January 05, 2009
We are at the start of what promises to be an unusually difficult year in the global economy. Policy decisions in the United States and other rich world countries will matter immensely for poor and vulnerable people living in developing countries. Fortunately, there are a number of fairly straight-forward policy initiatives that could make life less difficult for poor people in the developing world while also benefiting the majority in high-income countries. With that in mind, here is my partial policy wish list for 2009:
- Avoid protectionism. And may the Obama Administration take a positive step: Offer permanent duty-free, quota-free market access for the poorest countries. That rich countries manage to avoid protectionist trade and industrial policies that would exacerbate the global downturn and be particularly disastrous for household income and unskilled workers (in textiles for example) in low-income countries. A U.S. loan to the auto industry is less bad than the French subsidies that are on the table. Simon Johnson has a good idea. He suggests that the G-20 monitor and report on proto-protectionist steps among its members on its Web site. Besides doing no new harm, how about the incoming Obama Administration proposing to the Congress permanent duty-free quota-free access for select low-income countries as suggested by Kim Elliott? That would put trade to work for development (on which the Doha round has been a flop up to now), at virtually no cost to U.S. jobs.
- That the Obama Administration act now on global warming, proposing a gas tax-financed cut in the payroll tax. That the U.S. Congress pass legislation by mid-2009 setting a target for reduced emissions of greenhouse gases (at least an 80% cut from 1990 levels by 2050, which is what President-elect Obama has called for and which would be in line with European pledges). This could be via revenue-neutral carbon charges or public auction of emissions rights, the revenue from which could be remitted to help America's working families adjust to the low-carbon economy as David Wheeler has suggested. Charges should be at least $15-$30 per ton of CO2 emissions; at that level, Wheeler claims that renewable energy, such as concentrated solar, becomes competitive. A first step would be instituting a floor on gasoline prices (I would suggest $3.50 to start moving to $4 over a year or so) as Kemal Dervis has proposed and as Tom Friedman has implored. A gasoline tax could be progressive and revenue-neutral if it financed a reduction in the payroll tax; that in turn would encourage job creation which Dani Rodrik wants to see as central to the stimulus package.
- Get serious about development as one of the Three Ds. That the Obama Administration strengthen the development leg of the three-legged foreign policy stool (defense, diplomacy and development) which I have noted could be done at a budget cost of less than $10 billion per year, excluding new R&D in clean energy. This amounts to an incredibly big bang for the buck in restoring global respect for the United States, especially when compared to the hundreds of billions we spend on traditional "security" and defense. The $10 billion covers not only reform of U.S. foreign assistance but also development-focused policy fixes to U.S. trade, migration and climate change policy.
- Modernize foreign assistance -- and take the lead on universal basic education. That the incoming U.S. administration and the new Congress work together to lay the foundation for a major reform of U.S. foreign assistance programs, and embrace innovations such as our Cash on Delivery (COD) Aid proposal. Also that the United States take leadership creating a Global Education Fund to promote universal basic education, recently proposed by Gene Sperling and others.
- Get the facts on global migration. That OECD members agree to ensure that all their 2010 censuses will include three basic questions about the movement of people (including "Where were you born?" and "Where did you live five years ago?") that would enable sound empirical research on migration and development. Such research could help to motivate policy changes that would foster development-friendly increases in the temporary movement of people across national borders, especially people from developing countries who seek opportunities in rich countries (on this issue, stay tuned for the recommendations of our Commission on International Migration Data for Development Research. Meanwhile, read Michael Clemens' recommendations for the incoming Obama Administration and a striking working paper on the wage gaps caused by barriers to movement across international borders.)
- Reform governance at the IMF and the World Bank. That the current crisis breathe life back into officialdom’s efforts to reform the IMF and the World Bank, especially to reform their embarrassingly outmoded mid-twentieth century governance arrangements. Specifically, that the announced commissions on IMF and World Bank governance, led respectively by Trevor Manuel and Ernesto Zedillo go beyond the timid incremental fixes of the last couple of years (marginal increases in votes and a third chair on the World Bank Board for African countries). For example, how about getting the United States and Europe to publicly renounce their patronage privileges in the appointment of future heads of the World Bank and IMF, respectively? Or how about instituting special majorities (for an excellent exposition see also) for election of those heads, that would require, for example, a majority of country members as well as a majority of weighted votes?
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.