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About two months ago, when everybody finished panicking about the averted-just-in-time fiscal cliff, most pundits were clever enough to point out that the deal forged between Republicans in Congress and President Obama was not much of a solution at all. Sure, there was no credit downgrade and the US didn't default on its loans, but there remained the looming "sequester", an across the board cut in federal spending that would have terrible economic consequences. The logic went that the sequester was such bad policy, that because everybody agreed that it would hurt the economy, Republicans and Democrats would be forced to play ball with each other and come up with a compromise. As I write this, the sequester is set to take effect with not much more than finger pointing coming from Washington. 

Why are lawmakers not working together to avoid the sequester? Sure, Republicans want to cut spending, but not to the Pentagon, right? Actually, not right. As House Speaker John Boehner explained in a January 6 interview with the Wall Street Journal, 

President Obama seriously miscalculated how much Republicans want to preserve military spending. As it turns out, they're willing to let the sequester do its work, and now Obama and the nation are paying the price. 

So the question is, what to do now? The President predictably embarked on a campaign style tour to explain just how bad the cuts will be in the hopes of bringing Republicans to the table, but I don't think that's going to work. 

Instead, the president could let the sequester happen. He could explain to the American people that the Republican party won this battle. They've gotten deep cuts, to the tune of $85 billion, in federal discretionary and mandatory spending. It's just what Republicans have always wanted. Most people already seem to see it that way, anyway.  The cuts will hurt the economy, but congressional Republicans don't seem to mind. After the Bush presidency (and not so much during the Bush presidency) Republicans' main argument against government spending was the need to cut the deficit. Well, here's how they want to do it. Although, it doesn't seem to bother them that the sequester will actually make it harder to cut the deficit. Go figure.  

So, put it to the American people to decide if they want to live in an America with fewer teachers, crumbling roads, slower responses to disease outbreaks, longer flight delays, and harder-to-find jobs. It's not fair to use people's livelihoods as political chess pieces, but perhaps this is an opportunity to settle one of the biggest philosophical differences in American politics.  If it turns out that massive spending cuts by way of the sequester have made things better, people should vote Republican. If the sequester has made life more difficult, vote the bums out. Voters will have the chance to decide in November 2014.

A sequester primer 

Ashley Clark is a MPP/MA-IAS student at UC Berkeley.

Last week, the International Policy, Development and Practice Speaker Series welcomed David Vogel, Professor at the Haas School of Business, UC Berkeley.

Professor Vogel’s speech, entitled “The Politics of Precaution,” began with two startling case studies. Mr. Vogel talked about the differing reactions of The United States and Europe in regulating two potential risks: ozone chemicals and genetically modified organisms (GMOs). When the first dangers of ozone chemicals emerged in the 1970s, the United States was quick to respond with boycotts and increased regulation, ending a $3 billion dollar domestic industry. In contrast, European governments did not respond and there were not public outcries for regulation. He contrasted that to the response to GMOs; here, the EU has responded with increasing GMO regulation, almost destroying the entire industry in Europe. The US, on the other hand, has passed no federal regulation.

What accounts for this change, where two sets of risks were met with opposite responses with enormous consequences?  Why is the US no longer one of the most stringent, risk-adverse, and innovative regulators, a title that now is held by the EU? Professor Vogel points out three broad factors that have caused the EU to emerge as the dominant example of regulatory standards in the world. First, public opinion in both areas has changed. Whereas Americans are now more trusting of the government’s regulations and status quo, Europeans, after the ill-handled “Mad Cow disease,” are more likely to see a dearth of regulation by the government. Secondly, there has been a serious shift in the opinions of policy makers in the US and the EU. Starting after the presidential loss in 1992, the Republican Party in the US has given up on earning the Green Vote, contrary to their previous position, and both parties have become increasingly polarized. The EU, in contrast, came about in the 1990s through a commission led by elites and businessmen. As a concession to those who feared that the price of a single market would be decreased health and safety standards, politicians strengthened EU commitment to more stringent standards.

Finally, the way risk is assessed in both countries has changed. Risk assessment comes with two potential falsities: a false negative and a false positive. In a false negative, the government tells people a product is safe when it is not. In a false positive, the government warns its citizens about the danger of a product that turns out to be safe. In the US, the rise of the cost-benefit analysis has put the burden of proof on those who would propose regulation, emphasizing the use of numbers. This is due to the aversion of false-positives, not wanting to cause an unnecessary stir. The EU, on the other hand, favors a precautionary principle, which seeks to avoid false negatives and puts the burden of proof on those opposed to regulation. Interestingly, Professor Vogel saw that, on the elite-political level, the precautionary principle portrays a systematic distrust of science, as opposed to the US cost-benefit analysis method, which embraces scientific demonstrations.

Ashley Clark is a MPP/MA-IAS student at UC Berkeley.

Last week, the International Policy, Development and Practice Speaker Series welcomed Flavio Feferman, President of Developing Markets Group, an economic consulting firm, and Lecturer at the Hass School of Business, UC Berkeley.

Mr. Feferman’s speech, entitled “Cluster-based Economic Development: My Recent Experience in Brazil,” started with a case-study of economic development clusters in North East Brazil. After identifying the key industries within the area already functioning, such as tourism, agricultural and fruit exports, and a burgeoning ICT sector, the region formed public-private sectoral groups to work collaboratively to define a regional economic development strategy and to bring about economic change. Through funds from regional and national actors, they were able to integrate and grow effectively.

Mr. Feferman explained that the main idea behind cluster based development is to strengthen local clusters and to bring about economic growth through sectoral diversification.  Diversification, by scaling new sectors/clusters, promotes the movement of resources to more productive activities. This can often be through finding and “testing” new economic activities, such as the development of the flower export cluster in Colombia, which emerged from of an existing agricultural base in the region. This diversification process drives income per capita to grow. 

This inverted-u of income per capita to sectoral diversification is counter-intuitive to traditional economic thought; in addition to specializing in industries with established competitive advantages, countries should find new industries that enable the development of new competitive advantages and greater diversification.  China is perhaps the best example of this process:  the country was able to diversify into increasingly more sophisticated economic activities, often through the formation of regional industrial clusters. Fundamentally baked into this model is the idea of entrepreneurship, which should be nurtured and encouraged to help promote economic diversification and the scale-up of new sectors. As countries reach more advanced stages of development, the process of diversification slows down, as some industries loose competitiveness (particularly industries that rely on low labor costs).

Some economic clusters occur naturally; some places have the resources that make it prime for the industry, or a natural endowment that gives them a comparative advantage. However, some places, what he calls “Clusters 2.0,” are clusters that encourage building innovation and entrepreneurial ecosystems. The main problem with developing these clusters in poor countries is that the firms often face an adverse institutional and business environment.  Public policy should support activities that promote local capabilities and an entrepreneurial ecosystem, such as technology transfer and dissemination, technical training programs, early stage financing, specialized infrastructure, and overall improvements to the regional business environment to support both local entrepreneurship and foreign investment.  Another important part of policy is to establish a public-private dialogue, a planning process for regional economic development that includes stakeholders from the private sector, government, and regional research and training institutions.

California has recently implemented a Cap and Trade system to reduce emissions of Greenhouse Gas (GHG) emissions in the state. What is Cap and Trade and how does it work? The following is a policy brief clarifying the most important aspects of Cap and Trade which have been implemented in California's system. A nation-wide system for auctioning and trading GHG emissions would go a long way toward mitigating climate change. 

Cap and Trade programs set limits on the amount of carbon dioxide and its greenhouse gas (GHG) equivalents that industries can emit, but allow market forces to decide how industries reach that limit. Rather than choosing winners and losers, Cap and Trade sets a benchmark, establishes rules, and lets the economy do the rest. 

-- Regulators set up auctions for businesses to purchase GHG allowances with a minimum and maximum price (price collar). 

-- Regulators set a limit on GHG for a given year and let businesses decide how much to pay for their emissions. 

-- Polluters reduce emissions as much as they can in order to need to buy the fewest allowances, thus driving innovation in clean and green technology. 

-- If a business purchases more allowances than it needs, it can bank them and use them in another period, or sell them to another business that bought too few. 

-- If a polluter can’t reduce emissions and has purchased as many allowances as it can, it can pay other businesses to offset their emissions or undertake other activities that reduce GHG, such as reforestation. These offsets must be verifiable.

-- Offsets, if regulated properly, provide a fail safe for heavier polluters to be able to stay in business while global levels of GHG will continue to decline. 

-- Revenues from allowance auctions can be used to fund research or subsidize renewable energy.


A Cap and Trade system has been used in the US to effectively eliminate the threat of acid rain. Thanks to Cap and Trade, emissions of sulphur and nitrogen oxides are well below the level that causes serious environmental harm. Other countries have also implemented carbon Cap and Trade systems, to varying degrees of success. Their shortcomings are opportunities to learn. In Europe, the system’s “cap” was set too high, and offsets were too easy to acquire without oversight, leading to few real reductions in GHG. Those experiences should inform the parameters of a system here. 

It’s time to implement a nation-wide Greenhouse Gas Cap and Trade system for all polluting industries with the following specifications:

-- A cap that is strict enough to encourage businesses to seek as many energy efficiencies as possible

-- A cap that can be adjusted if need be. If emissions plummet, regulators should be able to lower the cap; if compliance proves impossible, there should be a mechanism for upper adjustment

-- A system of offsets that reduces the probability of “leakage” by clearly stipulating that in order for offsets to count, regulators must be able to confirm that they are permanent and have removed GHG from the atmosphere

-- A price collar and banking options for allowances to ensure price stability

-- Apply to all industries that emit GHG

Cap and Trade is not the only way to reduce atmospheric GHG. Other proposals have benefits, but greater drawbacks than Cap and Trade. 

Carbon Tax 
Tax carbon dioxide and other GHG, thus raising their prices and reducing demand.                                  
         +  This type of tax would be fairly easy to administer.
         −  A tax does not guarantee a reduction in GHG, only an increase in price.
         −  Most economists agree that a carbon tax would hurt the poor more than the rich. Some suggest using revenue from the tax to subsidize costs for low-income families, but this would mean that they would continue using the same amount of carbon as before.
         −  Taxes in general are politically unpopular, making this option less feasible.

Command and Control
The government could just tell businesses and consumers how much they are allowed to pollute. It would be up to them to decide how and if to comply.
         +  Strict regulations could lead to big drops in GHG.
         −  Businesses may decide to move their operations to places with more lax restrictions, thus hurting local economies without reducing GHG.
         −  Regulations would likely hurt low-income consumers by increasing the price of goods and services.

Business as Usual
There’s always the option of doing nothing and hoping that it will somehow turn out okay in the end. This is not an acceptable alternative.

President Obama’s State of the Union address included the expected highlights of immigration reform, gun control, climate change, the deficit, and Afghanistan. Perhaps more unexpectedly, he also called on Congress to raise the national minimum wage to $9.00 an hour, and to tie future increases to the cost of living. Just how big a change is that, and will it achieve the President’s stated intent of ensuring a livable wage for workers?    

First, the change to $9.00 from the current national minimum wage of $7.25 is a significant increase. The increased wage would be higher than the current minimum wage in all states except from Washington (which currently stands at $9.19). A few other states come close at $8.00 or higher (California, Oregon, Nevada, Illinois, Washington DC, Massachusetts and Vermont); however, the majority of states go by the national minimum of $7.25. See a map from the BLS here. Additionally, the real minimum wage (adjusted for inflation), has decreased since the late 1960s:

In comparison to other countries, our minimum wage is in the mid-range of OECD nations with available minimum wage data (time series data available here). Compared to European nations with a minimum wage, and adjusted for the purchasing power of the currency and the price of goods in the nation, the U.S. falls not quite in the top third:

Source: Eurostat

Note this selection of countries does not include Germany or Scandinavian countries, which don’t have statutory minimum wages because collective bargaining is so strong. These countries tend to have much higher wages.

How would $9.00 compare to the “cost of living”? Well, that depends on where you are and how you define livability standards. Researchers at MIT have developed a Living Wage Calculator that accounts for varying costs across states and regions, and back calculates the wage needed for a full-time worker to achieve poverty level and livable wages.  The estimates range from $7.86 in Arkansas to $12.51 in Hawaii for a single adult. Cost of living varies enormously by region, and its difficult to say whether a national minimum wage should meet an average cost of living across the country, or ensure a livable wage to any American worker in any part of the country. Another consideration is how the minimum wage should be updated to rise with the cost of living: would a chained CPI adjustment be more palatable from the beginning of such an annual adjustment program than it has proven as a Social Security fix?

The question of whether raising the minimum wage will increase unemployment has been highly debated elsewhere, and we won’t get into that debate here and now. All this, however, may be ignoring another elephant in the room: is an increase in the minimum wage an effective way of providing assistance to the working poor? Dylan Matthews points to evidence that we can get more “bang for our buck” through the Earned Income Tax Credit, for example. However, Matt Yglesias reminds us that the EITC will show up in the federal budget and minimum wage increases will not, making it much more politically palatable in current fiscal times.

Ashley Clark is a MPP/MA-IAS student at UC Berkeley.


This week, the International Policy, Development and Practice Speaker Series welcomed David B. Arnold, the President of The Asia Foundation.

Seen through the lens of his work at The Asia Foundation, Mr. Arnold delivered a talk on "Asia’s Development Challenges." He identified three major challenges for Asia and the Asia-Pacific area. First, he described the weakness of governance and governance indicators impeding economic growth and progress. However, interesting experiments to fight corruption have also begun. In Mongolia, for example, The Asia Foundation is helping to develop special courts to try corruption cases, as well as developing a website in India where people text information about bribes they paid to a server and a map of bribes is drawn from these texts. Secondly, he disaggregated the positive growth at the macro-level of Asian economies from the negative growth in income gaps and increasing inequality.

Finally, the third major development challenge he identified was an increasing prevalence of sub-national conflicts. He stated that if you look at the duration of these sub-national conflicts, the average duration is 32 years. The ongoing conflicts are taking their toll on development in Asia; conflict is estimated to retard growth and progress towards the Millennium Development Goals 1-3% per year.

When asked about the role of private institutions, Mr. Arnold emphasized that the value-added of foundations and NGOs is not monetary. Instead, private institutions can forge meaningful partnerships with civil society organizations within the countries they operate in, creating what he calls the “software” of development through which the hardware development (such as dams, etc.) can both take place and fit within. Secondly, private institutions have a strong value-driven approach. These two things combine to help private institutions play a catalytic and innovative role in development.

Mr. Arnold was also asked about the rise of “indigenous non-profits,” or the creation of foundations and NGOs funded by donors within Asia. He explained that most of these private institutions are doing singular, project-driven work, such as building schools or providing books, and are not oriented towards social justice and broader change. However, he predicts this will slowly change over the next two decades.

Mr. Arnold, in addition to his substantive comments on Asia, gave the crowd good professional advice. "Learn when to say yes," he encouraged the room. He explained that learning when to say yes takes you to more interesting places and more fascinating jobs. He also explained that one who works in development needs to be a "cock-eyed optimist;" there are success stories and progress, and it is important to see and highlight them to encourage future good work.

Kate Daniel is a first-year masters student at the Goldman School of Public Policy.

I spoke recently with a friend who has trained in an infantry unit in the Vermont Army National Guard about the Pentagon’s announcement last week to allow women to serve in combat positions.

First, some clarification on what the announcement means. Women have been serving in the military since World War I; in fact, my great aunt joined the Coast Guard SPARS, the Women’s Reserves, during World War II.[1] The roles of female soldiers grew from there, particularly in the Gulf War. In 1994, the Defense Department issued a formal rule banning women from serving in “direct ground combat,” which blocked them from armor, artillery, and infantry divisions. The Pentagon’s action on January 23 lifts this ban. Women currently make up about 14 percent of the enlisted ranks.

My friend pointed out 4 important considerations for what this means:

1)   Women have already found themselves in combat roles, some by accident and some by design. Female military police, pilots, linguists, medics, and other support roles see combat when their envoys or stations are attacked.  Today’s battlefields of Iraq and Afghanistan are far more ambiguous than they have been in earlier days of military history; there is no literal “front line” from which to exclude women, or civilians or other noncombatants. Some women have even been awarded military honors for valor in combat. Kayla Williams describes for Slate magazine how the announcement is in many ways formally recognizing reality, and that we shouldn’t fear it.

2)     One of the key requirements for serving in the military has been satisfactorily fulfilling physical fitness tests. The Army is now considering an overhaul of these fitness requirements to distinguish between general service and combat roles, and has pledged to make the standards gender neutral. This marks movement towards the approach that it doesn't matter who you are – male, female, black, white, Latino/a, gay, straight; what matters is if you get the job done. For infantry units, the standard will include whether a soldier can carry his or her gear, maneuver in a firefight, and deal with the physical and emotional stress of combat. Special operations units, such as the Army Rangers, Marines, and Navy Seals, are expected to hold women to the same existing, and very high, physical fitness standards for men.

3)   There’s a clear need for more female soldiers on the ground in Iraq and Afghanistan. Williams points out that there are numerous occasions where men are not able to effectively communicate or interact with local women due to cultural norms. A female American soldier can better speak to an Iraqi woman without causing tension or fear, and it is far more desirable to have female soldiers conduct body searches of women. 

4)   The military is already facing much higher rates of sexual assault than the average civilian population, as well as some criticism for how ranking officers have dealt with the problem. This is especially salient in combat zones. It’s unclear how the policy change will affect this issue. There is some concern that backlash against the increased role of women could take the form of more assaults or lax enforcement of policies. At the same time, there is optimism that increasing the number of women in the military will shift attitudes and create a more egalitarian atmosphere. In response to these concerns, as well as general concerns about unit cohesion, advocates of bringing women into combat roles have noted the smooth sailing since the repeal of “don’t ask, don’t tell”.

It’s encouraging to see the Department of Defense take conscious and deliberate steps toward social equity. Perhaps lifting the ban is not much more than recognizing a transition that’s been occurring anyway. As anyone who championed the repeal of “Don’t Ask, Don’t Tell,” would agree, however, that formal recognition is meaningful and important in its own regard.


[1] Note that the Coast Guard is now under the jurisdiction of the Department of Homeland Security, and so is not directly affected by the Department of Defense’s announcement.

Ashley Clark is a MPP/MA-IAS student at UC Berkeley. 

This week, the International Policy, Development and Practice Speaker Series welcomed George Scharffenberger, currently the Director of Programs for Masters in Development Practice.

In his talk entitled "Personal Perspectives on 40 Years of International Development Efforts: Speculation on why $3 trillion has brought us so little," Mr. Scharffenberger took us through his personal experiences before launching into his assessment of development failures. Mr. Scharffenberger looked at the failures of development over the past 35 years at a macro and micro level. He blamed the failures at the macro level on the belief in a "secret sauce," or easy to implement and replicate solution that has plagued the development community. Instead, approaches should be adaptable and sought for local contexts. On a micro-level, he encouraged resistance to fatalism while retaining skepticism. He argued that the approach to project-funding should favor experimentation. He warned that Randomized Control Trials (RCTs), which are the vogue in development currently, can be a mixed bag; although results-based funding should not be discouraged, it can be an easy leap from proving something can be done to trying to scale or implement the project incorrectly.

Mr. Scharffenberger has more than 35 years' experience in the design, management and evaluation of international economic and social development activities including long-term assignments in Senegal, the Gambia, Morocco, and Madagascar. George was the founding executive director of the Blum Center for Developing Economies at UC Berkeley after having held executive positions in the international NGOS World Links, VITA, and Pact. Prior to his current role at the Master in Development Practice, he was the special Assistant for International Development Policy and Practice at the Office of the Vice Chancellor for Research at UC Berkeley.

The International Policy, Development and Practice Speaker Series meets every Thursday from 12:30-2:00 pm in GSPP 105 this Spring Semester.

Matthias is a graduate student at the Goldman School of Public Policy.

Americans generally agree money in politics is a problem. Typically this is expressed in calls to overturn the Supreme Court's Citizen's United decision or to declare money as separate from speech. However, according to Harvard professor Lawrence Lessig, these calls may largely miss the point.

In a lecture given Tuesday, Lessig provided a moving speech of how money has fundamentally changed politics in the United States and our responsibility to advocate for change. Through the course of his speech, however, his definition of the problem  stood out.

Rather than warn of direct corruption or pursue attacks on the Supreme Court, Lessig directed the audience to reevaluate how money alters the system of politics. As he described it, money shifts Congress' focus away from democratic votes and towards raising money. Indeed, how focused will a Congressmen be on attending their constituent interests when they have to spend 30 to 70 percent of their time on raising funds for their next election?

Lessig also reframed how money in politics is typically viewed by showing how it also works as a self-propagating extortion scheme. He pointed out how several temporary tax cuts have been extended time and time again because they are excellent fundraising tools. In the current system, businesses are forced to contribute thousands of dollars or face immediate cost increases elsewhere. 

In Lessig's estimation, money in politics has developed into a system of dependence. Recognizing how money affects the system is important in creating working, structural solutions. However, it is still the responsibility of the citizen to embrace the role of activist to enact the change America needs.