Inequality

Emerging Voices features contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is by Deirdre White, president and CEO of CDC Development Solutions (@CDCDevSolutions). Here she discusses the limits of foreign aid and how the private sector can help further development goals.   Due to years of national economic turmoil, the future of U.S. foreign aid is now uncertain. In May, Congress proposed capping next year’s foreign aid budget at $40.6 billion, which is fifteen to twenty percent less than the current amount of $51.7 billion. The recent sequestration has reduced international assistance programs by another $1.7 billion. Fortunately, several advances bode well for the future of economic development. First of all, over the next several years, a number of today’s developing countries—including Ghana, Mozambique, and Tanzania—are expected to move into the ranks of the middle income countries, joining states such as Chile, Brazil, and South Africa. With more wealth, these countries should be better equipped to help their underserved citizens. Still, many organizations in these countries, including government agencies, businesses, and nonprofits, require foreign assistance; but more than traditional direct aid investment, these organizations now need elite professional training. Thus, as the U.S. government begins to cut foreign aid spending, there is an enticing opportunity for private sector organizations to step in and provide much needed skills-transfers and training. Seeking to cultivate this approach to development, the State Department and USAID hosted a Forum on International Corporate Volunteerism last month that recognized the catalytic impact of training programs for organizations and individuals in emerging and frontier markets. Representatives from Amazon, Citibank, IBM, CDC Development Solutions (the organization I work for), spoke at the event, as companies learned how they can use their resources to further global development. Drew O’Brien, the State Department’s special representative for global partnerships, championed the effectiveness of innovative public-private partnerships. In his opening remarks, O’Brien explained “Corporate volunteer programs bring private sector innovation and experience to our diplomatic and development work . . . At the same time, they help to achieve our foreign policy objectives.” Jim Scott, senior advisor to the NGO Seed Global Health and a panelist at the event, described how his organization’s Global Health Service Corps (GHSC) is cultivating stronger, more sustainable health systems by training doctors and nurses in underserved areas. This year, GHSC will send thirty-three physicians, nurses, and medical professionals to African countries on year-long assignments. Rather than providing direct medical services in rural areas that do not currently have access, these volunteers will work with government ministries of health and education to train dozens of local practitioners in medicine, psychology, and nursing. This type of program will enhance the knowledge base of current and future generations. One GHSC volunteer, who will be travelling to Malawi, is a child psychologist. According to Scott, there are no child psychologists currently practicing in that country. Thus, the volunteer plans to work on a strategy to secure the practice of child psychology in Malawi after she leaves, in addition to training local professionals in the practice. It is these types of long-term plans and partnerships that will help emerging and frontier markets overcome many challenges. More than direct funding, developing communities abroad need expertise. “What would happen if every Fortune 500 company fielded 100 employees per year?” asked Stanley S. Litow, president of the IBM Foundation and vice president of IBM’s Corporate Citizenship efforts, speaking about the long-term potential of the initiatives he oversees. “Collectively, we would deploy 50,000 of the most talented leaders around the world to solve some of the most difficult problems facing society.” IBM, which is celebrating the five-year anniversary of its Corporate Service Corps, the largest program of its kind, recently deployed a team of volunteers to Brazil to work with Casa da Criança, a NGO that serves youth centers across the country. Since 1999, the organization has managed over $19 million in donated products and services; mobilized 2,000 architects, interior designers, and artists; and has worked with nearly 30,000 partner companies. In four weeks, the IBM team helped train Casa da Criança in a new business approach that integrates digital technologies into their work and will enable the organization to manage their products, services, and partnerships more effectively and efficiently. The NGO expects to enjoy an eight percent gain in productivity and efficiency by using these technologies. This corresponds to $117,000 in annual savings. Over a five-year period, these new practices should save the organization enough money to serve an additional 600 children. In many African countries as well, business acumen could help jumpstart economic development. The journalist Ben Schiller pointed out in his recent Fast Company article that many entrepreneurs in emerging markets need to develop strong management skills more than they need funding. The private sector is in an ideal position to develop and benefit from training programs that spur economic development in emerging and frontier markets. At the end of his recent tour in Africa, President Barack Obama remarked, "I believe that the purpose of development should be to build capacity and to help other countries actually to stand on their own feet. Instead of perpetual aid, development has to fuel investment and economic growth so that assistance is no longer necessary." Innovative programs led by private sector actors, in partnership with NGOs, governments, and individuals can bring the world closer to this vision. As Special Representative O’Brien eloquently described, “We are fortunate to work in a field where there is no such thing as a bad idea. For every problem or issue that’s out there, there are solutions and partners that are waiting.” Now is the time for such partnerships to flourish.

My blog post last week proposing a global "Lawyers Without Borders" organization to represent local communities on international economic law issues generated such an unusual number of emails and comments I think it is worthwhile to highlight a couple responses. Robin Ford wrote: "Thanks for this timely  article. I agree, but would go further.  There are many organizations that provide pro bono assistance... Advocates for International Development, the international wing of the American Bar Association, the Human Rights Institute of the International Bar Association, Human Rights Watch, and more.  I am sure they talk to each[other] from time [to time], but an overall coordinating and strategy-setting body would help them all be more productive.  In addition, I would like to see the creation of a group of superb commercial lawyers willing to work for less to assist lesser developed countr[ies’] governments with matters such as debt financing and public-private initiatives.  Far too often such governments are disadvantaged...when their legal team is not as skilled as the one acting for the other side of a deal." Garth Meintjes, executive director of the International Senior Lawyers Project, wrote: "The solution that you propose already exists, albeit not yet at the scale and scope that you envision.  The International Senior Lawyers Project is a free resource for communities and developing country governments who need high-level legal expertise.  ISLP works internationally on an attorney-client basis to empower those who lack the legal knowledge or representation to manage their resources effectively and to develop their economies.  ISLP’s staff in New York, London, and Paris are working hard to reach more clients and to recruit more volunteers.  Please visit ISLP.org for more information." What did you think about the blog post? We’d love to hear your thoughts. Please post them in the comments below

Private capital flows through foreign direct investment and portfolio investment now exceed $1 trillion annually. This has deep income, wealth distribution, and human rights effects for people around the world—creating opportunity for many, but leaving some behind. International economic rules govern these capital flows by regulating banks and multinational investors, determining property rights, and establishing legal claims and mechanisms for redress. Yet vulnerable communities, such as subsistence landholders, informal workers and entrepreneurs, marginalized religious and ethnic groups, and slum dwellers, have virtually no voice in determining the rules of the global economy and lack effective representation to protect their interests within the developing international legal framework. Accountable governance is critical to protecting human rights, advancing shared opportunity, and promoting inclusive and sustainable development, but is fundamentally lacking at the global level. In the United States, organizations like the Legal Aid Society provide pro-bono services to poor clients faced with day-to-day legal challenges. But no such organization or network exists globally to represent poor communities regarding international matters. Although a number of international advocacy groups currently mobilize public action and pressure policymakers regarding some issues, these organizations are not directly accountable to the constituencies they serve because they do not directly represent vulnerable groups or individuals through client-based relationships. Moreover, all these efforts fall far short of addressing the real needs of affected communities in terms of capacity, reach, and scope. This challenge can be addressed by establishing a global network of legal offices to provide pro-bono client-based representation for vulnerable local communities affected by international economic policy. These advocates for local communities would help level the playing the field, improve social accountability, and ensure that the rules of the global economy work better for everyone. Similar to a standard consulting firm or corporate law firm, this network of pro-bono legal clinics would provide advice, lobbying, and counsel at all stages of the legal and policymaking process: including aiding legislative drafting by congresses and parliaments, rule-making by regulatory bodies like the Securities and Exchange Commission, treaty negotiation and drafting, arbitration within dispute-resolution forums like the International Centre for Settlement of Investment Disputes, policy-setting by international standard organizations like the Financial Stability Board, and litigation through domestic courts. International economic laws are complex and influence the lives of vulnerable groups in several different ways. Expert advocates would represent affected communities on the full range of issues and circumstances in which international laws and norms have significant local effects. This social accountability network should tackle the following challenges: representing communal landholders who are being forcibly displaced by foreign investment “land grabs” and development projects such as hydroelectric dams and oil and mining projects representing local communities whose access to subsistence livelihoods or resources are threatened by global climate change agreements influencing new global banking and finance regulations to protect the interests of small-scale microcredit borrowers and entrepreneurs in the global south protecting local fishing communities whose livelihoods are being eviscerated by the global fishing industry advocating on behalf of communities living near sites of fuel extraction and natural resource exploitation whose livelihoods are threatened by environmental pollution promoting intellectual property rights in trade and investment treaties that advance access to essential medicines and medical technologies A new network of advocates for vulnerable communities would address a critical challenge of global economic governance by advancing social accountability—a loosely based Lawyers Without Borders would ensure the rules of the global economy work for everyone, not just the rich and powerful.

Most everyone agrees that inequality matters. Studies by the World Bank, the IMF, and by academics (such as Richard Wilkinson of the University of Nottingham) demonstrate how harmful inequality can be, affecting a whole host of factors, ranging from economic growth rates to teenage pregnancy rates and crime. Given the stakes, recent trends in Latin America have been quite positive. Using the Gini index, the most common measure of inequality (where zero represents a perfectly equal society, and one is perfectly unequal), Latin America has been one of the most unequal regions in the world, with the worst discrepancies found in Brazil, Honduras, Ecuador, Colombia, and Bolivia. But over the last decade the Gini declined in fourteen Latin American countries, led by Argentina, Brazil, Ecuador, and Panama. One reason is economic stability. The booms and busts of the 1980s and 1990s, which wiped out the savings of so many, have now dissipated. Another important factor has been the global demand for the region’s commodities (which range broadly from energy to foodstuffs to minerals), bringing an influx of dollars and spending. Government-run social programs too have mattered, in particular conditional cash transfer programs such as Mexico’s Oportunidades and Brazil’s Bolsa Familia that have helped improve the living situations of millions. Taken together, income for Latin America’s lower and middle classes rose much more quickly than that of the region’s economic elites, reducing inequality. These positive trends contrast to what has been happening in the United States. Measured by the OECD, America’s Gini coefficient rose by over .04 points during the last twenty years—placing it above OECD members such as Italy and Japan, and on a more comparable level with Turkey. This growing income inequality stems not from the middle and lower classes getting poorer in absolute terms, but rather from the wealthiest 1 percent pulling away from the pack—their annual income increased 275 percent from 1979 to 2007 compared to 37 percent for those in the middle. An interesting series by the Global Post illuminates these changes, matching up U.S. cities with their equals (in terms of inequality) around the world. For example, Ithaca, NY is on par with Peru (.46), Milwaukee, WI with Uruguay (.45), and Naples, FL with Chile (.52) (you can see more of the comparisons here). A different back of the envelope inequality measurement divides the annual income of a country’s wealthiest 20 percent of the population by the bottom 20 percent. Calculated by Adam Isacson, the United States is now more unequal than ten Latin American countries including Mexico, Venezuela, and Nicaragua. The question now is how to take on these widening gaps, given the social and aggregate economic costs. Here there is something to learn from America’s hemispheric neighbors. Economic growth alone won’t fix the problem; targeted social programs and safety nets matter. Perhaps too there is something to learn from their politics—with many nations finding their way past years of democratic legislative gridlock to create more socially inclusive policies.

This guest post is by Curtis Valentine, a Term Member with the Council on Foreign Relations and a Returned Peace Corps Volunteer (South Africa 2001-2003) The continuous debates over domestic issues like immigration, education, the economy, and healthcare reveal what most of us already know: America is divided politically and economically. The results of the 2012 presidential and congressional elections suggest that most of us live amongst like-minded individuals. The disparity in income in America is among the highest of any developed country. A program of mandatory national service could help to bridge those divides, build greater unity, while putting millions of young people to work on the growing number of domestic challenges that compromise our economic and military competitiveness around the world. The era that combat veterans like my father grew up in seem distant to many of us today. During the 1960s and 1970s compulsory military service had the potential to blur racial, political, and economic lines. Today, non-military service institutions are extremely class-divided. Over time, non-military service has become synonymous with wealth. For example, Americans who join Peace Corps, AmeriCorps, and Teach For America (TFA), are overwhelming middle income or wealthier, and many are chosen from American’s most selective schools. The notion of compulsory service is not foreign to present day Americans. In some high schools and colleges across the country, students are required to perform a number of community service hours as a condition for graduation. An expansion of mandatory service would include either a full-time assignment in the spirit of the Peace Corps or part-time assignment like a community service project. In 2008, then President-elect Barack Obama called for a plan to require fifty hours of community service in middle school and high school and 100 hours of community service in college every year. The plan was later removed from his official website. In 2003, Congressmen Charles Rangel and John Conyers, and Senator Fritz Hollings introduced the Universal National Service Act. In a response to what his office saw as an overrepresentation of poor and minority Americans in the military during the Iraq War, Congressman Rangel introduced the bill to highlight the impact of the war on all Americans. Rangel commented that  the bill was introduced "to make it clear that if there were a war, there would be more equitable representation of people making sacrifices." The legislation would have required all Americans to serve for two years in one of a variety of capacities, including military time, AmeriCorps, Peace Corps, TFA, or local initiatives. Opponents of compulsory service argue that this would be an intrusion by government in what has traditionally been a voluntary act. Others argue that requiring service or compensating for service takes away the spirit of the act. Interestingly enough, Peace Corps, TFA, AmeriCorps, and the military are all considered service institutions yet all of them compensate their volunteers monetarily, with both preferential government hiring post-service and graduate school funding support. In the case of part-time compulsory service, the notion of offering tax breaks for donating time – in the spirit of the tax breaks for donating goods – could reduce the financial burden incurred. Even supporters of compulsory service would contend that penalties, such as a fine for not serving, would only favor wealthy Americans with the means of paying it. The goal of any program is to have impact. A program of compulsory service would do best to use the Peace Corps model of embedding volunteers in the communities they serve. Locating volunteers from other parts of the country would create the cultural exchange needed to fully earn the respect of those the volunteer would be serving. The program would also promote skills transfer and capacity building for sustainability. This movement is a global one; other countries in Europe, Africa, and the Caribbean are considering expanding or creating compulsory service projects for their young population ages 15-29 as well. In Ghana, the government is expanding and re-evaluating their current National Service program to ensure volunteers are well placed and well resourced. In Barbados, the government is creating a new National Youth Service program to address the need for Bajan youth to work with each other for the common good. Though many European countries like France and Germany have ended mandatory military service, other countries like Austria, Denmark, Finland, and Greece continue to require male citizens perform military service. Compulsory service is bold, but the absence of a bold solution will only ignore growing social seclusion. Without a program like compulsory service, Americans will continue to struggle with the idea that we are inextricably linked. Barring a bold solution from national leaders, America will continue to move forward without a long term plan to rebuild communities and create the social cohesion and national unity that is critical to U.S. national security.

Yesterday on my blog, I wrote about the obstacles that prevent poor people from obtaining insurance—and the innovations that are upending this reality. I focus on Ghana, where the organization MicroEnsure is offering low-cost life insurance tied to mobile phone use and savings accounts. As I explain: Insurance is not something generally available to the poor, who arguably need it most. It is generally viewed as a luxury financial product, and financial institutions have shown little interest in creating insurance products to meet the needs of the poorest. But that is starting to change. You can read the full post here.

Emerging Voices features contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is from Nicole Tosh, a program associate with the Global Assets Project at the New America Foundation. She discusses how cash transfers can empower girls living in poverty and the technological innovations that stand to facilitate cash transfers. Yesterday was the first annual International Day of the Girl. A number of initiatives, partnerships and even films are being released, directing the attention of policymakers, NGOs, and governments squarely to the issues facing girls in poverty. Finally the world is waking up to a reality that 600 million girls are already acutely aware of: life as a girl at the bottom of the pyramid is tough. The chief argument made by those leading this effort is that anti-poverty interventions targeting girls—rather than women or children generally—disrupt the intergenerational cycle of poverty that traps whole communities. Of course, there are a handful of dissenting voices who disagree with this ever-growing movement. As I’ve written previously, their opposition tends to be based either on a simplistic understanding of the research or generally misdirected. Research on investments in girls shows that more education leads to fewer but healthier children and higher earnings. Having fewer children leads to a decreased risk of death and other pregnancy-related complications, and more earnings means more money reinvested in the girl’s family. All of this cannot happen, however, unless girls are empowered. What does empowerment mean? It means giving a girl the opportunity to stay in school rather than forcing her to work in the home or wed in her teenage years, providing her with the resources and knowledge to deal with family planning and other health issues, and allowing her to make her own decisions—financial or otherwise. The numbers show empowerment matters. Maternal mortality is the single greatest cause of death among girls aged 15 to 19. While the Millennium Development Goals (MDGs) have made education equality a top priority, girls still comprise 53 percent of out-of school youth; and 75 percent of AIDS-infected youth in Africa are girls. In light of the stark realities that girls confront, policymakers, NGOs, and governments are beginning to focus their efforts on providing direct assets to girls (DATG). While the term “asset” can refer to a number of different tangible objects (think: bike) and even intangible quantities (think: education), the most basic and literal asset—money, in the form of direct cash transfers to girls—may just be one of the most promising. The reasons for this are many. Cash transfers, an increasingly recognized antipoverty tool, provide beneficiaries with the means to meet their needs, but perhaps equally important, cash transfers offer economic independence for many of the world’s poorest. But that’s not all. Study after study has shown that cash transfers can have an impact on beneficiaries’ education, health, and overall social capital. In fact, findings shared at this year’s International AIDS Conference on Kenya’s Cash Transfer for Orphans and Vulnerable Children Program showed a decrease in HIV risk behavior among youth who received cash transfers. Specifically, the results indicate that children receiving payments were 30 percent more likely to delay their sexual debut, and 7.2 percent less likely to have multiple sexual partners over the last year. While research continues to assess the impacts of conditional versus unconditional cash transfers—those that require beneficiaries to meet certain conditions versus those that do not—in general, cash transfers to the poor represent a seismic shift in the way aid is doled out to those who need it most. Whereas in-kind aid (food, fuel, etc.) meets a specific need and seems to imply that the donor rather than the recipient knows best, cash transfers allow individuals to use the money to meet their family’s multiple needs and accepts that the recipient may in fact know what’s best for his or her family. This is the crux of the argument behind the 2010 book, Just Give Money to the Poor, written by policy experts Joseph Hanlon, Armando Barrientos, and David Hulme. The Global Assets Project at the New America Foundation released a paper yesterday, Investing in Girls: Opportunities for Innovation in Girl-Centered Cash Transfers, examining the landscape of girl-targeted government-to-person (G2P) cash transfer programs across Latin America, Africa, and Asia. Seventeen programs across six countries—Guatemala, Yemen, Pakistan, Nigeria, India and Bangladesh—are likely just the beginning of this trend. Improvements in electronic payment (e-payment) platforms, experimentation with encouraging savings and asset building, and innovations like biometric identification promise to not only allow for more efficient payments to girls, but also to enhance the impacts of cash transfer programs on their lives. E-payments not only reduce leakages and corruption, but they have the potential to provide beneficiaries with a secure place to store their money away from those who could exert control over girls’ limited financial resources. SMS messages to their mobile phones reminding girls of savings goals could help encourage them to develop a savings habit, which would not only ensure that girl beneficiaries have money set aside for a rainy day, but would also provide long-term benefits for their ability to manage money. Finally, biometric IDs (which rely on voice, iris scans, fingerprints and other unique biological traits) are being implemented in India, where early female marriage is common despite laws in place prohibiting girls to marry before age 18. Biometric IDs can help ensure that girls are “counted” and thus have an identity that allows them to access financial institutions for storing and saving cash transfer payments and that cannot be falsified by parents eager to marry off their daughters. Of course, there are hurdles to overcome. First and foremost, data on many of these programs is very limited. We need researchers to not only conduct impact evaluations on the overall effectiveness of programs, but also on specific components of program design, paying special attention to the payment and delivery mechanisms. Second, developing countries often lack the infrastructure to provide full financial inclusion. This is where mobile network operators (MNOs), branchless banking systems, and other out-of-the-box approaches to financial access can play a role. Financial inclusion in many of these countries will not happen overnight, but incremental avenues through mobile banking, branchless banking, and in-school banking can open the door for many “unbanked” girls in the developing world. With the launch of the recent Better Than Cash Campaign, which is encouraging governments to transition to electronic payments for beneficiaries of pensions, social protection programs, and other G2P transfers, more governments will likely jump on the e-payment bandwagon. And with increased attention dedicated to the unique needs and power of girls in the developing world, more of these payments could be directed their way. As these two trends merge together, especially in light of the technological innovations underway, new and exciting opportunities for girls in poverty are sure to follow.

The following is a guest post by two of the leading experts on Chinese foreign direct investment in the United States, and on the U.S. government's investment review process. Thilo Hanemann is Research Director at the Rhodium Group, an economic research firm based in New York, and Daniel Rosen is China Practice Leader at Rhodium and a visiting fellow at the Peterson Institute for International Economics. Last week President Obama issued an Executive Order requiring Chinese-controlled Ralls Corporation to abandon a wind farm project near a military base in Oregon and divest all related assets. This is only the second time a U.S. President has formally blocked a foreign acquisition, and the first since 1990. Ralls presents an interesting case, but there are a lot of misperceptions about the motivations for the decision to block the deal, and about the implications. First, this was not a political move by the President to position himself as tough on China, as suggested by some. The timeline of the review through the Committee on Foreign Investment in the United States (CFIUS) and the Presidential decision is set by law and the fact that the President was forced to make a decision resulted from Ralls’ refusal to walk away from the investment after the negative CFIUS decision, as firms commonly would. Having made news, the deal could well enter the campaign now, given Ralls’ decision to try suing the President and CFIUS, but no one in Washington set out to make this a political game. Second, and most importantly, the decision does not signal a more restrictive U.S. policy towards Chinese investment. Rather it demonstrates continuity with regard to espionage concerns related to geographic proximity of assets to defense installations. Several previous Chinese investments have been stalled for the exact same reason (see Northwest Nonferrous-Firstgold, TCIC-Emcore, Far East Golden Resources -Nevada Gold). Chinese firms have not had trouble acquiring and equipping U.S. wind farms more distant from such sensitive areas – see Goldwind’s Shady Oaks Project in Illinois or Sany’s other wind farm in Texas, for example. Neither is this a case of retaliation by the U.S. government to punish Sany for its protectionist stance toward the attempted takeover of Xugong by Carlyle in 2006. The United States continues to be open to Chinese investment while screening for a narrow set of national security concerns. Third, the decision confirms that Chinese investors face special scrutiny with regard to espionage concerns. Given the wording of the Executive Order and the condition to remove all existing equipment and installations, espionage concerns related to Chinese-made equipment close to high-tech defense installations is the most likely reason for the negative CFIUS decision. The combination of past espionage by some Chinese firms and poor corporate governance transparency in China will incline the security community to pay especially close attention to Chinese firms no matter if they are state-owned or private. Wind installations in the same area equipped with turbines from Denmark are not raising the same concerns. Fourth, the case makes clear that closing deals with a certain risk profile (in this case proximity to an advanced weapons testing station involving unmanned drones and electronic warfare aircraft) without first filing with CFIUS is a mistake. Similar to other failed investments (such as Huawei-3Leaf), CFIUS reportedly found out about the deal from media and then asked Ralls to file with the inter-agency body. While Ralls had interaction with the Department of Defense (similar to Huawei with the Department of Commerce in the 3Leaf case), it was wrong to assume that regulatory approval outside of CFIUS from one of the various government bodies with a seat at the CFIUS table is enough in such cases. The lesson learned from Huawei-3Leaf should have been that not filing will raise suspicions and limit the time for discussing mitigation options with CFIUS. Fifth, the lawsuit by Ralls against the President and CFIUS will not overturn the decision, but it might help clarify some important questions about the mandate and jurisdiction of CFIUS. In its amended court filing, Ralls complains that CFIUS and the President exceeded their legal mandate, for example by imposing certain divestment conditions on the company. The court may help clarify these competencies.  In addition, the Ralls case points out an important inconsistency in Washington’s ability to address espionage concerns related to foreign ownership: had Sany not acquired Oregon developers but rather built wind farms as greenfield projects on leased land, CFIUS would have had no legal mandate to investigate. Instead, any espionage concerns would have had to be dealt with through domestic counter-espionage laws, with vastly higher evidence standards, a contestable appeals process, and a longer lead time – all of which are absent under CFIUS. The Ralls case offers an opportunity to discuss these important questions and refine the understanding of the CFIUS mandate and process. However, the case will not substantially change the current U.S. policy stance towards Chinese investment. The United States will stick to its traditional openness to foreign investment, but at the same time diligently screen investments for security threats, including commercial and political espionage.

Microfinance undoubtedly figures among the most important development innovations in the past several decades. Beginning in the 1970s, microfinance pioneers promoted the radical idea that it was possible to unlock the talents and energies of the poor themselves by providing them with small loans without collateral – a concept dismissed by traditional financial institutions. Over the years, as the industry has grown and evolved,  it has also attracted substantial critical attention, including in books like David Roodman’s Due Diligence: An Impertinent Inquiry into Microfinance. Today, as debates over regulation and best practices continue, microfinance is regarded as one tool for poverty reduction, women’s empowerment, and financial inclusion, but far from a silver bullet for development. No institution is more closely associated with microfinance than Grameen Bank, started by Nobel laureate Muhammad Yunus, which launched the microfinance movement in Bangladesh. According to its website, Grameen has given loans totaling more than $11 billion to over 8 million borrowers, 96 percent of whom are women. But political tensions are threatening Grameen’s work and Yunus himself, as I wrote yesterday on my blog. A new ordinance essentially gives the government control over appointing the bank’s managing director, raising concerns about the bank’s independence.  As I write: For sure, microfinance as an industry has had its fair share of problems. But trailblazing Grameen—and its millions of poor women owners –deserve better than a politically motivated government takeover. You can read the full post here.

The following is a guest post by Scott Thomasson, the president of NewBuild Strategies LLC, an energy and infrastructure consulting firm in Washington, DC. When voters in Atlanta went to the polls at the end of July for a major transportation funding referendum, transportation watchers turned their eyes to Georgia with hopes of a positive story of local leadership after a long, frustrating year for federal transportation funding. Metro Atlanta voters were asked to increase their sales tax by a penny for ten years, with most of the revenues dedicated to an itemized list of $6 billion in road and transit improvement projects. The “T-SPLOST” referendum was billed as a critical step forward for the city’s economy, and a chance to break the funding drought for transit expansion in a city that has spent decades pushing the limits of new road capacity. The news from Atlanta was not good. Despite endorsements from leaders in both parties, a massive public relations campaign by the Atlanta Chamber of Commerce, and support from environmental groups, the proposal was decisively rejected. It’s a stinging defeat for local officials, and a setback for the city’s image as a rock star of the modern Sun Belt economy. The damage to its reputation was soon confirmed, when credit rating agency Moody’s declared a “credit negative” for Atlanta and downgraded a bond rating for MARTA, the city’s strained transit authority. Moody’s message was pretty straightforward: “The Atlanta region needs major upgrades to its dated and limited transit system and congested roadways to maintain its long-term position as an influential economic center.” It’s an ominous warning for other areas of the country facing similar investment challenges. There is a very real national interest in the success of large, transformative infrastructure projects in our major cities. No city is an island--Atlanta is an international transportation hub and an important engine of commerce for the U.S. economy as a whole. Atlanta’s epic infrastructure failure hurts us all. We should do what we can to see that it’s not repeated. As Atlanta decides how best to move forward, there are lessons it can take from other cities like Los Angeles, Denver, and Phoenix that succeeded in passing similar infrastructure referenda. Denver’s ambitious FasTracks program is a particularly good example. It relies on incremental sales tax revenue to fund a massive expansion of its transit system with projects in multiple cities and counties in Denver’s metro area. And like Atlanta, Denver failed by a wide margin in its first referendum attempt—a 1999 initiative dubbed “Guide the Ride.” It took five more years before voters agreed to fund a redesigned and rebranded “FasTracks” proposal. During that time, the FasTracks campaign retained a political consulting firm and proactively engaged the public and local businesses in the planning process. Denver used another creative approach that has helped assure voters their money is being spent effectively: it partnered with the federal government to leverage available funding with a low-interest loan from the Department of Transportation’s Transportation Infrastructure Finance and Innovation Act (TIFIA) program, which it will repay in part from dedicated sales tax revenues. Like Denver, Los Angeles passed its own “Measure R” tax referendum, and Mayor Villaraigosa has since campaigned tirelessly for a “30/10 Initiative” that will use a TIFIA loan to accelerate thirty years worth of planned projects to be completed in ten years. The Mayor has enlisted support from Senator Barbara Boxer, who chairs the committee that determines TIFIA’s funding, and Transportation Secretary Ray LaHood, who has spoken favorably of the 30/10 approach. Atlanta could benefit from studying both of these projects. Not every city has the advantage of a powerful committee chair who can encourage federal cooperation for local transit projects. But the growing popularity and expanded funding for TIFIA is an opportunity to reconsider the federal role in helping cities with early-stage planning and project selection for large initiatives like T-SPLOST. More cities should have early access to the advice and counsel of federal agencies and their expert staff, so local planners can prioritize suitable projects for federal financing and signal their intent to voters before a referendum vote, not after. Just contemplating a competitive application can add value for local taxpayers, because it forces an implicit market test of projects to decide which are most worthy of funding. I’m betting not a lot of Atlanta’s 157 projects would make the cut. TIFIA is already receiving more interest than it can handle, so the immediate priority is ensuring the evaluation process for fully developed project applications. With competition for TIFIA loans growing fierce, that means cities like Los Angeles and Denver that already have a dedicated funding source approved will have much better chances than a city like Atlanta that’s still trying to get its act together. But the Department of Transportation has recently signaled that a more inclusive and interactive approach may be in the works. Department of Transportation officials recently held online webinars to answer questions about TIFIA financing and the application process. Hundreds of people from around the country participated. The Department of Transportation has also made vague announcements that it is developing a new “Project Finance Center” to expand its expert financial staff and offer support services to project sponsors. Hopefully expanding outreach and technical support services for local planners will become a priority for the Department over time, because cities like Atlanta are going to need all the help they can get.

The following is a guest post written by Curtis Valentine, a CFR term member and education reform advocate in Maryland. Follow him on Twitter at @curtiseveryday. In a recent meeting of the National Governors Association, Education Secretary Arne Duncan proclaimed that "with over 2 million high skilled jobs currently unfilled [America] doesn’t have a job crisis, we have a skills crisis.” Duncan’s remarks are important in view of a recent Education Department report that only 39.3 percent of adults ages twenty-five to thirty-four held an associate, bachelors, or graduate degree in 2010. At this pace, America will never meet the goal set by President Obama for the United States to have the highest college attainment rate in the world by 2020. While the four-year degree has traditionally been seen as the standard, a growing number of Americans are relying on community colleges for post-secondary education. The number of Americans attending a two-year college rose from 5.5 million in 2000 to 8 million in 2010. Can the growth in community college students be the key to America closing its skills gap and again truly leading the world in college graduates? To do so will take sustained leadership by those at the top, but more importantly by those closest to the issue. Though President Obama has been supportive of community colleges, he could build greater support by framing college education not only as an economics issue but as a national security issue as well. According to a 2011 Report by the Center on Education and the Workforce at Georgetown University, by 2018 some 92 percent of science, technology, engineering and math (STEM) workers will need post-secondary education. The unique ability of community colleges to respond to America’s ever-changing workforce needs reinforces the importance of investing in STEM education partnerships. For example, public-private partnerships with the National Security Agency and the Department of Homeland Security have resulted in 36 percent of community colleges creating programs focusing on cyber-security. For those already working full time, community colleges are a way to move from underemployment to full employment. While the U.S. unemployment rate has remained steady in recent months, the number of America’s underemployed grew from 8 million to 9.3 million in the final six months of 2011.  Community colleges have long been a haven not only for those seeking career readiness but also those seeking continuing education programs. The relationship between cost and college completion demands that we keep tuition costs down and financial aid up for all Americans, especially for the underemployed looking to return to college. While tuition at community colleges averages 64 percent less than at four-year institutions, these students still struggle with financing their education. The Obama administration and Congress coming together on a temporary measure to keep federal student loans low was good step in the right direction because it gave millions of college students the certainty they need to continue. The administration's idea of investing $1 billion into a Race to the Top for Higher Education could help create the innovation we need to control costs. Using grant funding, this would give incentives to colleges to find innovative ways to lower costs while also aligning entrance and exit standards with the K-12 education system. The Obama administration should make the proposed Race to the Top for Higher Education a priority while highlighting the strong relationship between the cost of college and graduation rates. Community colleges can also be an incubator for how we address the shortfall created by our K-12 system. Currently, 34 percent of all new entering college students require at least one remedial class. The relationship between a student needing remediation and their graduating is startling. According to Complete College America, only one quarter of community college students who take at least one remedial course earn a certificate or degree. Colleges are already filling voids left by our current school system’s inability to respond to the needs of a global society. They are not only partnering with established institutions like the Gates Foundation, but are also looking for locally-based solutions to increase the number of America’s college and career-ready graduates. Prince George’s Community College in suburban Maryland, for example, has partnered with the local school system to implement the "Middle College" model. While in high school, students earn up to two years of college credit towards an associates degree. Federal grants to support innovative solutions like the Middle College concept can make all the difference in the race to out-educate the world and close America’s skills gap. Closing America’s skills gap can be just what the country needs to regain its position as the world’s leader in higher education. The ability of community colleges to meet their student population where they are socially, academically, geographically, and financially make them an invaluable leader in America’s plan to take back our position as the world’s largest producer of high skilled workers.

Today on my blog, I discuss how mobile money stands to reduce poverty by making financial services more inclusive and accessible--as well as the obstacles to fulfilling this possibility. As I write: If mobile banking is to meet its potential for the world’s poor, it must supplant the cash economies that still constrain too many livelihoods. You can read the full post here.