Month of March, 2009

Nobel Laureates Michael Spence and Paul Krugman offered competing opinions on the potential effectiveness of U.S. Treasury Secretary Tim Giethner's latest proposal to cleanse ailing banks of toxic assets. While Spence acknowledges that the plan is complex, he believes it is a step in the right direction. Krugman on the other hand believes Geithner is following the steps of former Secretary Hank Paulson in offering "cash for trash". Read more about it in Bloomberg's coverage of the debate here.

Growth Commission Chair Michael Spence was a guest on CNBC's Squawk Box this past week, where he discussed the Fed's recent announcement that it will purchase $300 bn in long term U.S. Treasury Bills, adding to the $750 billion worth of agency backed mortgages it plans to purchase this year. Spence lauded this move by the Fed, and stressed that the key to recovery is to unfreeze the credit markets. Additionally, Spence emphasized the attention that must be paid to making sure that developing countries recover from this crisis.  Inevitably, he said, the western countries will recover, but due to an increased propensity to save, they will not likely drive the same levels of aggregate demand that existed before the crisis. This shortfall will only be made up if recovery in the developing world keeps pace with the industrial countries. To watch the interview, please click here.

In a sobering editorial in Tuesday’s Financial Times, Trevor Manuel, the Finance Minister in South Africa, and member of the Growth Commission, presents the very real dichotomy facing a world searching for a way out of the current financial crisis.  On the one hand, world leaders can band together and “find appropriate instruments of governance through which the propulsive power or modern finance can be harnessed to serve a development agenda”. On the other hand, a failure to do so will result in “growth and social progress” continuing to be the “bonded servants of finance capital”.

The last decades have seen a tremendous improvement of the situation for girls and women in developing countries. Today, more girls attend school. More women earn an income in the formal labour market. Women participate in society to a greater extent.