Brookings Press Blog

Chad Bown, Author of SELF-ENFORCING TRADE, Quoted in The Economist

China is the world’s largest exporter and as the country’s exports have grown, so has the number of disagreements with its trading partners. An article in The Economist on the rising number of disputes that China has brought to the World Trade Organization says that it is a good thing that Beijing and other emerging markets are turning to the WTO to settle disputes instead of retaliating on their own. But can the WTO’s dispute settlement system cool mounting tensions with China?

Chad Bown, author of Self-Enforcing Trade, argues “that America or the EU may still find disputes with China tricky. Countries often threaten to target their retaliation against politically-sensitive products, hoping that their manufacturers will convince their own governments to change course. But this sort of strategy may be more difficult in a dispute with undemocratic China.”

- Read the full article.

- Learn more about Self-Enforcing Trade.

Yegor Gaidar Passes Away at Age 53

Author of Collapse of an Empire was architect of Russian economy’s "shock therapy"

Yegor Gaidar, the intellectual force behind Russia’s "shock therapy” "conomic reforms of the 1990s, passed away on December 16 at the age of 53.  

While still only in his mid-30s, Gaidar launched a wave of hugely important privatization reforms as a key adviser to then-Russian President Boris Yeltsin, starting in 1992. The success and legacy of these reforms are still fiercely debated. Some say they saved the country in the long-term, but the immediate dislocation and economic turmoil that they ignited earned Gaidar the lasting enmity of many rank-and-file Russians.

In his later years, Gaidar published a book warning Russia to reverse its Putin-era nostalgia for the Communist era. Published first in Russian, and in English by Brookings in 2007, the book explained why he was convinced that the Soviet economic system was unsustainable and doomed to fail from the start rather than a potentially successful form ruined by individual policies or a few inadequate officials. The Putin regime even seemed to be pursuing some of the same strategies that had essentially bankrupted the Soviet states, such as relying disproportionately on volatile energy markets to float other parts of an economy more fragile than many wanted to believe. In Collapse of an Empire, Gaidar implored his countrymen to save Russia by looking into the future rather than peering backward.

- Read more about Yegor Gaidar’s life and death.

- Learn more about Collapse of an Empire: Lessons for Modern Russia.

David Brooks cites WHAT WORKS IN DEVELOPMENT?

In his New York Times column, David Brooks discussed the underlying causes of the tremendous destruction from the earthquake in Haiti. He referred to What Works in Development? edited by Jessica Cohen and William Easterly to back up his point that “we don’t know how to use aid to reduce poverty.” Countries have spent trillions of dollars in foreign aid worldwide, yet this assistance has not generated growth. According to the book:

The picture is grim. There are no policy levers that consistently correlate to increased growth. There is nearly zero correlation between how a developing economy does one decade and how it does the next. There is no consistently proven way to reduce corruption. Even improving governing institutions doesn’t seem to produce the expected results.

- Read the full New York Times column by David Brooks

- Learn more about What Works in Development?

Going Bananas: SELF-ENFORCING TRADE offers primer on recently settled WTO dispute between EU and Latin American countries over bananas

In mid-December, the EU reached accord with Latin American countries on the banana tax. This was the longest-running WTO dispute and is the subject of Chapter 3 in Chad Bown's Self-Enforcing Trade. In “An Introduction to WTO Dispute Settlement,” Bown uses the EC–Bananas III dispute to introduce the WTO’s formal trade dispute resolution process:

The fundamental economic interest that boiled over into a formal trade dispute in the early 1990s involved foreign access to the European import market for bananas—the world’s largest banana market with imports of roughly $2.5 billion per year. While the trade dispute on which I focus erupted in the early 1990s, the issue of EC banana imports has been politically contentious on the domestic front (that is, between EC member states) dating back to the 1950s and the Treaty of Rome. Until the early 1990s, member states had different and divergent external trade policies toward bananas. . . . The different trade policies of EC member states toward the same product managed to coexist until 1993 when, after politically rancorous internal negotiations, the members finally converged on a single, European Community–wide import regime for bananas. The new import policy, known as Regulation 404, was essentially a tariff rate quota. The quota divvied up the EC import market and established one quantitative import limit allocated to ACP producers and another to non-ACP producers (mainly Latin American exporters). Bananas coming in under the quota available to Latin American exporters would be subject to an import tariff that was not applied to imports from the ACP countries.

According to Bloomberg News, Latin American countries are the clear winners of the dispute. As a result of the settlement, banana prices in the EU will drop and exports from Latin America will rise.

- Read more about the settlement of the banana case from Bloomberg and the Financial Times

- Learn more about Self-Enforcing Trade

- Download Chapter 3 of Self-Enforcing Trade to learn the background on this issue

The Cost of Doing Nothing: Not Enacting Health Care Reform Comes with a Hefty Price Tag

An op-ed in the Boston Globe argues that Congress failing to deliver on health care reform carries a significant economic cost. Linda Bilmes, coauthor of The People Factor, and Rosemarie Day, deputy director of the Commonwealth Health Insurance Connector Authority of Massachusetts, write:

Less health insurance equates to more premature deaths, and shorter life expectancy. It also impairs the quality of life—and hence the productivity—of those who are living. This is evident in comparing the health of Americans who live in states with high levels of insurance with those who do not.

Bilmes and Day argue that the current debate over whether the country can afford the estimated $850 billion price tag of health care reform misses the point. Doing nothing comes with a hefty cost, as well, because the uninsured impose big financial and economic costs on the United States.

- Read the op-ed

- Learn more about The People Factor

Is America truly the “Land of Opportunity”? Isabel Sawhill and Ron Haskins dispel 5 myths

Hard work + talent = financial success

For generations, Americans have believed that this formula will allow them to get ahead in our land of opportunity. But do Americans really enjoy more economic opportunity than people in other countries? Is each generation better off than the previous one? Ron Haskins and Isabel Sawhill provide somewhat surprising answers to such questions in a myth-busting piece in Sunday’s Washington Post (October 31).

- Read “5 myths about our land of opportunity”

- Learn more about Haskins and Sawhill’s new book Creating an Opportunity Society

One Year Later

Books for Understanding and Dealing with the Financial Meltdown

 

This week marks the one-year anniversary of the demise of Lehman Brothers and the beginning of more government intervention in the financial markets than at anytime since the Great Depression. Both individuals and institutions have been forced to adjust to this new financial world. A number of Brookings books look at various aspects of the financial meltdown and how to move forward in its aftermath.

 

Too Big To Fail: The Hazards of Big Bank Bailouts, was originally published in 2004 and presciently warned that too little had been done to reduce creditors' expectations of Too Big To Fail protection. In an updated and revised version of the book, Gary H. Stern and Ron Feldman offer new insights and new recommendations for policymakers.

 

The damage from a depressed housing market was exacerbated by the subprime lender implosion, sending shock waves through the financial sector and international economies. In Borrowing to Live: Consumer and Mortgage Credit Revisited, editors Nicolas P. Retsinas and Eric S. Belsky lead an elite group of experts in dissecting the state of consumer and mortgage credit in the United States and pointing the way out of the current impasse.

 

Once heralded as a financial innovation to diversify risk and enable Wall Street to finance Main Street, securitization of debt helped create the subprime mortgage meltdown of 2006. In this implosion, debt was absorbed by a concentrated group of financial entities, and in 2008 credit markets consequently froze. In Prudent Lending Restored: Securitization After the Mortgage Meltdown, noted economists Yasuyuki Fuchita, Richard Herring, and Robert Litan offer suggestions on how we can reform securitization, including a solution to insure the mortgage market against default risk.

 

On a more personal level, the downturn in the stock market forced individuals to reconsider their retirement plans. Working Longer: The Solution to the Retirement Income Challenge advocates pushing retirement back by two to four years. Doing so, according to authors Alicia H. Munnell and Steven A. Sass, would help workers to save more money for retirement and shorten the amount of time they need to live off of their retirement savings.

 

Today’s workers have greater responsibility for planning for retirement due to the dramatic shift in America’s pension system over the past 25 years. Where workers could previously depend on defined-benefit pension plans, increasingly they now must manage defined-contribution 401(k) plans and IRAs. Automatic: Changing the Way America Saves argues for a fresh approach to increase saving, simplify retirement planning, and help manage the risks associated with today's individual account environment.

 

- Learn more about:

• Too Big To Fail

• Borrowing to Live
• Prudent Lending Restored
• Working Longer
• Automatic

- Watch what Fed Chairman Ben Bernanke had to say about the financial system during a speech at Brookings

HOPE VI and the New Promise of Public Housing in America’s Cities

Book launch hosted by current HUD Secretary Shaun Donovan and former secretary Henry Cisneros

Among lessons learned, HOPE VI has taught us that replacing public housing with vouchers isn't always the best option for displaced families. “Many of them ended up in new ghettos of Section 8 because they took the path of least resistance and because landlords were unscrupulous and piled people on top of each other to get the money,” said Henry Cisneros, former Secretary of the U.S. Department of Housing and Urban Development (HUD) under President Bill Clinton. “In some cases we didn’t improve people’s lives as we could have done,” he added. Today, current HUD Secretary Shaun Donovan faces many of the same challenges.

On July 14, the current and former HUD secretaries teamed together to host a discussion on the next steps for urban revitalization and opportunity. Secretary Donovan announced new funding for the current HOPE VI program and outlined the future of Choice Neighborhoods.

In the new book From Despair to Hope: Hope VI and the New Promise of Public Housing in America’s Cities, Cisneros and co-editor Lora Engdahl document the evolution of HOPE VI, one of the most ambitious urban redevelopment initiatives yet. The authors also chronicle the major federal effort to replace desolate public housing with mixed-income communities, and discuss the lessons learned.

- Learn more about the book, From Despair to Hope

- Read articles on the event from CQ Politics and Next American City

What will America do without skilled workers?

The People Factor cited in the Federal Times

“A survey of federal agencies commissioned by Sen. George Voinovich, R-Ohio, discovered that between 1997 and 2000, federal agencies spent about 1.9 percent of their financial payroll on training, while the private sector spends 4 percent and leading organizations even more,” stated a recent article in the Federal Times. With the economic slowdown, there is heightened need for skilled workers in the United States, but with the continuous downsizing of even the wealthiest firms, companies are tempted to downsize their human resources also. But is this truly possible? What repercussions await a great country with workers of little skill? The People Factor: Strengthening America by Investing in Public Service, by former Commerce Department Assistant Secretary Linda Bilmes and W. Scott Gould, deputy secretary of the Veterans Affairs Department, addresses the issue.

So what can America do to increase its number of skilled workers? The People Factor argues that the country cannot prosper without a strong, highly functioning federal work force to manage the government. Bilmes and Gould call for a $10 billion investment to improve recruiting, better training and enhanced management of the federal workforce predicting that the investment will yield $300-$600 billion in productivity gains.

In an age where human resources remain the most important factor for global growth, The People Factor urges the nation to invest in its greatest resource—public service.

- Get more information on The People Factor

- Learn about America’s “people factor” in the full article by Tim Kauffman of the Federal Times

What is "The People Factor?"

In the time it takes to watch this video, Federal government agencies will have...

• Solved multiple crimes

• Supervised the safe take-offs and landings of hundreds of airplanes

• Paid food stamps to hungry citizens

• Issued a national weather forecast

• Monitored the skies for any sign of enemy attack

• Rescued struggling ships at sea

• And processed some $50 million in banking transactions.

But after a century of neglect, the cracks are beginning to show. Due to rapid globalization, business has changed and adapted in order to survive. By contrast, the government systems and structures that served an earlier age are still in place. In The People Factor: Strengthening America by Investing in Public Service, Linda J. Bilmes and W. Scott Gould provide a compelling business case for investing in the civil service so that it may better serve the nation. By investing $10 billion to improve recruiting, training and management of the federal workforce, the authors predict that investment will yield $300-$600 billion in productivity gains.

- Follow The People Factor, the blog

- Watch The People Factor, the video

- Learn more about The People Factor, the book