Posts Tagged ‘World Bank’
“The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.”*…
The always-illuminating Adam Tooze on poverty around the world…
In his speech at the 1973 Annual Meetings, World Bank President Robert McNamara coined the term “absolute poverty,” describing it as “a condition of life so degrading as to insult human dignity and yet a condition of life so common as to be the lot of some 40% of the peoples of the developing countries.” He then posed a difficult question: “And are not we who tolerate such poverty, when it is within our power to reduce the number afflicted by it, failing to fulfill the fundamental obligations accepted by civilized [people] since the beginning of time?” This defining speech solidified the Bank’s new goals at that moment: to accelerate economic growth and to reduce poverty.
That was 1973. Half a century later, what a wave of publications the World Bank tell us is that the fight against absolute poverty faces a new and urgent historic challenge.
From the 1990s onwards economic development brought giant progress towards the goal of ending absolute poverty. But that progress stopped ten years ago.
Since 2015, the push to raise the world’s population out of the direst deprivation, has stagnated. As the World Bank authors acknowledge, we are “facing a lost decade in the fight against global poverty”.
Not only has there been little progress since 2015. But the onset of what the World Bank Poverty, Prosperity and Plant Report dubs the “polycrisis”, is putting further progress even further out of reach. As a blog post amplified:
We are facing a series of overlapping and interconnected crises that are impacting lives and livelihoods almost everywhere. The combined effects of slow economic growth, rising conflict and fragility, persistent inequality, and extreme weather-related events have sent shockwaves across the globe. High-income economies are showing signs of resilience, but the outlook for low-income economies and fragile countries remains deeply troubling.
Just a decade ago, we had cause for more optimism. There was significant progress in sustainable development between 1990 and 2015, with more than a billion people lifted out of extreme poverty. This was a monumental achievement, driven primarily by strong economic growth in China and India, and it brought the wealthiest and least-well off economies closer in income levels. Yet, what seemed like a clear path to complete poverty eradication has since faded… global poverty rates have only now gone back down to pre-pandemic levels, with forecasts indicating a trajectory for the coming years that is dismal at best. Almost half the world’s population—around 3.5 billion people—is living on less than $6.85 a day, the poverty line for upper-middle-income countries. At a more extreme level, almost 700 million people are living on less than $2.15 a day, the poverty line for low-income countries. Extreme poverty has become increasingly concentrated in Sub-Saharan Africa or places affected by conflict and fragility…
… Thanks to Asia’s remarkable growth, absolute poverty is no longer a general global condition. It is now concentrated in a belt running across the breadth of West Africa, the Sahel, Central and Eastern Africa and extending up to the Horn of Africa. Across this vast region a rapidly growing population that will soon number more than half a billion, struggle to survive amidst increasingly harsh and unpredictable environmental conditions, more hampered than helped by states that fail to provide even basic infrastructure and services and where as one recent study of Nigeria has shown, inter-communal violence is amplified by environmental shocks.
Conflict, violence and political instability make either public or private action to escape poverty impossible. As the World Bank comments:
The importance of stability for future poverty reduction can be seen from the graph below, prepared for Western and Central Africa. Countries that managed to avoid fragility (Benin, Cabo Verde, Gabon, Ghana, Equatorial Guinea and Senegal) managed to steadily reduce poverty. Relative to countries that are presently fragile, or that moved in and out of fragility, stable countries reduced poverty by an additional 15 to 20 percentage points. Stability, by the way, goes beyond an ability to maintain peace. Macro-fiscal and debt sustainability are equally critical, as Ghana which recently defaulted on its external debt unfortunately shows. Poverty (at $ 2.15) increased from 25% in 2020 to 33% in 2023.
The implication is clear. Future poverty reduction will increasingly be premised on the ability to ensure stability, as stability is a precondition for economic growth and poverty reduction. In a world in which conflict and instability are on the rise, and debt distress is rising, this is a sobering realization and bad news for the global community’s ability to eradicate poverty anytime soon.
It is a long way from the civilizational language espoused by McNamara half a century ago…
Addressing poverty in turbulent times: “Africa & absolute poverty in an era of polycrisis,” from @adam_tooze.
Apposite: “How China Defeated Poverty” (possible paywall)
(Image above: source)
* Franklin D. Roosevelt
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As we seek stability, we might recall that it was (tradition holds) on this date in 1517– All Hallows (All Saints) Eve– that Martin Luther, a priest and scholar in Wittenberg, Germany, upset by what he saw as the excesses and corruption of the Roman Catholic Church (especially the papal practice of taking payments– “indulgences”– for the forgiveness of sins), posted his 95 Theses on the door of Castle Church. Thus began the Protestant Reformation.
(source)
“Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair”*…
… or inflation is when you get less for the old price. Mark Dent on America’s most egregious case of shrinkflation– an investigation he began with a purchase from eBay…
… It’s everything I hoped for: a factory-sealed four-pack of regular Charmin Ultra toilet paper produced in 1992.
I look at the fine print and gasp…170 sheets per roll!
These days, a regular Charmin Ultra Soft roll, if you can find one, has 56 sheets. Even the roll they market as “Double” doesn’t have 170 sheets — it has 154. And the 1992 rolls are hardly the largest — the back of the package includes a note from parent company Procter & Gamble explaining these rolls have fewer sheets than a previous version.
Toilet paper is shrinkflation at its absolute worst. Imagine if Chipotle spent decades reducing the size of its burritos until they looked like tacos.
How far does the downsizing go? And why has the industry managed to make its products so small with barely any scrutiny?… I called Edgar Dworsky to help unroll the mystery of toilet paper shrinkage.
Dworsky, a Massachusetts-based consumer advocate who runs the consumer education websites Mouse Print* and Consumer World, is perhaps the only person in the US who reads the fine print, and he’s certainly the only one who’s consistently tracked changes to the sizes of products like cereal, snack chips, frozen pizza, and coffee mix, becoming the go-to shrinkflation source. As companies sought to avoid price hikes during the last couple of years and opted for shrinkflation, Dworsky’s decades-long work was profiled by the New York Times and praised by John Oliver.
When it comes to downsizing products, Dworsky tells me that toilet paper, along with paper towels, “probably come in first place.” And my 1992 toilet paper is just the tip of the iceberg…
[Dworsky helps Dent (and us) understand just how far shrinkflation has gone (e.g., a regular Charmin roll, 56 sheets today, had 650 sheets in 1974), why (the full range of) manufacturers are acting so aggressively (spoiler alert: it’s garden-variety greed, but also other forms of self-interest), and how they market less-for-more…]
… While it may seem deceptive to shrink toilet paper with little notice aside from the fine print — and to compare “Mega” and “Double” rolls to basically nonexistent products — it’s not against the law. Companies can shrink their product and charge the same amount, or more, while doing nothing to warn consumers aside from updating the fine print.
The new publicity around shrinkflation has at least caught the attention of legislators. Two new shrinkflation bills have been introduced this year. One would give the FTC power to punish shrinkflation and another would force companies to notify consumers when they shrink products while keeping the price the same. France enacted a similar law a few months ago.
Absent new protections, though, toilet paper will keep getting smaller and rebranded with deceptively larger names that actually contain less product. “There is no end,” Dworsky says.
He’s already spotted Charmin’s latest stunt: The company has swapped out “Super Mega” rolls for “Mega XL,” a rebrand with the same number of sheets. Dworsky suspects Charmin fears running out of descriptors and wants to save the mother of all superlatives, “Super Mega,” for the next time its shrinkage has gone too far.
“I mean, seriously, what can you do to Super Mega? Become Super Super Mega? Super Mega Plus?” he says.
The toilet paper companies will find a way. They always do…
“Why toilet paper keeps getting smaller and smaller,” from @mdent05 in @TheHustle.
* Sam Ewing
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As we compare, we might send carefully-calculated birthday greetings to two important economists, both born on this date in 1954:
Katharine G. Abraham, a professor at the University of Maryland, served as the commissioner of the Bureau of Labor Statistics from 1993–2001 and a member of the Council of Economic Advisers from 2011–2013. She laid the groundwork for the American Time Use Survey, and (germanely to the piece above) testified repeatedly before Congress on the shortcomings of existing methodology of the Consumer Price Index in the 1990s (and the necessity of making revisions based on objective research) and expanded coverage of the prices of services in the Producer Price Index.
Sanjiv M. Ravi Kanbur, T.H. Lee Professor of World Affairs, International Professor of Applied Economics, and Professor of Economics at Cornell University. worked for the World Bank for almost two decades and was the director of the World Development Report. In May 2000, Kanbur resigned as director and lead author of the World Development Report, following the publication of the initial draft of the 2000/2001 report on the internet. Kanbur’s resignation came a year after the resignation of the World Bank’s senior vice-president and chief economist, Joseph Stiglitz…
Kanbur’s initial draft argued that, “anti-poverty strategies must emphasise ’empowerment’ (increasing poor people’s capacity to influence state institutions and social norms) and security (minimising the consequences of economic shocks for the poorest) as well as opportunity (access to assets).” The final version of the report still contained the three central pillars of: (a) empowerment, (b) security and (c) opportunity, however the order was changed to (a) opportunity (with emphasis given to market-driven economic growth and liberalisation as ways of reducing poverty), (b) empowerment and, (c) security. The World Bank denied that US treasury secretary Larry Summers or anyone else had influenced the report to make it less radical…. (source)
“It’s the economy, stupid”*…
It’s no secret that economic conditions have political impacts; still the stark, almost mechanical character of that impact can still be surprising– and can raise the question of motive. Consider on the findings of a recent study by analysts at Sveriges Riksbank, Sweden’s central bank…
Using a novel regional database covering over 200 elections in several European countries,
this paper provides new empirical evidence on the political consequences of fiscal consoli-
dations. To identify exogenous reductions in regional public spending, we use a Bartik-type
instrument that combines regional sensitivities to changes in national government expendi-
tures with narrative national consolidation episodes. Fiscal consolidations lead to a signifi-
cant increase in extreme parties’ vote share, lower voter turnout, and a rise in political frag-
mentation. We highlight the close relationship between detrimental economic developments
and voters’ support for extreme parties by showing that austerity induces severe economic
costs through lowering GDP, employment, private investment, and wages. Austerity-driven
recessions amplify the political costs of economic downturns considerably by increasing dis-
trust in the political environment.
Here, Adam Tooze:
With a significant data set, this paper argues that post-2008 austerity clearly increased support for far-right parties by deepening recessions and generating social fragmentation. Note that the authors measure support for “extreme” parties, which risks lumping together fascists and socialists through liberal “horseshoe theory” — the most ostensibly objective, empirical social science has a dose of ideology in it! — but this is nonetheless important in confirming the old Keynesian claim that was so starkly forgotten by Eurozone political elites after the financial crisis. The question that arises, then, is why a truth discovered through much pain in the 1930s (slashing demand only deepens economic and social problems) was set aside: was this a case of foolishness or the pursuit of other, narrower [economic self-serving and/or political] interests?
Why do we keep making the same mistakes: “The Political Costs of Austerity,” from @riksbanken and @adam_tooze.
For a sense that there may be some remedial action afoot, at least in the aid available to troubled economies, see “A reboot of the World Bank and IMF tests US influence” (gift article; source of the image above)… though it’s fueled by geopolitical competition for influence, so may simply be trading one problem for another…
And for a contrary view: “The Economic Anxiety Explanation of Fascism Is Wrong” (though the author’s case begins from the assertion that “there just is little to no evidence that economic hardship leads to fascism,” a claim weakened by the paper above; still his larger argument is worth reading).
* James Carville, while he was serving as a strategist to Bill Clinton’s 1992 presidential campaign (which unfolded during a recession)
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As we wonder if it is, in the end, all about the Benjamins, we might recall that on this date in 1929 Yale economist Irving Fisher wrote in the New York Times that “Stock prices have reached what looks like a permanently high plateau.” Eight days later, on October 24, 1929, the stock market began a four-day implosion on what became known as Black Thursday. This crash cost investors more than World War I and was a main catalyst of the Great Depression.
Fisher’s declaration was in response to Great Britain’s Chancellor of the Exchequer, Philip Snowden, then-recent description of America’s stock market as “a perfect orgy of speculation,” which was quickly followed by U.S. Treasury Secretary Andrew Mellon’s assertion that American investors “acted as if the price of securities would infinitely advance.” Fisher’s prognostication has entered history as the worst stock market prediction of all time.
“The only thing useful banks have invented in 20 years is the ATM”*…
ATM’s have been around in the U.S. since 1969; there were, as of 2018, 470,135 of them in operation, from which $5.1 Billion was withdrawn. The market for the machines and the technology that connects them was $20 Billion in 2020, projected to grow to $30 Billion in 2028. They were originally– and are still primarily used for cash disbursement; but over the years they’ve added a number of other functions: account deposits, bill payment, even lottery and movie ticket purchase– there are over 10 Billion ATM transactions in the U.S. alone. As cash plays a less central role in transactions, the the number of machines and transactions has slightly declined. Still they are a major factor in today’s financial infrastructure– and that few of us really understand. Patrick McKenzie is here to help– and to remind us that their history has lessons that are broader…
The first automated teller machines, which debuted in the late 1960s, were, as the name suggests, strictly cost-saving devices for bank branches. Branches exist as sales offices but have incidental cash-management functions. The denser depositors are around a branch, the more transactions happen during peak windows like e.g. the morning commute and lunchtime. The more transactions you need to support in a window, the more tellers you need to employ. Tellers are both surprisingly inexpensive relative to the degree of trust placed in them but surprisingly costly relative to occupations like e.g. cashiers which look outwardly similar. Banks have long wanted to control the costs of the teller base.
The original thesis behind the ATM was that you could move the most routine teller transactions, like cash withdrawals and balance inquiries, to a machine, and then reserve the teller for higher-complexity routine transactions like cashing checks. The machines gradually gained more features as they achieved ubiquity.
Interestingly, teller employment is actually up substantially since the introduction of ATMs. Secular demand for retail banking grew with the economy and the larger number of branches has compensated for reduced numbers of tellers per branch. See Bessen 2016…
ATMs are a fascinating example of a pattern we see a lot in finance: an internal operations improvement which was built into a business which eventually begat an infrastructure layer that may be a much bigger business. And for all their ubiquity, almost no one, even people professionally involved in finance, understand how they work…
See also: “Automated Teller Machines” (source of the image above)
The plumbing of finance: “The infrastructure behind ATMs,” from @patio11.
* Paul Volcker (2009)
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As we insert our cards, we might send carefully-denominated birthday greetings to Kaushik Basu; he was born on this date in 1952. An economist, he served as Chief Economist of the World Bank from 2012 to 2016. Having taught at MIT, Harvard University, the Institute for Advanced Study at Princeton, and the London School of Economics, he is currently a professor at Cornell. From 2009 to 2012, during the United Progressive Alliance‘s second term, Basu served as the Chief Economic Adviser to the Government of India. His recent work has been on collective moral responsibilities and the role that individuals play in fulfilling them. In 2021, he was awarded the Alexander von Humboldt Foundation Research Award.
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