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CGD in the News

April 19, 2019

What 'Marielitos' Say About the Impact of Immigration (US News & World Report)

From the article:

U.S. President Donald Trump's consideration of sending immigrants to so-called sanctuary cities represented by Democrats is more than possible retaliation against his political opponents. It also evokes an event nearly 40 years ago that to this day shapes the partisan debates in the United States and other countries about the impact of immigration.

That debate focuses on whether a large influx of low-skilled immigrants hurts native workers. That answer is complicated and depends upon how studies are framed, according to economists and research conducted around the world. Some economists say low-skilled immigrants from poor countries can hurt low-skilled native workers, while others say such an influx can bolster a local economy.

The Mariel boatlift in 1980 is highly instructive about the impact low-skilled immigrants have on native workers, being the focus of numerous studies. The boatlift was a mass migration of Cubans into the U.S. that began on April 20 of that year and lasted through October, and was allowed by then-President Fidel Castro after a severe downturn in Cuba's economy.

In all, an estimated 125,000 people traveled from Cuba to the U.S. and after reports emerged that some of the migrants had been released from Cuban jails, a heated public debate began in America about the merits of allowing large immigrant populations. A sizable portion of those Cubans, called "Marielitos," permanently settled in the Miami area, says economist Michael Clemens, a senior fellow at the Center for Global Development, a nonprofit think tank based in Washington.

"Everyone assumed at the time the flood (of immigrants) would have to (adversely) influence the labor market," Clemens says. But that didn't happen, Clemens says, who points to research published in 1990 by economist David Card of the University of California-Berkeley as the lasting standard that examines immigration's impact on a local economy.

Card's study found no changes in wage or employment trends between Miami and other similar-sized U.S. cities in his study. Social scientists have since looked at several factors that may explain Card's findings, and a 2017 study by Harvard economist George Borjas challenged the 1990 research by asserting that low-skilled immigrants do damage the employment prospects for native workers.

But the Borjas study is flawed, Clemens says. In a separate 2017 study that Clemens co-authored with Jennifer Hunt, Clemens says Borjas' study ignored female and Hispanic workers and people who had high school diplomas Additionally, Borjas looked only at male workers aged 25-55, and placed an overly representative weight on African-American workers compared to the overall Miami labor market.

However, Borjas forcefully contested Clemens and Hunt by presenting data in 2017 that showed that even removing African-American workers from his analysis did not alter his findings. "In short, using the increase in the relative size of Miami's black workforce after 1980 to dismiss my Mariel evidence performs the job of obfuscating the debate further, but does little to clarify," Borjas wrote.

The flaw in the argument that an influx of workers will adversely affect native workers is in looking at people as if they are bananas, Clemens says. When the supply of bananas increases, the value of each individual banana falls. That isn't the case with humans, Clemens says, whose research shows that as more people arrive in a local economy, demand for goods and services such as housing and food also increases.

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What should policymakers keep in mind when crafting laws to handle immigration? Clemens says it's simple: Countries need to have clear, consistent lawful channels for migration.

"When people have legal status, they make larger financial contributions to society," Clemens says. "It's more beneficial to the country of origin. It's also beneficial to the home country, where people can send remittances. Plus, you're taking money away from smugglers."

April 18, 2019

FT Health: Foreign aid and the threat to multilateralism (Financial Times)

From the article:

At a time of rising populism and questions over the value of foreign aid, a new analysis suggests Britain’s contributions are largely well spent — especially the share channelled directly by its international development agency.

The Center for Global Development think-tank concludes that nearly four-fifths of the £28bn donated via the British government over eight years was spent well or satisfactorily. It was reviewing 65 individual assessments by the Independent Commission on Aid Impact, a UK watchdog.

While most of the money goes via the Department for International Development, other agencies were less well rated. In particular, spending via the Foreign and Commonwealth Office — which some ministers are keen to have take back direct control of Dfid — performed worst, with some disbursements possibly not even meeting the legal definition of aid.

There is no room for complacency. A previous analysis by CGD highlighted that some other countries — and multilateral institutions — perform better than the UK when considering factors such as efficiency, transparency and fostering institutions. New Zealand and Denmark ranked particularly well, although high quality was offset by a relatively low quantity of aid. The US, which gives generously, scores poorly, notably because much remains “tied” or linked to its own interests.

But as the World Bank heads into new leadership by a man highly critical of multilateralism, and with public opinion febrile, constructive criticism should not trump the benefits aid can bring.

April 16, 2019

'Wise persons' to scrutinize EU development finance (Devex)

From the article:

BRUSSELS — European Union states have given nine economists six months to suggest changes to the bloc’s development financing structure, as the European Investment BankEuropean Commission, and European Bank for Reconstruction and Development vie to assert their role in meeting the 2030 Agenda for Sustainable Development.

The mandate for the “High-Level Group of Wise Persons,” agreed last week by European governments, is to set out “the challenges to and opportunities for rationalising” European development finance, particularly the respective roles of EIB and EBRD.

The group will look at what best delivers “development impact,” “the respective strengths and weaknesses of the mandates and instruments of all actors involved,” and “the strategies put forward by the EIB, the EBRD and the Commission to further develop their mandates with a view to enhancing private sector development and sovereign lending, including, as appropriate, in least‑developed and fragile countries.”

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In September last year, the commission declared that it wanted to play a leading role in steering investments from European development actors, including national players such as the Agence Française de Développement. That clashed with the vision of EIB President Werner Hoyer, who has said there are “many inefficiencies” in the European development landscape and is pursuing plans for an EIB subsidiary focused on projects outside the EU. Meanwhile, EBRD is now considering a move into sub-Saharan Africa, to be decided at its annual meeting next year.

“Collectively, the EU invests more in developing countries than the rest of the world combined,” said Mikaela Gavas from the Center for Global Development think tank. “But the impact of its investment is mired in a system that is fragmented and uncoordinated and thus unable to meet its full potential of taking a leading role in sustainable development.”

Gavas said the wise persons’ group could propose a division of labor between EIB and EBRD, but the “problem is that the objectives, modes of operating and the expertise of the two banks are very different. There cannot simply be an arbitrary division between lending operations in the public and private sectors, or Europe and Africa.”

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April 14, 2019

Ivanka Trump promotes women’s empowerment in Ethiopia (Associated Press)

From the article:

Far from the din of Washington, Ivanka Trump toured businesses run by women in Ethiopia on Sunday while promoting a White House global economic program for women.

President Donald Trump’s daughter and senior adviser visited a coffee shop and textile company in Addis Ababa. It was her first stop in Africa on a four-day trip to Ethiopia and Ivory Coast on behalf of a White House project intended to boost 50 million women in developing countries by 2025.

Aiming to offer assistance and learn about the struggles of women in business, she took part in a traditional coffee ceremony, visited with weavers and announced new financial support for businesses

“Investing in women is smart development policy and it’s smart business,” Trump said, sitting in Dumerso Coffee, a dimly lighted space with a woven ceiling, tile floor and colorful paintings. Alongside were women who work in the industry. “It’s also in our security interest, because women, when we’re empowered, foster peace and stability,” she said.

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Experts praised the government-wide approach, which will incorporate new and existing programs, though some stressed that it was early in the process. The investment comes as the president is proposing cuts to foreign aid, and as the administration is expanding a ban on U.S. aid to groups that promote or provide abortions.

“The part of the proposal which is around looking at laws — that is a good thing to focus on,” said Charles Kenny, a senior fellow at the Center for Global Development, referencing the initiative’s support for changing laws, regulations and customs that create barriers preventing women from fully participating in the workforce.

But he said the abortion-related ban could have a negative economic impact. “I think one of the most powerful tools for women’s economic empowerment is the ability to choose when and how many children they have,” Kenny said.

Daniel Runde of the Center for Strategic and International Studies said Ivanka Trump was strategically building on the work of past administrations. He called her an effective “goodwill ambassador” for the issues and a smart emissary to send to Africa.

Hillary Clinton, as U.S. secretary of state, “provided high-level attention to these issues,” said Runde, who previously worked for USAID and is an informal adviser to the administration on development policy. “Ivanka Trump is playing a similar role to the role that Secretary Clinton played.”

 

April 10, 2019

US lawmaker threatens World Bank capital increase over private sector concerns (Devex)

From the article:

U.S. Rep. Maxine Waters, chair of the House Financial Services Committee, voiced concerns about a World Bank effort to direct more private investment to low-income, fragile, and conflict-affected countries — and she threatened to withhold support for the bank’s capital increase package unless the institution shows greater transparency.

In a hearing with U.S. Treasury Secretary Steven Mnuchin on Tuesday, Waters began her opening remarks with a statement about the International Development Association — the arm of the bank that delivers grants to 75 low-income countries — and its “private sector window.” Her remarks came just as the World Bank Spring Meetings were getting underway, and on the day that David Malpass, a now-former U.S. Treasury official, took over as the institution's president.

“I’m concerned that IDA, through its new private sector window ... today is transferring $2.5 billion to the World Bank’s private sector arm, the International Finance Corporation, and is subsidizing private firms selected without competition on the basis of unsolicited proposals,” Waters said.

“The PSW is likely to prioritize financial returns over positive development impacts, which will be difficult to monitor. The PSW also stands in conflict with the World Bank’s own principles that call for subsidies to be justified, transparent, competitively based, focused on impact, and guarded against rent-seeking opportunities,” she said.

Waters concluded with a specific request — and a specific consequence if the bank chooses not to heed it.

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Waters is not the first to raise questions and concerns about IDA’s private sector window.

After a review late last year noted that the PSW had only allocated $185 million of its resources, Charles Kenny, senior fellow at the Center for Global Developmentobserved that, “If anyone was still dreaming that there were a bunch of significant shovel-ready public-private infrastructure deals in low-income countries just waiting for slightly better financing terms, the PSW’s experience should get them woke.”

Kenny and others have also raised some of the transparency and open competition questions that Waters focused on in her remarks to Mnuchin. Resources from the IDA window subsidize private sector deals, but information about who actually receives those subsidies, and on what basis, and with what development impact are difficult to come by, Kenny wrote last year.

“The taxpayers who provide this finance, as well as the client countries of IDA which would otherwise have received it, have the right to know how it is being used,” he argued.

The World Bank did not immediately respond to a request for comment on this story.

 

April 8, 2019

Opinion: 5 priorities for the World Bank's new leader (Devex)

From the article:

Despite critical commentary about his professional credentials and commitment to the multilateral system, David Malpass has been elected unopposed as the next president of the World Bank. Complaints about the outdated gentlemen’s agreement that led to this appointment will soon be overshadowed by Malpass’ initial signals on where he wants to lead this still globally important development institution.

During his campaign, Malpass said some of the right things but was silent on other priorities for the World Bank. To win the support of all his 189 members, Malpass must now unambiguously endorse the bank’s role in helping the world meet five challenges.

First, he must prioritize support for Africa’s development and integration into the world economy. The central development challenge for the next two decades is to help Africa deal with its demographic, environmental, and developmental challenges. The success or failure of this endeavor will determine the future of the 2.5 billion people who will inhabit the continent by 2050 — with major spillovers for every other region.

The World Bank is already the largest multilateral financier of Africa’s development, but it can play an even stronger role to facilitate a more coherent approach by Africa’s other large development partners — including the European Union and China.

Second, he must help middle-income countries make the right development choices. Emerging markets and middle-income countries will increasingly drive global growth. Their new infrastructure’s sustainability will define how livable our planet will be for the next century. Their economic success will provide expanded markets for global exports and jobs around the globe. And they are home to women, minorities, and other vulnerable groups who struggle with basic numeracy and literacy, lack human security, and live in fear of slipping back into absolute poverty. It would be a missed opportunity of historic proportions for the World Bank to watch these developments from the sidelines.

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April 5, 2019

Trump nominee wins job to run World Bank (Washington Post)

From the article:

World Bank directors selected White House nominee David Malpass on Friday to run the institution after an uncontested race, giving the job to a former Trump campaign adviser and Treasury official who has at times spoken critically of the bank.

Development officials had expected a more competitive contest for the job after the previous president, Jim Yong Kim, stepped down in January. But no other countries nominated candidates, apparently content to stick with the long tradition of allowing the United States to choose the bank’s leadership.

In a message to World Bank staff on Friday, Malpass sought to reassure skeptics who have called out his and the White House’s critical remarks on multilateral institutions.

Malpass also repeated his intention to focus the bank’s attention on the neediest nations, a priority that could cause friction with the World Bank’s more affluent borrowers, including China.

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One of those reforms winds down lending to higher-income countries such as China, a plan Malpass has endorsed.

“China is the world’s second-biggest economy,” he said in February. “It doesn’t make too much sense for the higher-income countries to be drawing so many of the resources of the bank when there are poorer countries that could make use of those resources.”

Scott Morris, a former Treasury official and senior fellow at the Center for Global Development, said Malpass’s Friday remarks were an “important and constructive signal,” but that bank shareholders would have to exercise strong oversight to be sure the bank’s mission stays on track.

“As bad as the Trump administration’s posture and policies are on climate change or support for refugees, Mr. Malpass now seems to recognize that he is accountable to a diversity of governments and shareholders — not just one. But saying he understands the multilateral goals of the bank is one thing, and embracing the agenda is something else,” Morris said.

Doug Hertzler, senior policy analyst with ActionAid USA in D.C., said he found it “disturbing” that “someone who has been against international cooperation would be named to head the World Bank, really without much objection.”

The Trump administration has questioned the value of multilateral institutions including the United Nations and the World Trade Organization. But it supported a funding increase for the World Bank last year, which raised $13 billion from member countries.

In exchange, the White House got the bank to agree to reforms, including a review of the salaries of board members and staff, which the administration viewed as excessive in some cases. Senior managers this year received no salary increases.

 

April 4, 2019

U.S. aid to Central America: What it does, why Trump cut it and why that may not end the migration crisis (USA Today)

From the article:

President Donald Trump's decision to cut $450 million in foreign aid to three Central American countries – collectively known as the Northern Triangle – will end dozens of projects designed to bolster security, the economy, education and judicial systems.

The goal of the programs is to improve conditions in the countries so citizens don't flee to the U.S. While Trump wants to cut the assistance, former officials say the programs are seeing results. For example:

In Honduras, U.S. Agency for International Development (USAID) officials have been working in local communities to reduce violence, contributing to a drop in the homicide rate every year between 2011 and 2018.

In El Salvador, where a struggling economy has pushed people to make the trek north, USAID helped small- and medium-sized businesses create more than 22,000 jobsbetween 2011 and 2016.

And in Guatemala, where the judicial system has been wrought with corruption and inefficiency, U.S. money has helped the government hire more judges and provided security for justice officials to protect them from cartels they are trying to prosecute. 

Trump said the aid cuts, and his threat to close the southern border entirely, will punish governments of those countries for failing to prevent people from fleeing.

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Researchers at Vanderbilt's Latin American Public Opinion Project surveyed 29,000 people living in five Central American countries, and found that those living in neighborhoods with U.S.-funded projects saw less violence. In those communities, 51% reported fewer murders and extortion attempts, 35% said they no longer avoided walking through dangerous areas and 25% said they saw a drop in drug sales. 

"It's an extraordinarily rigorous study, and it's very persuasive," said Michael Clemens, a senior fellow at the Center for Global Development, who was not part of the report but has studied the reasons young people flee Central America for the United States.

Rising migration

Trump sees things differently.

The combination of violence, poverty and food insecurity in Central America has driven record numbers of families to head north to seek U.S. asylum.

On Tuesday, State Department spokesman Robert Palladino said rising migration showed that U.S. aid was not working.

Border Patrol agents apprehended more than 36,000 members of family units in February – a record – and border communities are being overwhelmed trying to care for them. That figure has steadily increased in recent months, with Border Patrol officials predicting a further rise for March.

"The president has determined that these programs have not effectively prevented illegal immigration from coming to the United States, and they’ve not achieved the desired results," Palladino said. "It's not succeeded in stemming this flow."

Still, Clemens said cutting off funding was misguided. He said the evidence, including the Vanderbilt study, shows that U.S. aid has led to gradual progress in living conditions in Central America.

"There is literally zero evidence that bludgeoning the (Central American) governments and long-time partners of those governments is somehow going to produce security in the region," he said.

 

April 4, 2019

David Malpass sails past doubts to secure World Bank presidency (Financial Times)

From the article:

David Malpass is poised to secure approval from the World Bank’s board as the next president of the Washington-based multilateral lender on Friday, after a low-profile campaign with no competition.

The comfortable run experienced by the 63-year-old former chief economist of Bear Stearns on the path to the World Bank presidency marks a victory for the Trump administration, which will now have an avenue to bring its America-first worldview to one of the top international economic institutions.

Mr. Malpass has prevailed despite concerns among officials in many countries about his well-documented skepticism of multilateralism, and doubts about his commitment to some of the World Bank’s main goals, particularly combating climate change. 

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Mr. Malpass has laid out a narrower vision for the World Bank, saying it should be more exclusively focused on providing assistance to the poorest countries. He consistently warned that multilateralism had gone “too far” and international economic co-operation had become sprawling and ineffective.

“The timing is tough, because it’s a moment when the World Bank needs to do more, and have a leader with a big vision, bringing it into the 21st century,” said Nancy Birdsall, president emeritus of the Center for Global Development.

Mr. Malpass is expected to take office as early as next week, in time for the spring meetings of the International Monetary Fund and the World Bank, giving him the opportunity to make a high-profile debut.

His early actions will be closely scrutinised for any signs of tensions with China. In congressional testimony as recently as November, Mr. Malpass had warned that the multilateral development banks risked being captured by Beijing’s “geopolitical” influence.

 

April 1, 2019

U.S. officials said aid to El Salvador helped slow migration. Now Trump is canceling it. (Washington Post)

From the article:

MEXICO CITY — Until last week, U.S. officials held up El Salvador as proof that foreign aid could help curb migration. The partnership between the two countries drew praise from diplomats, members of Congress and even America’s top border enforcement official.

Then President Trump announced that he was withdrawing economic assistance to the Central American country and its neighbors Guatemala and Honduras.

“They haven’t done a thing for us,” the president said Friday.

The claim baffled development officials and Salvadorans, who saw the country’s cooperation with the United States on security, civil society and economic development as a success story, inasmuch as it achieved the Trump administration’s goal of slowing the flow of migrants heading north to the United States.

In the past three years, both El Salvador’s homicide rate and migration flows have declined sharply. More than 72,000 Salvadorans were apprehended crossing the U.S. border in 2016. By 2018, the number had plummeted by more than half, to fewer than 32,000.

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Analysts caution against attributing reductions in migration solely to U.S. aid. They say changes in migration are likely the result of a variety of causes, many of them beyond the control of governments.

“There has been no serious look at the historical relationship between development and migration that would convince anyone that economic development of any form across the developing world leads to sudden decreases in migration,” said Michael Clemens, co-director of migration at the Center for Global Development in Washington. “Demographic forces are so much ­stronger.”

Over the last decade, the Salvadoran population aged out of the so-called youth bulge, when a disproportionate number were ages 15 to 29 — the period when people are most likely to migrate.

Guatemala and Honduras are several years behind El Salvador demographically, which might help explain discrepancies in their migration rates.

Migration from the three nations of Central America’s Northern Triangle rose rapidly from 2012 to 2016, much of it undocumented minors fleeing growing gang violence.

According to the Center for Global Development, more than 8 percent of 17-year-olds from El Salvador, Guatemala and Honduras arrived at the U.S. border from 2011 through 2016. In a separate study linking violence to migration, it found that for every 10 additional murders in those three countries, six more children migrated to the United States.

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