-generating land uses from neighbors (very frequently a waste of taxpayer dollars), promoting more integrated regional economic development.

The model works by mandating that each municipality within the designated seven-county area contribute 40 percent of its annual growth in commercial-industrial tax revenues to a regional pool. These resources are then redistributed to the participating municipalities based on local capacity. The mechanism helps equalize local available resources, filling local budget gaps where they exist, without undermining local autonomy.

For the vast majority of communities, the sharing program has meant lower taxes and better services. A 2012 study concluded that without the program, nearly 80 percent of the region’s 186 municipalities would have to raise taxes to maintain their current level of services. Revenue sharing has enabled the cities of Minneapolis and St. Paul to invest in higher quality public services like policing and education over the decades since the law was enacted. Many older suburbs bear less of the public burden for repairing old infrastructure, renewing public facilities, cleaning up brownfields, upgrading neighborhood housing, or dealing with abandoned properties. Even many developing bedroom suburbs have benefited from revenue sharing since these places often lack a strong commercial tax base, leading to shortages in infrastructure or education funding.

These results indicate that regional revenue sharing can enable at-risk suburbs like Ferguson to pay for basic services like public safety without relying excessively on fining their small citizenries.

The path to creating revenue sharing programs in our metropolitan areas runs through state legislatures. The Minnesota law was passed in the 1970s with “a unique coalition of central-city and suburban legislators working together to ensure the future economic vitality of the entire state.” The same case should be made today in Missouri to rural, urban, and suburban representatives alike. With better services and lower taxes for the vast majority of municipalities, the political math adds up.

As Orfield and Wallace put it, regions facing growing economic, social, and fiscal disparities have a choice: “allow the disparity to deepen or work to find solutions that can benefit all.” If we are serious about fixing Ferguson and other places like it, states across the country, starting with Missouri, must address the structural governance and fiscal flaws that lie at the heart of the matter. 

       

While antibiotics are necessary and crucial for treating bacterial infections, their misuse over time has contributed to a rather alarming rate of antibiotic resistance, including the development of multidrug-resistance bacteria or “super bugs.” Misuse manifests throughout all corners of public and private life; from the doctor’s office when prescribed to treat viruses; to industrial agriculture, where they are used in abundance to prevent disease in livestock. New data from the World Health Organization (WHO) and U.S. Centers for Disease Control and Prevention (CDC) confirm that rising overuse of antibiotics has already become a major public health threat worldwide.

As drug resistance increases, we will see a number of dangerous and far-reaching consequences. First, common infections like STDs, pneumonia, and “staph” infections will become increasingly difficult to treat, and in extreme cases these infections may require hospitalization or treatment with expensive and toxic second-line therapies. In fact, recent estimates suggest that every year more than 23,000 people die due to drug-resistant infections in the U.S., and many more suffer from complications caused by resistant pathogens. Further, infections will be harder to control. Health care providers are increasingly encountering highly resistant infections not only in hospitals – where such infections can easily spread between vulnerable patients – but also in outpatient care settings.

Fundamental Approaches to Slowing Resistance

Incentivize appropriate use of antibiotics. Many patients and providers underestimate the risks of using antibiotics when they are not warranted, in part because these drugs often have rapid beneficial effects for those who truly need them.  In many parts of the world the perception that antibiotics carry few risks has been bolstered by their low costs and availability without a prescription or contact with a trained health care provider. Education efforts, stewardship programs, and the development of new clinical guidelines have shown some success in limiting antibiotic use, but these fixes are limited in scope and generally not perceived as cost-effective or sustainable. Broader efforts to incentivize appropriate use, coupled with economic incentives, may be more effective in changing the culture of antibiotic use. These options might include physician or hospital report cards that help impact patient provider selection, or bonuses based on standardized performance measures that can be used to report on success of promoting appropriate use.  While these might create additional costs, they would likely help control rates of drug resistant infections and outweigh the costs of treating them.

Reinvigorate the drug development pipeline with novel antibiotics. There has not been a new class of antibiotics discovered in almost three decades, and companies have largely left the infectious disease space for more stable and lucrative product lines, such as cancer and chronic disease. Antibiotics have historically been inexpensive and are typically used only for short periods of time, creating limited opportunities for return on investment. In addition, unlike cancer or heart disease treatments, antibiotics lose effectiveness over time, making them unattractive for investment. Once they are on the market, the push to limit use of certain antibiotics to the most severe infections can further constrict an already weak market.

Late last year, H.R. 3742, the Antibiotic Development to Advance Patient Treatment (ADAPT) Act of 2013, was introduced and referred to the House Energy and Commerce Subcommittee on Health. If enacted, the ADAPT Act would create a streamlined development pathway to expedite the approval of antibiotics that treat limited patient populations with serious unmet medical needs. This could potentially reduce costs and development time for companies, thereby encouraging investment in this space. Regulators have indicated that they would also welcome the opportunity to evaluate benefits and risk for a more selective patient subpopulation if they could be confident the product would be used appropriately. The bill has received a great deal of support and would help address a critical public health need (I cover this topic in more detail with my colleagues Kevin Outterson, John Powers, and Mark McClellan in a recent Health Affairs paper).

Advance new economic incentives to remedy market failure. Innovative changes to pharmaceutical regulation, research and development (R&D), and reimbursement are necessary to alleviate the market failure for antibacterial drugs. A major challenge, particularly within a fee-for-service or volume-based reimbursement system, is providing economic incentives that promote investment in drug development without encouraging overuse.  A number of public and private stakeholders, including the Engelberg Center for Health Care Reform and Chatham House’s Centre on Global Health Security Working Group on Antimicrobial Resistance, are exploring alternative reimbursement mechanisms that  “de-link” revenue from the volume of antibiotics sold. Such a mechanism, combined with further measures to stimulate innovation, could create a stable incentive structure to support R&D.

Improve tracking and monitoring of resistance in the outpatient setting. There is increasing concern about much less rigorous surveillance capabilities in the outpatient setting, where drug-resistant infections are also on the rise. Policymakers should consider new incentives for providers and insurers to encourage a coordinated approach for tracking inpatient and outpatient resistance data. The ADAPT Act, mentioned above, also seeks to enhance monitoring of antibiotic utilization and resistance patterns. Health insurance companies can leverage resistance-related data linked to health care claims, while providers can capture lab results in electronic health records. Ultimately, this data could be linked to health and economic outcomes at the state, federal, and international levels, and provide a more comprehensive population-based understanding of the impact and spread of resistance. Current examples include the Food and Drug Administration’s (FDA) Sentinel Initiative and the Patient-Centered Outcomes Research Institute’s PCORnet initiative. 

Antibiotic resistance is an urgent and persistent threat. As such, patients and providers will continue to require new antibiotics as older drugs are forced into retirement by resistant pathogens. Stewardship efforts will remain critical in the absence of game-changing therapies that parry resistance mechanisms. Lastly, a coordinated surveillance approach that involves diverse stakeholder groups is needed to understand the health and economic consequences of drug resistance, and to inform antibiotic development and stewardship efforts.

Editor's note: This blog was originally posted in May 2014 on Brookings UpFront.

       

For more than a decade, government assistance to Afghanistan, Iraq, and Pakistan (the so-called AIP countries) has dominated United States aid efforts. And as the examples below illustrate, American institutions and mindsets found it extraordinarily difficult to adjust to aid in unsafe places. Cameron Munter draws on his experience as the head of the Provincial Reconstruction Team (PRT) in Mosul, Iraq in 2006 and as ambassador of the United States to Pakistan in Islamabad in 2011, with a description of U.S. reconstruction and state-building from which we may find lessons to consider in the future.

In 2006, when he went to Mosul as the first leader of the first PRT, the American civilian and military authorities in Baghdad painfully learned that the post-conflict situation would not correct itself. The undergrowth of our own bureaucratic structure prevented us from gaining a sophisticated understanding of our surroundings. Members of the PRT came and left after a few months, without passing on their hard-obtained knowledge. Local authorities quickly realized that the PRT had neither the money nor the firepower of the brigade commanders. And most of all, the guiding principles in place were still the creation of a kind of constitutional framework where political leaders, police, courts, businesspeople, and citizens would have institutions familiar to Americans, institutions that would work as we knew how to make them work.

Munter arrived in Pakistan at a time of great hope for U.S.-Pakistani relations. In 2011, in a series of meetings with the U.S. deputy secretary of state for resources and the head of USAID, Kerry-Lugar-Berman priorities took center stage: education, energy efficiency, job creation, special projects in the tribal areas, and public health. It is one thing to define a task and quite another to apply it to the specific context of a country in which security considerations prevent most USAID workers from even laying eyes on their projects. Overall, it seems the United States was much better at measuring its commitment to a prosperous, democratic Pakistan at peace with its neighbors by counting how much it spent and how fast rather than creating the proper relationship with those on the ground with whom it might have partnered.

Under these circumstances, what are lessons learned? When security is shaky, assistance is difficult. It may be that in situations like the AIP countries, we only have the capacity to engage in humanitarian aid and immediate reconstruction. If that is so, then the whole question of engagement in dangerous places is reopened: In a military setting, with military tasks, and thus a military system of organization, can civilian assistance succeed? Money spent is the way we measure commitment in such a setting, and that doesn’t bring the results we need.

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• Imagining assistance: Tales from the American aid experience in Iraq in 2006 and Pakistan in 2011

      

       

       

       

       

       

       

       

Hamzah bin Laden issued a new video message this week, only his second ever, calling for all Muslims to support the Palestinian intifada. The 17-minute message coincided with a longer message from al-Qaida leader Ayman al-Zawahiri urging support for the Syrian branch of al-Qaida, the Nusra Front.

Hamzah's message says recovering Jerusalem and the al Aqsa mosque is the most important responsibility of every Muslim. He quotes his father Osama bin Laden, stressing that fighting Israel is the fundamental basis of al-Qaida's ideology and narrative. The video shows images of Palestinians clashing with Israeli soldiers. In the message, Hamzah says: "knives are our weapon; you should have no trouble finding your own knives."

Israeli border police run in front of Dome of the Rock during a protest after Friday prayers at a compound known to Muslims as al-Haram al-Sharif and to Jews as Temple Mount, in Jerusalem's Old City February 22, 2013. Photo credit: Reuters/ Muammar Awad.

Hamzah also urges all Muslims to kill Jews and "their interests worldwide." The United States should be attacked, he says, for providing Israel with $3 billion a year in assistance—which Hamzah predicts will rise to $5 billion a year soon. He says American-Israeli "security collaboration is at its highest level" and Americans "have to pay their bill with blood." Every Muslim "has to personally take part in defending the al Aqsa mosque by waging jihad to avenge our pure sisters who were killed in cold blood" by Israel.

Both Hamzah and Zawahiri laud the Syrian revolution for bringing al-Qaida to the border of Israel. The two messages were released by al-Qaida's media arm, al Sahab, a day apart. Their release ends a seven-month silence by both—they had not released any messages since last summer. Zawahiri has already released a second message lauding the late leader of the Afghan Taliban Mullah Omar and castigating the self-proclaimed caliph of the Islamic State Abu Bakr al Baghdadi.

Hamzah's message may be an indication that he is being groomed to be Zawahiri's successor. The 25 year-old favorite son of bin Laden is a charismatic face for the organization, which has been eclipsed in the global media by the Islamic State. By associating himself with Palestinian attacks in Jerusalem, Hamzah is trying to appeal to the widespread support in the jihadist movement for them.

       

While antibiotics are necessary and crucial for treating bacterial infections, their misuse over time has contributed to a rather alarming rate of antibiotic resistance, including the development of multidrug-resistance bacteria or “super bugs.” Misuse manifests throughout all corners of public and private life; from the doctor’s office when prescribed to treat viruses; to industrial agriculture, where they are used in abundance to prevent disease in livestock. New data from the World Health Organization (WHO) and U.S. Centers for Disease Control and Prevention (CDC) confirm that rising overuse of antibiotics has already become a major public health threat worldwide.

As drug resistance increases, we will see a number of dangerous and far-reaching consequences. First, common infections like STDs, pneumonia, and “staph” infections will become increasingly difficult to treat, and in extreme cases these infections may require hospitalization or treatment with expensive and toxic second-line therapies. In fact, recent estimates suggest that every year more than 23,000 people die due to drug-resistant infections in the U.S., and many more suffer from complications caused by resistant pathogens. Further, infections will be harder to control. Health care providers are increasingly encountering highly resistant infections not only in hospitals – where such infections can easily spread between vulnerable patients – but also in outpatient care settings.

Fundamental Approaches to Slowing Resistance

Incentivize appropriate use of antibiotics. Many patients and providers underestimate the risks of using antibiotics when they are not warranted, in part because these drugs often have rapid beneficial effects for those who truly need them.  In many parts of the world the perception that antibiotics carry few risks has been bolstered by their low costs and availability without a prescription or contact with a trained health care provider. Education efforts, stewardship programs, and the development of new clinical guidelines have shown some success in limiting antibiotic use, but these fixes are limited in scope and generally not perceived as cost-effective or sustainable. Broader efforts to incentivize appropriate use, coupled with economic incentives, may be more effective in changing the culture of antibiotic use. These options might include physician or hospital report cards that help impact patient provider selection, or bonuses based on standardized performance measures that can be used to report on success of promoting appropriate use.  While these might create additional costs, they would likely help control rates of drug resistant infections and outweigh the costs of treating them.

Reinvigorate the drug development pipeline with novel antibiotics. There has not been a new class of antibiotics discovered in almost three decades, and companies have largely left the infectious disease space for more stable and lucrative product lines, such as cancer and chronic disease. Antibiotics have historically been inexpensive and are typically used only for short periods of time, creating limited opportunities for return on investment. In addition, unlike cancer or heart disease treatments, antibiotics lose effectiveness over time, making them unattractive for investment. Once they are on the market, the push to limit use of certain antibiotics to the most severe infections can further constrict an already weak market.

Late last year, H.R. 3742, the Antibiotic Development to Advance Patient Treatment (ADAPT) Act of 2013, was introduced and referred to the House Energy and Commerce Subcommittee on Health. If enacted, the ADAPT Act would create a streamlined development pathway to expedite the approval of antibiotics that treat limited patient populations with serious unmet medical needs. This could potentially reduce costs and development time for companies, thereby encouraging investment in this space. Regulators have indicated that they would also welcome the opportunity to evaluate benefits and risk for a more selective patient subpopulation if they could be confident the product would be used appropriately. The bill has received a great deal of support and would help address a critical public health need (I cover this topic in more detail with my colleagues Kevin Outterson, John Powers, and Mark McClellan in a recent Health Affairs paper).

Advance new economic incentives to remedy market failure. Innovative changes to pharmaceutical regulation, research and development (R&D), and reimbursement are necessary to alleviate the market failure for antibacterial drugs. A major challenge, particularly within a fee-for-service or volume-based reimbursement system, is providing economic incentives that promote investment in drug development without encouraging overuse.  A number of public and private stakeholders, including the Engelberg Center for Health Care Reform and Chatham House’s Centre on Global Health Security Working Group on Antimicrobial Resistance, are exploring alternative reimbursement mechanisms that  “de-link” revenue from the volume of antibiotics sold. Such a mechanism, combined with further measures to stimulate innovation, could create a stable incentive structure to support R&D.

Improve tracking and monitoring of resistance in the outpatient setting. There is increasing concern about much less rigorous surveillance capabilities in the outpatient setting, where drug-resistant infections are also on the rise. Policymakers should consider new incentives for providers and insurers to encourage a coordinated approach for tracking inpatient and outpatient resistance data. The ADAPT Act, mentioned above, also seeks to enhance monitoring of antibiotic utilization and resistance patterns. Health insurance companies can leverage resistance-related data linked to health care claims, while providers can capture lab results in electronic health records. Ultimately, this data could be linked to health and economic outcomes at the state, federal, and international levels, and provide a more comprehensive population-based understanding of the impact and spread of resistance. Current examples include the Food and Drug Administration’s (FDA) Sentinel Initiative and the Patient-Centered Outcomes Research Institute’s PCORnet initiative. 

Antibiotic resistance is an urgent and persistent threat. As such, patients and providers will continue to require new antibiotics as older drugs are forced into retirement by resistant pathogens. Stewardship efforts will remain critical in the absence of game-changing therapies that parry resistance mechanisms. Lastly, a coordinated surveillance approach that involves diverse stakeholder groups is needed to understand the health and economic consequences of drug resistance, and to inform antibiotic development and stewardship efforts.

Editor's note: This blog was originally posted in May 2014 on Brookings UpFront.

      

Editor's note: This article appears in the April 2015 issue of Global Forum. Click here to view the full publication.

Since passage of the Affordable Care Act in 2010, the last several years have seen a groundswell in physician payment and delivery reforms designed to achieve higher value health care through incentivizing higher quality care and lower overall costs. Accountable care models, for example, are achieving marked progress by realigning provider incentives toward greater risk-sharing and increased payments and shared savings with measured improvements in quality and cost containment. Medical homes are introducing greater care coordination and team-based care management, while the use of episode-based or bundled payments is removing perverse incentives that reward volume and intensity.

These reforms are coming just as the number of highly targeted, highly priced treatments continues to expand. The U.S. Food and Drug Administration (FDA) approved a decade-high 41 novel new drugs in 2014, many of them targeted therapies approved on the basis of increasingly sophisticated progress in genomics and the understanding of disease progression. In areas like oncology, such targeted treatments have grown as a percentage of global oncology market size from 11% in 2003 to 46% in 2013. New brand specialty drug spending in the U.S. is estimated to have been $7.5 billion in 2013, or 69% of total new drug spending. The growing prevalence of these drugs and their cost to the health system are setting the stage for significant flashpoints between industry, payers, and providers, seen most clearly in the debate over hepatitis C treatment costs that roiled stakeholder interactions for most of the past year. 

More of these targeted treatments are in the development pipeline, and a growing number of public policy efforts taking shape in 2015 are focused on accelerating their availability. The House of Representatives' 21st Century Cures Initiative, for example, has released a slew of legislative proposals aimed at promoting breakthrough innovation by increasing the efficiency of drug development and regulatory review. These efforts have significant downstream implications for the pace at which targeted and specialty therapies will become available, their associated costs, and the growing importance of demonstrating value in the postmarket setting.

As payers and providers continue their push toward increased value-based care, more innovative models for connecting such reforms to drug development are needed. Earlier collaboration with industry could enable more efficient identification of unmet need, opportunities to add value through drug development, and clearer input on the value proposition and evidentiary thresholds needed for coverage. Equally important will be unique public-private collaborations that invest in developing a better postmarket data infrastructure that can more effectively identify high value uses of new treatments and support achieving value through new payment reforms.

Stronger collaboration could also improve evidence development and the coverage determination process after a targeted  treatment has gained regulatory approval. Facilitated drug access programs like those proposed by the Medicare Administrative Contractor Palmetto GBA create access points for patients to receive targeted anti-cancer agents off-label while payers and industry gather important additional outcomes data in patient registries. More systematic and efficient use of policies like Medicare's Coverage with Evidence Development (CED), which allows for provisional coverage for promising technologies or treatments while evidence continues to be collected, could enable industry and payers to work together to learn about a medical product's performance in patient populations not typically represented in clinical studies. A CED-type model could be especially useful for certain specialty drugs: data collected as a condition of payment could help payers and providers develop evidence from actual practice to improve treatment algorithms, increase adherence, and improve outcomes. 

Finally, collaborations that support stronger postmarket data collection can also support novel drug payment models that further reward value. Bundled payments that include physician-administered drugs, for example, could encourage providers to increase quality while also incentivizing manufacturers to help promote evidence-based drug use and lower costs for uses that generate low value. Outcomes-based purchasing contracts that tie price paid to a medical product's performance could be another promising approach for high-expense treatment with clearly defined and feasibly measured outcomes.

Many of these ideas are not new, but as manufacturers, payers, providers, and patients move into an increasingly value-focused era of health care, it is clear that they must work together to find new ways to both promote development of promising new treatments while also making good on the promise of value-based health care reforms.

      

Event Information

The Sentinel System is a state of the art active surveillance system relying on a distributed data network to rapidly scale analysis of health care data collected from over 178 million patients nationwide. Sentinel is an important safety surveillance tool used by the U.S. Food and Drug Administration (FDA), and its underlying distributed data infrastructure is increasingly being recognized to have the potential to support the needs of diverse stakeholders including other public health agencies, health systems, regulated industry, and the clinical research enterprise. Despite Sentinel’s importance in safety surveillance, patients are largely unaware of Sentinel’s public health mission and commitment to protecting patient privacy. Therefore, it is both timely and critical to identify opportunities to raise awareness and build trust for Sentinel safety surveillance among patients, consumers, and the general public.

On June 23, the Center for Health Policy at Brookings, in collaboration with the FDA, hosted an expert workshop to discuss opportunities to raise awareness of the Sentinel System through improved communication to patients and consumers. Participants, including Sentinel Data Partners, patient focused organizations (e.g., consumer advocacy groups), experts in patient privacy, ethics, and health literacy, and representatives from the FDA explored possible opportunities where each stakeholder might be uniquely positioned to engage with patients, and how these communications could be designed and delivered effectively. Discussions from this workshop resulted in recommendations including a set of guiding principles, potential tools, and strategies to improve awareness of the Sentinel System, but more broadly, safety surveillance activities led by the FDA.

Event Materials

• Sentinel Engagement_Discussion Guide
• Engagement_Agenda
• Engagement_Participant List
• Engagement_Speaker BioSketches
• Engagement_Meeting Summary

       

EXECUTIVE SUMMARY

Parents, educators, government ministers and policymakers in all contexts and countries around the world are concerned with learning and how to improve it. There are many reasons for this, but none is more important than the fact that learning is at the heart of success at the individual, community and global levels. Learning First is the title of this report, with the strong implication that learning should be the foremost goal of education policies worldwide.

The present review seeks not only to explain why this is the case but also focuses on what we need to know—that is, what research is needed—in order to improve learning in the decades to come, particularly among those children most in need. This question is addressed in the following six sections.

1. Learning Goals and Research. The first section begins with a historical synopsis of international education goals put forward in 1990 at the World Conference on Education for All in Jomtien (Thailand), in 2000 at the Education for All conference in Dakar, and later in 2000 as a part of the UN Millennium Development Goals for 2015. In 2011, the Center for Universal Education at the Brookings Institution published A Global Compact on Learning: Taking Action on Education in Developing Countries, which stated that there is a “global learning crisis—which affects children and youth who are out of school with limited learning opportunities and those who are in school but not learning the skills they need for their futures.” The present review of learning research in low-income countries follows from that report. The overall purpose is to explore the most pressing learning issues today that require further research attention in the years to come.
    
2. Learning Definitions and Contexts. This section reviews how the field of education has defined learning over the years. Here, learning is defined as a modification of behavior due to experience—such as in knowledge, skills, attitudes and values. Three main principles of effective learning are suggested: individual active involvement, social participation, and meaningful engagement. As a way to emphasize the importance of learning contexts, three individual stories—Illa, a four-year-old Quechua-speaking girl in Peru; Pawan, an eight-year-old primary school student in urban India; and Rachida, a young illiterate woman in rural Morocco—are provided in order to better explain the importance of learning as a culturally specific phenomenon. These stories help to illustrate a more general learning framework, encompassing the relationship between two dimensions of learning—its processes and contexts. A discussion follows concerning the need to disaggregate learners and their learning contexts—between countries and within countries—as a way to overcome frequent and simplistic generalizations about how the “average” child learns.
    
3. Global Change and the Contexts of Learning. This section considers the issue of global change on how learning and learning contexts are being transformed around the world. For example, researchers need to pay more attention to the impact of migration on children’s learning and on educational systems more broadly. In each instance of translocation, children confront the challenges of adapting to a new environment that may include different languages, dialects or cultures within the nonformal learning contexts of daily life. Similarly, in formal education contexts, student migrants have to cope with contrasts in culture, lifestyle and language of schooling, and demonstrate skills and achievement that may vary dramatically with their culture of origin. Other changes due to globalization include increased multilingualism in schools, growing overcrowding in classrooms, inability to keep up with teacher training, changes in intergenerational learning, and the growing importance of 21st-century skills. Based on these observations, it is suggested that learning contexts and needs should be understood as a shifting target.

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INTRODUCTION

With fewer than three years until the planned end-date of the United Nations Millennium Development Goals (MDGs), attention is rapidly turning to what will follow. The elaboration of the next global development agenda is a complex, multi-pronged process that is academic, political and practical, involving experts from a myriad of social and economic sectors and representing a cross-section of constituencies. While the formal U.N. process is still in the early stages, the ongoing discourse (predominantly occurring in the global north, but not exclusively) has introduced several potential frameworks for this agenda. This paper describes the leading frameworks proposed for the post-2015 global development agenda and discusses how education and learning fit within each of those frameworks. While many within the education community are working to develop a cohesive movement to advance an “access plus learning” agenda, it remains equally important to engage proactively with the broader development community to ensure that education fits within the agreed upon overarching organizing framework.

The frameworks described below represent a snapshot of current thinking in 2012. On the road to 2015, the education community will need to refine and sharpen its thinking with respect to how learning is incorporated into the prevailing framework. The seven frameworks that will be addressed in this paper are:

1. Ending Absolute Poverty
2. Equity and Inclusion
3. Economic Growth and Jobs
4. Getting to Zero
5. Global Minimum Entitlements
6. Sustainable Development
7. Well-Being and Quality of Life

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In the 13 years since the dawn of the new millennium, significant progress has been made in addressing some of the world’s most important problems. One billion fewer people live in extreme poverty, 3 million children’s lives are saved annually and 610 million children in developing countries are enrolled in primary school, more than ever before. However, this progress has not been shared evenly around the globe. Populations affected by weak systems of governance and that suffer violence and disasters have systematically been left behind.

They are much less likely to enjoy progress vis-à-vis any of the United Nations’ Millennium Development Goals (MDGs), which include eradicating extreme poverty and hunger, improving children and women’s health, and enrolling children in school. No country classified as a “fragile state,” for example, has met all eight of the MDGs. Children born in low-income, conflict-affected countries are twice as likely to die before the age of five years, twice as likely to lack access to clean water and more than three times as likely to not attend school than children living in peaceful, low-income countries. People living in poverty, many of whom are affected by conflict, are more vulnerable to the effects of climate change and disasters. Children are especially affected, and those from the poorest families are up to 10 times more likely to bear the brunt of environmental disasters linked to climate change.

The needs of people living in fragile states are an urgent priority for our time, and thus will almost certainly be prominent in the next round of global development goals. As the global community reflects on the new agenda that will replace the MDGs when they expire in 2015, it will do well to take stock of the existing strategies for supporting the needs of populations in fragile states. A range of strategies are undoubtedly needed, and there is good reason why there is a heavy emphasis on the economic, legal and security dimensions of development efforts in fragile states. However, efforts in the social sphere are equally needed, and education is one important strategy for supporting populations in fragile states that was often overlooked until recently.

This report provides a broad review of the field of education in fragile states and charts a new agenda for maximizing education’s contribution to the development and well-being of people living in these contexts. We hope it serves as a comprehensive introduction to the topic for those coming to this issue for the first time as well as provides new insights for those already actively engaged in the subject. The arguments we make here are based on evidence developed both from careful analysis and synthesis of the latest available data as well as primary research.

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On Monday, the White House Council of Economic Advisers (CEA) released a report examining the long-term decline in the share of prime-age men (aged 25 to 54) who are either working or actively looking for work. What economists call the labor force participation rate for this population decreased from 98 percent in 1954 to 88 percent today, the second largest decrease among OECD countries. This trend has raised concerns not only for its impact on economic growth, but also because it seems to track an increase in mortality over that time, particularly among white males, as economists Anne Case and Angus Deaton have found.

The CEA report documents a number of possible explanations for this trend, including increasing rates of women in the workforce, rising disability insurance claims, falling demand for less-skilled workers, and barriers to employment for those with criminal records.

The report’s national analysis alone, however, obscures tremendous variation across the United States in employment among this critical group.

According to data from the Census Bureau’s American Community Survey, in 2014, 81 percent of prime-age men nationwide were employed (this statistic differs from the labor force participation rate in that it omits those who are looking for, but not in, work). Yet among the nation’s 374 metropolitan areas for which data are available, that rate ranged from over 93 percent in the oil boomtown of Midland, TX, to just over 50 percent in Kings County in California’s Central Valley.

There are clear regional patterns to this important statistic. Many of the metro areas with the highest employment rates for prime-age men are smaller places located in the middle of the country, from the Upper Midwest, to energy-rich areas in Texas and the Plains states, to the Intermountain West. In several large, economically dynamic metro areas such as Denver, Houston, Minneapolis, San Jose, and Washington, D.C., rates of work among prime-age men are also very high.

Of much greater concern is the large number of metropolitan regions with very low rates of work among prime-age men. These include many small former industrial centers in states like Michigan, Indiana, and Ohio; areas of West Virginia and Louisiana that rely on declining-employment industries like mining; and long-struggling agricultural economies in Arkansas, Texas, and inland California.

These patterns echo findings from the CEA report that falling demand for labor is an important part of the long-term decline in prime-age male employment. In many places where a high school diploma alone once provided the gateway to a middle-class job, nearly one-third of men in this age group are out of work. This is also evident in the local relationship between educational attainment and work—where educational attainment rates are higher among prime-age men, members of that group are more likely to be employed. A 10-percentage point difference in employment rates separates the most highly-educated quarter of metro areas from the least highly-educated quarter.

Beyond education, size seems to matter, too. Large metro areas exhibit higher rates of work among prime-age men than small metro areas. Across the 100 largest U.S. metro areas, 83.2 percent of prime-age males are employed, compared to 79.8 percent in the smaller 274 metro areas. This relationship partly reflects that men in large metro areas have higher rates of educational attainment than those in small metro areas. Yet even men who have no more than a high-school diploma work at higher rates in large metro areas (64 percent) than similarly educated men in smaller metro areas (62 percent). Larger regional economies with greater economic diversity may stimulate stronger demand for workers at lower skill levels.

Several of the policies that the CEA report recommends to improve prime-age male labor force participation, such as bolstering investment in public infrastructure, reforming unemployment insurance, and boosting educational attainment could help boost rates of work in lagging U.S. metro areas. However, none directly addresses the fact that problems in male employment disproportionately affect small and often economically isolated U.S. regions. This evidence suggests that policies to help dislocated workers relocate to larger, more economically dynamic metro areas—particularly by improving the supply of affordable housing in those regions—should be part of a comprehensive strategy to help reverse the troubling long-term decline in men’s work.

      

We can all breathe a big sigh of relief – the job market does not appear to be dramatically slowing.

After a very weak jobs report for the month of May – when only 11,000 jobs were created – the employment numbers bounced back strongly in June, with 287,000 payroll jobs created this month.

This represents the strongest monthly rate of new job creation this year, and is well above economist expectations of about 170,000 jobs created. The return of Verizon workers to their jobs after a strike last month accounted for only about 35,000 of these jobs. Employment growth over the past 3 months now averages 147,000 – a bit below last year’s rate but quite good in a labor market where there is now less slack than before.

Job growth was strong in a range of sectors, including leisure and hospitality, health care and information technology. Growth was also notable in professional and business services, retail trade and finance. Even manufacturing showed a small uptick in employment (of 14,000), after having fallen in previous months (due to the rising value of the dollar and economic slowdowns overseas). But construction jobs this month were flat and mining employment fell again, but only slightly.

On the household side of the ledger, unemployment edged up a bit, from 4.7 to 4.9 percent. But much of this was due to a small bounce back in the labor force participation rate, which had dipped in the previous two months. Other concerns, such as rising part-time employment among those preferring full-time work, were also eased as such employment declined this month.

If there was any disappointment in the report, it was in wage growth. Hourly wages rose by just 2 cents this month, or about 1 percent on an annualized basis. Wage growth had been stronger in the two previous months, suggesting that some labor markets were perhaps tightening up. Over the past year, wage growth has averaged 2.6 percent – above the inflation rate and a modest improvement over previous years in which we were slowly recovering from the Great Recession.

Overall, the June jobs report should ease concerns of a coming economic slowdown, which grew stronger after the “Brexit” vote in Britain. Indeed, this report restores the view that prevailed a few months before, of a slowly but steadily improving labor market.

       

       

       

       

Hong Kong has seemed quiet for the last four months. The foreign media moved on to other stories once last fall’s protest movement came to an end. But locally the debate over a new system to elect the territory’s chief executive has continued non-stop, and the situation is about to heat up again. On Wednesday Hong Kong time, the government will announce its proposal for electoral reform. Once it does, the pro-democracy opposition will face some difficult choices.

Here, in not too much detail, is a quick review of the background.

In 2007, the government of the People’s Republic of China, which has sovereignty over Hong Kong, announced it would accept an election of Hong Kong’s chief executive (CE) through universal suffrage for the 2017 election. It also said that candidates would be picked by a Nominating Committee. Pro-democracy politicians and the public at large, a majority of which supports a more democratic system, welcomed the universal suffrage part of this pledge but suspected that Beijing would use the Nominating Committee to restrict who got to run. What good is a one-man-one-vote election, they asked, if voters had to choose between candidates who are from the territory’s conservative establishment camp and will likely accommodate Beijing? (Good question.)

The following ensued:

• After several years of public debate, the Hong Kong government began a formal process consulting the public in December 2013. The key point of disagreement was over whether election candidates could emerge only through a Nominating Committee vote or through other mechanisms as well. Those who wanted other mechanisms believed that the Committee’s membership would be friendly to Beijing and pick candidates accordingly. Some of these skeptics were prepared to engage in civil disobedience to try to get their way.
• In late June 2014, the Hong Kong government announced the results of the consultation and the incumbent CE, C. Y. Leung, made a formal report to Beijing. This was the first step in a five-step process for constitutional revision, a process set by China. There is general agreement that Leung’s report understated the opposition to a nomination system that relied exclusively on the Nominating Committee.
• On August 31st, the Standing Committee of China’s National People’s Congress (NPC-SC) announced a decision on basic parameters for the new system (step two). Sure enough, it ruled out any supplementary nominating mechanisms. It also strongly suggested that the Nominating Committee would be constituted the same way as the 1,200-person Election Committee that had heretofore selected the CE and whose members were mostly friendly towards Beijing. The NPC-SC also limited the number of final CE candidates to two or three and dictated that each had to receive majority support from the Nominating Committee to become a candidate.
• The public response to the decision was sharply negative. The logical conclusion seemed to be that the new system was rigged in a way that Hong Kong voters have to pick among establishment candidates only, and that a pro-democracy aspirant had no way of getting nominated.
• In late September, students began a civil disobedience campaign that was marked by episodes of violence, and resulted in the occupation of three sets of major roadways in the territory. These lasted until early December, but the campaign did not persuade the government to back down on its basic approach.
• At the same time, the Hong Kong government, staying within the parameters Beijing announced on August 31st, began a second consultation process on its more specific reform proposals.

Why, you may ask, doesn’t Beijing just impose the system it wants? The reason is that it already committed that in step three of the five-step constitutional revision process, the government would introduce a bill in the Hong Kong Legislative Council reflecting its final proposal and that the legislature would have to approve it by a two-thirds margin. Even though the legislature is constituted in a way that gives disproportionate power to interests aligned with Beijing, the establishment camp currently does not have enough votes for a two-thirds majority. Consequently, the government must win over four or five moderate legislators from the democratic camp. In response, the more radical democrats have worked hard to keep the moderates committed to rejecting any government that is based on Beijing’s parameters, because it means that China gets to screen who gets to run. 

In light of this problem, the Hong Kong government did a clever thing. In the consultation document, it included the option of “democratizing” the Nominating Committee while remaining within Beijing’s basic parameters. It proposed to do this first by making the body more representative of Hong Kong society and reducing the proportion of seats held by business interests and groups otherwise linked to China. Second, it suggested a two-stage process of selection. In the first stage, the Nominating Committee would consider more “potential candidates” than the two or three that would ultimately be nominated to run in the election. To be picked as a potential candidate, an individual would need the support of only a minority of Committee members (how low was unspecified). This could increase the possibility of one or more democratic politicians emerging as potential candidates and then, in the second stage, at least one of them being selected as a final candidate. The result would be a competitive election.

Last week, Raymond Tam, the Hong Kong government’s secretary for constitutional and mainland affairs, indicated that something along these lines would be proposed by the government this Wednesday. He talked of using “the necessary legal room to maximize the democratic elements” and making the “entrance requirement" for potential candidates no higher than one-eighth of the membership. Additionally, there would be greater openness, transparency and accountability in the process of reviewing potential candidates within the Nominating Committee.

The devil, of course, will be in the details of the proposal (more on that later in the week). Moreover, Tam said nothing about making the Nominating Committee more representative of Hong Kong society. Did that element get set aside, and if so, what are the implications? If the membership of the committee is still biased in favor of the political status quo, would it matter if the process within the Nominating Committee is more competitive and transparent?

Whatever the proposal, the ball will then be in the pan-democrats’ court. Do they vote as a block to reject any process that allows the Nominating Committee to screen candidates? Do they then want to expose themselves to near-certain criticism that their recalcitrance denied the Hong Kong public the opportunity to vote for the CE? Or, do they take a chance on the more flexible approach that Tam is proposing, in the hope and belief that a pan-democrat will be screened in, which in turn would seem to set up a competitive election?

Read Richard Bush's response to the Hong Kong government's proposal for electoral reform »