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1041. Fiscal Asymmetries and the Survival of the Euro Zone

Author:
Paul R. Masson
Publication Date:
12-2011
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
The independence of the European Central Bank (ECB), seemingly guaranteed by its statutes, is presently under attack. The ECB has been led to acquire large amounts of government debt of the weaker euro zone members, both to help contain their interest costs and to help protect the solvency of banks throughout the zone that hold their debt. This paper presents a model of a dependent central bank that internalizes the government's budget constraint. Using a Barro-Gordon framework, the model embodies both the desire to stimulate output and to provide monetary financing to governments. As a result of the inability to pre-commit to first-best policies, the central bank produces excess inflation — a tendency partially reduced in a monetary union. The model implies that not only shock asymmetries, but also fiscal asymmetries, are important in the membership calculus of desirable monetary unions. On the basis of this framework, calibrated to euro zone data, the current membership is shown not to be optimal: other members would benefit from the expulsion of several countries, notably Greece, Italy and France. A narrow monetary union centred around Germany is sometimes mooted as a preferable alternative, especially if it could guarantee central bank independence. However, simulation results suggest that such a narrow monetary union would not be in Germany's interest: though better than the euro zone with a dependent central bank, it would not internalize enough trade to make it more attractive than the resumption of monetary autonomy by Germany.
Topic:
Debt, Economics, Monetary Policy, and Governance
Political Geography:
Europe, Greece, France, Germany, and Italy

1042. Europe's declining role in the G-20: What role for the EU in the club of the most important powers?

Author:
Juha Jokela
Publication Date:
12-2011
Content Type:
Policy Brief
Institution:
Finnish Institute of International Affairs
Abstract:
Europe and the EU have played an influential role in the development and decision-making of the Group of Twenty (G-20). Europe's influence in shaping the developments in the group and, more broadly, in global governance is, however, declining. The G-20 Summit in Cannes provided Europe with an opportunity to re-assert its leadership. Its aspirations were, however, overshadowed by internal divisions heightened by the deepening European sovereign debt crisis. Even prior to the current crisis, the increasing global competition and decrease in standing turned EU members inward-looking. Instead of a further Europeanization of foreign policy and external relations, many have observed a tendency to re-nationalize European policy-making. This tendency will make it increasingly difficult for Europe to secure its standing and adapt to the on going transition of the world's economic and political power. Europe should reinvigorate its commitment to a joint external action as a matter of priority. The key question for Europe is whether it will manage to Europeanize the G-20 and gear it towards the multilateral principles which lie at the heart of European integration; or whether we will see the opposite process, namely a 'G-ization' of the EU in the sense of major(European)powers dominating increasingly informal European and global decision-making. It is in Europe's interests to further institutionalize the G-20 and tie it to the formal multilateral architecture of the world economy and politics.
Topic:
Foreign Policy, Development, Economics, International Trade and Finance, and Governance
Political Geography:
Europe

1043. Nepal's Peace Process: The Endgame Nears

Publication Date:
12-2011
Content Type:
Policy Brief
Institution:
International Crisis Group
Abstract:
Nepal's peace process has moved into a phase of definitive progress. More than five years after the ceasefire, the parties have reached a deal on the Maoist fighters, who will leave the cantonments and enter the army or civilian life. An unofficial deal sets out power-sharing arrangements until the next election. The parties are focusing on the critical task of writing a new constitution, which promises a deep restructuring of the state to become more representative and decentralised. Challenges remain, including from continuously evolving coalition dynamics and divisions within parties. There will also have to be further discussions on the combatants. As the parties discuss federalism, which of all peace process issues goes most to the heart of ordinary Nepalis' expectations and anxieties, groups within and outside the Constituent Assembly will see their options narrow, which could strain the process. Yet, this is still the best chance the parties have had to reach formal closure on the war and to institute some of the fundamental changes they promised, provided they have the courage to make far-sighted compromises.
Topic:
Conflict Resolution, Democratization, Politics, Armed Struggle, and Governance
Political Geography:
South Asia, Asia, and Nepal

1044. Islamic Parties in Pakistan

Publication Date:
12-2011
Content Type:
Working Paper
Institution:
International Crisis Group
Abstract:
The ability of Pakistan's radical Islamic parties to mount limited but potentially violent opposition to the government has made democratic reform, and by extension the reduction of religious extremism and development of a more peaceful and stable society, more challenging. This is a reflection of those parties' well-organised activist base, which is committed to a narrow partisan agenda and willing to defend it through violence. While their electoral support remains limited, earlier Islamisation programs have given them a strong legal and political apparatus that enables them to influence policy far beyond their numerical strength. An analysis of party agendas and organisation, as well as other sources of influence in judicial, political and civil society institutions, is therefore vital to assessing how Pakistan's main religious parties apply pressure on government, as well as the ability and willingness of the mainstream parties that are moderate on religious issues to resist that pressure.
Topic:
Democratization, Islam, Religion, and Governance
Political Geography:
Pakistan and South Asia

1045. Good Governance and Bad Neighbors? The Limits of the Transformative Power of Europe

Author:
Tanja A. Börzel and Vera van Hüllen
Publication Date:
12-2011
Content Type:
Working Paper
Institution:
The Kolleg-Forschergruppe (KFG)
Abstract:
The EU\'s Eastern Enlargement is considered to be one of the (few) successful experiments of promoting good – both effective and legitimate – governance. By contrast, the EU\'s transformative power appears to be weak or non-existent vis-à-vis its (old) neighbors in the South and its (new) neighbors in the East. Both are not only marked by \'bad governance\' but also lack a (credible) membership perspective. While the Western Balkans and Turkey have made significant progress towards good governance, both with regard to government effectiveness and democratic legitimacy, the European Neighborhood Countries (ENCs) appear to be stuck in transition or never got that far in the first place. Even when the effectiveness of their governance institutions has improved, they remain well behind the other regions and especially their democratic legitimacy is still wanting or even in decline. The paper shows that there is a correlation between an EU membership perspective and the successful transformation of neighboring countries. Therefore, it has been argued that the ineffectiveness of the European Neighbourhood Policy (ENP) is due to the lack of this \'golden carrot\'. However, we argue that the prospects of EU membership stabilizes rather than drives the move towards effective and legitimate governance in candidate countries. Thus, a membership perspective is unlikely to either turn around negative or speed up positive developments in the EU\'s neighborhood. Even if the ENCs received a membership perspective, it would be unlikely to push them significantly towards democratic and effective governance as long as there is no endogenously driven process of change. Given the EU\'s preference for stability and state-building, the ENP does not provide an alternative for promoting good governance either. The ENP clearly lacks transformative power and where it might have some domestic impact, it risks consolidating rather than undermining authoritarian regimes by helping to strengthen their capacities for effective governance.
Topic:
Democratization, Regional Cooperation, and Governance
Political Geography:
Europe and Turkey

1046. Preparing for the Future? Understanding the influence of development interventions on adaptive capacity at local level in Ethiopia

Author:
Simon Levine, Eva Ludi, and Kindie Tesfaye
Publication Date:
10-2011
Content Type:
Working Paper
Institution:
Oxfam Publishing
Abstract:
Ethiopia is currently ranked 11th of 233 countries and other political jurisdictions in terms of its vulnerability to physical climate impacts, and 9th in terms of overall vulnerability, which is physical impacts adjusted for coping ability (CGD, 2011). Yet little is known about its people's adaptive capacity at individual and community level, or how existing interventions influence a community's ability to adapt.
Topic:
Agriculture, Climate Change, Development, and Governance
Political Geography:
Africa and Ethiopia

1047. Competitive Clientelism, Easy Financing and Weak Capitalists: The Contemporary Political Settlement in Ghana

Author:
Lindsay Whitfield
Publication Date:
12-2011
Content Type:
Working Paper
Institution:
Danish Institute for International Studies
Abstract:
Ghana has exhibited rather strong economic growth since the 1980s, but little transformation of the productive structure of its economy. The paper argues that ruling elites' policy choices are shaped by their political survival strategies. In turn, these strategies are shaped by (1) the characteristics of the ruling coalitions, which include a high degree of vulnerability in power, strong lower-level factions of the ruling coalition, and a substantial amount of fragmentation among the higher factions of the ruling coalition; (2) the weak capabilities and political influence of the nascent productive capitalists; and (3) easy access to financing for the state and the ruling coalition from foreign aid, mining and cocoa bean exports. As a result, ruling elites' policy actions did not prioritize the development of new productive sectors (or upgrading of old ones), but were geared towards delivering benefits to the higher and lower levels of the ruling coalition, as well as delivering a small amount of visible goods and services to as much of the population as possible in an effort to 'swing' voters their way at election time. Neither of these political survival strategies resulted in significant productive sector investments.
Topic:
Development, Economics, Politics, Social Stratification, and Governance
Political Geography:
Africa and Ghana

1048. Growth without Economic Transformation: Economic Impacts of Ghana's Political Settlement

Author:
Lindsay Whitfield
Publication Date:
12-2011
Content Type:
Working Paper
Institution:
Danish Institute for International Studies
Abstract:
Since the Fourth Republic was inaugurated in 1993, politics in Ghana has been increasingly characterized by competitive clientelism. Ruling coalitions are characterized by a high degree of vulnerability in power due to a strong opposition party, by strong lower-level factions within the ruling coalition due to their importance in winning elections, and by a high degree of fragmentation among the ruling elite. These characteristics, combined with a weak domestic capitalist class and high inflows of foreign aid, have led the ruling elites across political parties to pursue and implement policies that have a short time horizon, that do not significantly shift the allocation of resources towards building productive sectors, and which are often plagued by problems of enforcement. The results have led to growth without economic transformation. In particular, the country has witnessed recurrent macroeconomic instability, a haphazard process of privatization of state-owned enterprises, and no serious attempt to build up productive sectors outside of cocoa and gold.
Topic:
Democratization, Development, Economics, Politics, Social Stratification, Foreign Aid, and Governance
Political Geography:
Africa and Ghana

1049. Political Challenges to Developing Non-Traditional Exports in Ghana: The Case of Horticulture Exports

Author:
Lindsay Whitfield
Publication Date:
12-2011
Content Type:
Working Paper
Institution:
Danish Institute for International Studies
Abstract:
The nascent Ghanaian horticulture export sector, which emerged in the mid-1980s, has been ignored by ruling elites, especially after the return to multiparty democracy in 1993. Ruling elites across the two party governments between 1993 and 2008 did not actively pursue initiatives to support the industry. Without sustained political support, the types of public-private coordination of actions and investments needed to help the sector expand and upgrade were not forthcoming in an effective and timely manner. This private sector-driven non-traditional export sector constitutes a neglected opportunity for export diversification and building a new agro-industry, and also highlights some of the factors explaining why the country's economy was still dependent on the traditional exports of cocoa and gold by the close of the 2000s. The political challenges to changing the productive structure in Ghana can be found in the characteristics of ruling coalitions–vulnerability of the ruling elite in power, the high fragmentation within ruling coalitions, and their existing sources of and strategies for financing the state and the ruling coalition, combined with the country's existing economic structure as well as the size and capabilities of domestic capitalists. The characteristics of ruling coalitions in Ghana shaped the incentives facing ruling elites such that the ruling elites were not sufficiently compelled to support new productive sectors, such as horticulture export, which did not (yet) provide substantial revenues.
Topic:
Agriculture, Economics, International Trade and Finance, Social Stratification, and Governance
Political Geography:
Africa and Ghana

1050. Responsible business conduct: Re-shaping global business

Author:
John Evans
Publication Date:
11-2011
Content Type:
Policy Brief
Institution:
Columbia Center on Sustainable Investment
Abstract:
The Guidelines for Multinational Enterprises of the Organisation for Economic Co-operation and Development (OECD) is the Organisation's flagship instrument for responsible business conduct. The Guidelines provide non-binding recommendations to multinational enterprises (MNEs), drawn up and implemented by governments. Updated in 2011, they consist of principles and standards in such areas as sustainable development, governance, disclosure, human rights, employment and industrial relations, the environment, anti-corruption, consumer interests, and taxation. The 42 adhering governments are required to promote the Guidelines and to contribute to the resolution of issues arising under the Guidelines, including by setting up a complaints mechanism -- “National Contact Points” (NCPs) -- to which trade unions and non-governmental organizations (NGOs) are able to submit specific instances concerning alleged breaches of the Guidelines.
Topic:
Globalization, International Organization, International Political Economy, Markets, Foreign Direct Investment, and Governance