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1 Breathtaking change in a hyper world (Maleeha Lodhi in Khaleej Times) At many international conferences last year a number of themes resonated in deliberations of a world in profound but uncertain transition. In almost every forum there was agreement that geopolitical risks were outpacing the international community’s ability to adequately address them. The dispersal of power among states and away from them and emergence of different kinds of power was creating new uncertainties and magnifying risks.
Five issue areas in particular seemed to dominate the global conversation. 1) Managing a ‘G-Zero’, or for others, an increasingly multipolar world, where power shifts continue from the West to the Rest, especially China; 2) Closing of a phase of hyper-intervention by the West; 3) Complexity of governance in an era marked by increased empowerment of individuals and non-state actors by the new networked technologies; 4) An across the board breaking down of public trust – in governments, banks or corporations – and weakening of state authority and 5) Inadequacy of global governance institutions to deal with current challenges.
Most would agree that no one is calling the shots in the world today, and there is no clear leader dictating the economic and political rules of the game. The US remains the dominant power but is not in a position to secure outcomes on its own. Change is occurring at breathtaking speed in a hyper connected world. This is fuelling unmet expectations among people who have less patience. Together this is making it harder for governments to deliver. State capacity to provide public goods is also declining. At the global level the governance gap is even greater.
The growing inadequacy of global institutions to cope with present day challenges loomed large in the international debate. A new architecture for global governance was needed but instead, major powers preferred to respond to multilateralism’s shortcomings by forming ‘coalitions of the willing’.
2 Tech, not politics, will revolutionise banking (The Observer) When did you hear of Bitcoin? The first transaction involving the digital currency was just four years ago – believed to be a Briton paying a programmer in Florida for a pizza. What new financial instrument will we be writing about come 2020? We just don’t know – and it is this hectic pace of change in finance that poses the greatest challenge to Labour’s’s proposals to break up the banks.
There is already a very different revolution going on in banking, but it’s not in the branches on our high streets or even in our wallets. By the time Ed Miliband’s competition shake-up could come into effect, the current vogue for filling the branch with iPads, the chip-enabled debit and credit cards in your wallet, even contactless payment cards, could look as quaint as writing out a cheque with a fountain pen does now.
In the US, the biggest peer-to-peer firm, Lending Club, has already sourced $3bn in loans and found an avid backer in Google, which snapped up a stake in the firm last May. And then, like it or loathe it, the technology company that is transforming the financial landscape in Britain is Wonga.com. It has already joined the ranks of the biggest lenders in the UK, handing out one million loans last year.
Mobile banking, after a slow start, has skyrocketed over the past year and with smartphones soon to be ubiquitous across all generations, the forecasts about the end of conventional branch banking no longer look so far-fetched. There was once a cosy high-street banking cartel with barriers that effectively prevented customers switching accounts to upstart rivals. But technology makes switching accounts today far easier.
Labour is right to want to intervene in the dysfunctional market for small business loans, and to redirect schemes such as Funding for Lending towards manufacturing and industry rather than property. But there are technologically more imaginative opportunities and challenges than simply breaking up the banks.
3 Three myths on world’s poor (Bill and Melinda Gates in The Wall Street Journal) By almost any measure, the world is better off now than it has ever been before. Extreme poverty has been cut in half over the past 25 years, child mortality is plunging, and many countries that had long relied on foreign aid are now self-sufficient. So why do so many people seem to think things are getting worse? Much of the reason is that all too many people are in the grip of three deeply damaging myths about global poverty and development. Don’t get taken in by them.
Myth one: Poor countries are doomed to stay poor. They’re really not. Incomes and other measures of human welfare are rising almost everywhere—including Africa. In our lifetimes, the global picture of poverty has been completely redrawn. Per-person incomes in Turkey and Chile are where the US was in 1960. Malaysia is nearly there. So is Gabon. Since 1960, China’s real income per person has gone up eightfold. India’s has quadrupled, Brazil’s has almost quintupled, and tiny Botswana, with shrewd management of its mineral resources, has seen a 30-fold increase. A new class of middle-income nations that barely existed 50 years ago now includes more than half the world’s population.
Here’s our prediction: By 2035, there will be almost no poor countries left in the world. Yes, a few unhappy countries will be held back by war, political realities (such as North Korea) or geography (such as landlocked states in central Africa). But every country in South America, Asia and Central America (except perhaps Haiti) and most in coastal Africa will have become middle-income nations. More than 70% of countries will have a higher per-person income than China does today.
Myth two: Foreign aid is a big waste. Actually, it is a phenomenal investment. Foreign aid doesn’t just save lives; it also lays the groundwork for lasting, long-term economic progress. One common complaint about foreign aid is that some of it gets wasted on corruption—and of course, some of it does. But the horror stories you hear—where aid just helps a dictator build new palaces—mostly come from a time when aid was designed to win allies for the Cold War rather than to improve people’s lives.
Aid also drives improvements in health, agriculture and infrastructure that correlate strongly with long-run growth. A baby born in 1960 had an 18% chance of dying before her fifth birthday. For a child born today, it is less than 5%. In 2035, it will be 1.6%. We can’t think of any other 75-year improvement in human welfare that would even come close. A waste? Hardly.
Myth three: Saving lives leads to overpopulation. Going back at least to Thomas Malthus in 1798, people have worried about doomsday scenarios in which food supply can’t keep up with population growth. This kind of thinking has gotten the world in a lot of trouble. Anxiety about the size of the world population has a dangerous tendency to override concern for the human beings who make up that population.
When more children survive, parents decide to have smaller families. Saving lives doesn’t lead to overpopulation. Just the opposite. Creating societies where people enjoy basic health, relative prosperity, fundamental equality and access to contraceptives is the only way to a sustainable world. Contributions to promote international health and development offer an astonishing return. We all have the chance to create a world where extreme poverty is the exception rather than the rule.