DevPolitics

Bribe away!

“Who to punish” published on May 5^th, 2011 in The Economist discusses a recent policy proposal by Kaushik Basu, an economic advisor to India’s Finance Ministry. Basu’s proposal suggests exonerating “bribe-givers” of a crime when demanded to pay “harassment bribes,” bribes for public services they are entitled to. Basu’s policy would then entitle bribe-givers to go to court and re-coup their money. He argues that corruption will therefore decrease because people will be more likely to report bribery without fear prosecution.

Basu’s policy has the obvious flaw of condoning corruption, leading to potential increases in bribery by causing previous non-bribe-givers to give bribes. Nevertheless, it might also successfully combat corruption. Considering the widespread corruption in India, I therefore support his policy, but only in conjunction with other policies. The three policy recommendations I propose and elaborate upon below include: increasing pay for public officials, drastically improving the court system, and raising taxes.

In addition to legalizing bribe-giving, it is necessary to also increase thee salaries of public workers. Government workers demand bribes because they earn such poor salaries. Further reducing their income by impeding bribes, will therefore do little to get rid of their incentive to demand bribes in the first place.

My second policy recommendation, that the court system must be made cheap, quick and efficient for citizens, will remove any opportunity cost for citizens who go to court to file a claim against a bribe-recipient. This is necessary, because if it doesn’t occur the entire point of not paying a bribe or paying it in hopes of being reimbursed later, will be undermined. Implementing and enforcing such a policy will be extra challenging, however, considering that the courts will at the same time be confronted with an increase in cases, resulting from the people filing complaints against bribe-recipients. In addition, the entire policy might backfire if the court employees view this as an opportunity to supplement their own salaries by demanding even more bribes for themselves.

Raising taxes to pay for the salary increase of public officials, the restructuring of the court system, and the marketing campaign informing the Indian people of their rights and educating them on what constitutes a harassment bribe is necessary. If the cocktail of anti-corruption policies is effective, the tax effect on people’s pocketbooks might even be zero, as the money citizens would have paid for bribes would instead be used for taxes. It would have the benefit, however, of increasing government program efficiency, and decreasing deep-seated frustration and government mistrust. 

In conclusion, in addition to recommending Basu’s policy in combination with the above three policies, I also recommend randomizing the combination and implementation of these policies across states. This will enable the government to best determine what policy strategy would be most effective. This is especially important considering the potentially dangerous flaw of Basu’s policy I identified above.

 

On China's property tax reform

On April 8th, Prof. Yu-Hung Hong from Lincoln Institute of land policy has given a lecture on China’s property tax reform in Wagner school. He was assigned by the Chinese State Administration of Taxation to conduct research on individual property taxation (which is currently exempt from the property tax regime).

He seems quite optimistic about the proposed reform, saying it will be ample local revenue sources, thus increasing local public goods and service provision, reducing local government’s reliance on land lease so as to reduce housing price, etc. Everything seems so nice except the fact that he assumes local government in the first place would want to reduce land lease when they have individual property tax.

From my rough calculation, to replace land lease revenue, the equivalent annual burden of the proposed tax for Shanghai residents would be 686,000RMB(more than 100,000USD). So without gigantic central transfer, it will never serve as a sufficient substitute of land lease.

This is a classic example of China’s public finance reform, central government almost always want to have both: come up with nice policies and not spend a dime on it. However, usually large policy changes like local revenue adjustment would need, at least temporary, central assistance.  Assignment without proper supporting funding usually ends up with misconduct of local officials to find revenue to cover their fiscal gap. The current land lease driven local finance is a perfect example. And How can China’s central government still doesn’t seem to learn the lesson when they are actually addressing the very problem! 

 

Event: The situation of Colombian refugees in Panama and Ecuador.

On March 23th, 2011 the Migration Policy Institute had a discussion on “The Situation of Colombian Refugees in Ecuador and Panama.”

I chose to write about this discussion because it touched two topics we have discussed in class: managing the resource curse and rights based approaches to development.

The discussion was divided in three sections, the situation in Colombia, Colombian refugees in Panama and Colombian refugees in Ecuador. The panelists identify the causes of the problem in Colombia to be the forced displacement of people by illegal armed forces. These groups are forcing people out of their land in order to use the land for the production of coca and other narcotics. Land and narcotics have become a resource curse for Colombia. Colombia has more internally displaced people than the population in Panama. Even though Colombia has implemented successful policies such as the policy ‘Democratic Security” whose priority is to reduce the capacity of illegal armed conflicts and reduce the production of coca; over a period of time, the conflict moved to border parts of Colombia, that is why there has been a rise of Colombian refugees in neighboring countries such as Panama and Ecuador.

Refugees in Panama:

The living conditions of Colombian refugees are difficult since Panama has the most exclusionary refugee policy of all Colombian neighbors. Most refugees live in the province of Darien in Panama in legal limbo for more than ten years. They are not allowed to go beyond 3 miles of the border and they are not provided with health services. Many have been victims of xenophobia and are not allowed to use the banking system. The panelists mentioned that it was imperative to have more international presence in the border, for the Panama government to provide more right to the refugees. Some of these people have been living in the same deteriorating conditions for more than 10 years. Some refugees have been denied help by the Panamanian officers and have been deported to Colombia where they are at danger of being killed. What is sadder is that 9 out of 10 people who asked for exile are denied.

The situation of Colombian refugees reminds me of the situation of the prostitutes in Bangladesh who were being evicted. Even though most of these women became prostitutes for reasons beyond their fault they were always marginalized by the community for their status in society. Colombians are crossing the border to Panama for reasons beyond their control and when they get to Panama they are not provided with health services and are denied exile and live in what the panelist described as “prison villagers.”

Refugees in Ecuador:

Ecuador is the country, in the area, with more refugees. 98% of refugees are Colombian. Colombian refugees do not live in camps they tend to live in cities which makes it more difficult to provide them with resources. The government of Ecuador had a Refugee recognition campaign in 2009 to help refugees by providing them with refugee cards to get access to education and health services. However, the program’s duration was only a year. In addition, the card was not a guaranteed for the refugees to find employment. In fact, many Afro-Colombians who lived in Ecuador are discriminated against, they are denied jobs and children are not allowed to go to school. Even though refugees have rights under the Ecuadorian law, in practice they are not implemented.

The panelists suggested that there should be more international presence in the border, the lack of presence from the United Nations is also an issue. Ecuador needs assistance with its refugee programs since it is a poor country as well.

Listening to this video from the Migration Policy Reform was an eye opener. I was familiar with the internal conflict in Colombia; however, I was not aware of the increasing numbers of refugees in Ecuador and of the lack of international involvement. It is incredible that a country like Ecuador with scarce resources has tried to do its best to provide the community of refugees with basic necessities. The United Nations should be more involved in this humanitarian crisis. United Nations should have a permanent station in Ecuador and Panama providing help to the refugees. It seems like the humanitarian crisis in Colombia has been forgotten.

Beyond the liberal capitalism.... 23things...

Late in this March, I had a chance to meet Ha-Joon Chang, who is a professor of Economics at the University of Cambridge at Jurow Hall in NYU. He visited NYC to tell about his new book, “23 things they don’t tell you about capitalism”. After quick meeting with him, I decided to read the book. The reason why I decided to read it was simple; the book’s name was fancy enough to stimulate my curiosity, and in South Korea, my home country, his new book had already been at the middle of hot debates over what the next philosophy for development that will replace the Neo-liberalism should be.  

With 23 interesting historical facts and examples, he criticizes the liberal capitalism which are commonly said to be the engineer of recent financial digester. In the book, the author argues that over the past three decades, most countries have been very faithful to the liberal capitalism. But the policies have resulted in bubbles and increasing income disparity. By examining many myths about free-market liberalism, he maintains that there is no "free" market mainly because prices and wages are largely politically determined and at least affected by the policies conducted by governments (especially, the developed countries). As a conclusion, he argues that as liberal capitalism is one of the worst economic systems except for all the others (he seems to say about ‘the developed countries’), we need to redesign current economic system. The suggestions that he told the audience at the meeting and argues in the book are as follows: future (global) economic system should i) be more knowledge based, ii) come from a long-term perspective, iii) balance between finance and real activities, iv) be with more active government, and v) ‘unfairly’ favour developing countries.

I believe that his suggestions are very meaningful in terms of that it can help many countries (especially, developing countries) to navigate their new ways for sustainable development. To me ? Except suggestion iv), every suggestion sounds great. How about you?

 

The Economist: Drug Violence in Central America

The increased violence in Mexico as a result of the drug trade has been widely publicized. A recent article in the Economist (http://www.economist.com/node/18560287) details the spread of this violence to Central America, as the Mexican government tightens security and drug dealers seek out countries even less equipped to deal with their wake of violence. The article presents the current situation in Central America, and specifically in its “northern triangle” of Guatemala, Honduras, and El Salvador, as grim.

We have often talked during lecture about obligation in terms of development. Whose duty is it to help these countries? And if not the countries themselves, whose duty is it to help the people in them? Peter Singer would argue that it is the duty of any individual (or nation) who has more means than needed for their own basic survival to spread their wealth and help others. The Economist pushes this obligation one step further, by directly implicating the United States in causing the violence. “It is American consumers who are financing the drug gangs and, to a large extent, American gun merchants who are arming them.”

The countries of Central America in question have all the attributes of struggling states that we have discussed throughout the semester. Their institutions have been disempowered, their governments infiltrated by corruption, and their economies systematically weakened. These were all impediments to development that existed before the drug trade moved south, and were seemingly costs of developing under the shadow of a powerhouse like the United States. Now it seems, until the United States takes action, the influx of drug violence can be added to this list.

 

Microfinance Under Fire: Is it important to protect the reputation of Grameen Bank?

 

There has been continuous media coverage of the accusations being made against the microlender Grameen Bank and its founder Muhammad Yunus for mismanaging funds.  I found this New York Times Opinionator piece by David Bornstein particularly interesting.  Bornstein is clearly a Yunus supporter, but he concedes to the realistic fact that the government will most likely get their way and Yunus will be removed as the managing director of the bank.  Bornstein then focuses on the importance of the perception about why Yunus steps down/ is removed as the managing director.  He notes that Grameen Bank is the largest microlender in the world and refers to it as the “flagship enterprise for the industry and a leading example and inspiration for millions of citizen-led organizations established recently to address social problems that governments have failed to solve.” 

As international development practitioners we should be concerned about the perception of why too.  If Yunus, as the founder of this flagship enterprise, is perceived as being removed due to fraud and corruption, rather than retiring from his post due to his age, not only will the reputation of Grameen Bank be damaged, but there could be a negative ripple effect on the credibility of the entire industry. As Bornstein explains, the microfinance industry is built on trust, credibility and a genuine interest and understanding of the borrowers being served.  He makes a great point that if the Bengali government replaces Yunus with someone who only understands how to run a traditional bank and not a micro-lending bank the whole institution is at risk of collapsing.  He ends with the the statements that foreign governments and multi-lateral organizations have invested heavily in microfinance organizations including Grameen in Bangladesh and that it is not enough to invest, but these actors also have to “protect” them. 

It will be interesting to see how this high profile event plays out.  As Bornstein notes foreign governments and multi-lateral organizations have invested heavily in microfinance in Bangladesh.  Is it then their role to step in to make sure the reputation of Grameen Bank is not damaged?  What would this look like?  It seems critical that Yunus is replaced with someone that has a deep passion and understanding of microfinance.  Can other countries and multi-lateral organizations influence this transition?  Should they? 

link again: http://opinionator.blogs.nytimes.com/2011/03/21/microfinance-under-fire/#more-86263

A new t-shirt controversy (only 100,000 this time)

John referred in class to the 1,000,000 shirts controversy - a well-meaning guy who started a drive to collect said number of t-shirts to send to Africa and was immediately skewered in the blogosphere. Apparently a similar situation has arisen - unfortunately this time the entity involved is World Vision, a generally respected org that sent 100K misprinted Super Bowl shirts overseas. Read more here (the blog post also has a link to the 1M controversy for those interested):

http://goodintents.org/uncategorized/world-vision-the-new-100000-shirts

 

We agree to agree...by 2050?

 

Last weekend the Climate Change Summit in Cancun,Mexico came to a close being heralded as “historic” by the head of the UN climate change secretariat. So, what did this monumental accord agree to? According to this Al Jazeera article on-line, the plan for climate change is to figure out a plan. Yes that's right, 200 countries sat down and agreed that they would try to agree to an actual goal of how to reduce the emissions of green house gases by 2050. They also agreed to create a $100 billion fund for developing countries to tap into so they can obtain technologies to lessen their emissions or to subsidize the negative effects they are feeling from climate change. However, they are not sure where the funding will come from but realize that it is very vital. If you are unfamiliar with the damaging effects that climate change is currently causing around the world, take a peak at this video. I think we owe it to the people suffering from food insecurity due to the devastating effects of climate change to do more than agree to help them. Maybe we should think about how we can actually help them and stop putting off tough decisions.

Blue Gold: World Water Wars

 

        I recently had the chance to attend a public screening of the film Blue Gold: World Water Wars by Sam Bozzo, which is based upon the book of the same title written by Maude Barlow and Tony Clarke. This film effectively opened my eyes to one of the future areas of global conflict, as countries battle over one of the most basic and shared natural resources in the global commons, water. As we are able to purchase bottled water on any block in Manhattan, drink tap water, and are fortunate to have indoor plumbing/proper sanitation we may forget how important the issue of water is in the world of development. If you disagree, just ask the 884 million people on earth who lack access to this precious resource or the family of the one child that dies every 20 seconds due to water related disease. Take a study break, watch this film, and learn for your self what the privatization of water, poor global water policy, and commodification of this vital resource is doing to our world. It could possibly save your life if the former vice president of the World Bank Ismail Serageldin's prediction that, “the next world war will be over water,” comes true or at least raise your awareness of a critical issue.

Luckily, my Oma still wanted me

The International Herald Tribune Magazine issued a special report on the Global Agenda 2011, which includes several articles on many of the topics we discussed in class regarding development. I focused on “Not the Child My Grandmother Wanted” by Ayaan Hirsi Ali. The article recounts the author’s childhood experience in Somalia where her grandmother teaches her the value of a woman in their culture (women are worth as much as a piece of fat). Ali continues to analyze the differences between two books - Eat Pray Love by Elizabeth Gilbert and I Am Nujood, Age 10 and Divorced by Nujood Ali. She discusses the freedoms (or lack thereof) of woman in marriage and divorce in both books, and claims that Western feminism has created a disconnect between women in the Western world and women in the Eastern world. She calls for a new form of feminism that reminds Western women of their struggles to get to the freedoms they currently enjoy. Ali writes, “For the dream of liberation to come true for women in the East it is imperative that we seek to shatter the underpinnings of their subjugation, which are now enshrined in religion and custom.”

I agree with Ali. Her article reminds me of conversations I had with my Oma, who spent her first 35 years in the Dutch East Indies (today’s Indonesia), where she was raised to believe that women were lesser than men. My Oma’s claims that divorce was harder for women than men (because men could easily support themselves and find another wife, while women struggled to do so – and it was okay for men to be single, but not okay for women to be single) appalled my liberated American self. Luckily, my Oma still wanted me. Although western women have come far to enjoy equality and the freedom to choose their lives and place in the world, there is a long way to go for women empowerment globally. Ali’s case is one where human rights trump culture. Our culture changed, why can’t other cultures change? All women need to stand in solidarity and fight for women empowerment around the world.