Its legitimacy and effectiveness on the line, the World Bank faces criticism from its constituents and the civil society organizations that serve them. What options and arguments for accountability make the most sense for global governance institutions like the World Bank? HBS professor Alnoor Ebrahim testified before the U.S. House of Representatives on paths to change.
It is impossible to regulate against greed and ethical shortcomings. What can be done is to force greater transparency and accountability.
Respondents to this month's column by HBS professor Jim Heskett came close to general agreement on the proposition that economic growth is not measured properly by GDP, calling for new indicators. Jim sums up. (Online forum now closed. Next forum begins July 6.)
The changeover from defined benefit to defined contributions retirement plans in the United States has created a vast group of individuals that faces (or will face) the difficult problem of using a lump sum of assets to provide consumption for a relatively long but uncertain number of years. Up to this point, however, consumers appear not to have embraced annuitization. HBS professor Julio J. Rotemberg suggests an alternative instrument that, like immediate annuities, provides longevity insurance and postpones income until old age. In the proposed Mutual Inheritance Fund (MIF), a pool is formed by having individuals of a particular age buy shares in a mutual fund. The income from the underlying assets in the mutual fund is reinvested in the fund so that the value of the shares in an individual's name (and possibly also the number of these shares) grows over time. The basic idea behind the MIF is that the shares of pool members who die are liquidated, and the proceeds are then distributed in cash to the remaining members in proportion to the number of mutual fund shares that are currently in their name.
Insurance markets are growing rapidly in developing countries. Despite the promise of these markets, however, adoption to date has been relatively slow. Yet households often remain exposed to movements in local weather; regional house prices; prices of commodities like rice, heating oil, and gasoline; and local, regional, and national income fluctuations. In many cases, financial contracts simply do not exist to hedge these exposures, and when contracts do exist their use is not widespread. Why don't financial markets develop to help households hedge these risks? Why don't more households participate when formal markets are available? HBS professor Shawn Cole and coauthors attempt to shed light on these questions by studying participation in rural India in a rainfall risk-management product that provides a payoff based on monsoon rainfall. The results suggest that it may take a significant amount of time—and substantial marketing efforts—to increase adoption of risk-management tools at the household level.
Does access to personal savings increase female decision-making power in the household? The answer could be important for policymakers looking to increase female empowerment. HBS professor Nava Ashraf and colleagues developed a commitment savings product called a SEED (Save, Earn, Enjoy Deposits) account with a small, rural bank in the Philippines. The SEED account requires that clients commit not to withdraw funds that are in the account until they reach a goal date or amount, but it does not explicitly commit the client to continue depositing funds after opening the account. This working paper examines the impact of the commitment savings product on both self-reported decision-making processes within the household and the subsequent household allocation of resources.
The era of paternalistic medicine has passed, but the notion that patients can act as consumers and make appropriate decisions concerning medical treatment poses countervailing risks of its own. A better accommodation among key players needs to be struck to foster the safe use of pharmaceuticals, according to HBS professor Arthur Daemmrich. The "pharmacy to the world," once located at the intersection of Germany, Switzerland, and France, today is found in the United States. Studies of the industry have attributed this sustained competitive advantage to a variety of factors, including U.S. intellectual property policies, funding for biomedical research through the National Institutes of Health, the absence of government controls on drug prices, and the availability of venture capital and other factors that fostered the growth of the biotechnology industry. The data and analysis presented in this working paper, however speculative, are an initial step toward deepening the understanding of interrelationships between government regulation, patients' mobilization both as regulators and as consumers, and the functioning of the pharmaceutical industry.
Board members may be inclined to advance their own interests at voting time. This appears true for the World Bank's Board of Executive Directors, too. The problem? Many countries are being shut out of development funding. New research by Harvard Law School student Ashwin Kaja and HBS professor Eric Werker tells why misgovernance at the World Bank should be corrected.
This month's question brought out both the poets and the engineers among respondents. The rapid pace of new technology adoption within organizations implies change for management and society, says HBS professor Jim Heskett. How does change affect the open sharing of information? (Forum now closed; next forum begins May 1.)
What accounts for the disturbing trend of increasing terrorism and associated fatalities in South Asia? In 2007, a quarter of all terrorist attacks worldwide were committed in South Asia, second only to Iraq. HBS professor Lakshmi Iyer presents the first comprehensive analysis of internal conflict in South Asia using multiple data sources and incorporating a long-run time frame. She finds that the intensity of internal conflict in the post-2001 period is strongly associated with poverty, both in a cross-country comparison and in a comparison of districts within India and Nepal. Measures implemented by regional and national governments to combat internal violence vary considerably across countries and over time. Typically, the use of military force or relying on unofficial militias has not proved to be a successful counterinsurgency tactic in South Asia; strengthening police activity and using a political accommodation approach has led to some successes in the past.
HBS professor Jim Heskett sums up comments to this month's column. Given the possibility that a naturally pessimistic (or perhaps more realistic) CEO might adversely affect everything from market reactions to employee morale, HBS Working Knowledge readers' comments are full of advice for honesty, candor, and an optimistic bias.
Managers discuss their own experience in organizations in response to February's column. All good leaders teach as well as learn, says Jim Heskett. Is it possible with any degree of confidence to select people for certain leadership jobs? (Forum now closed. Next forum begins March 5.)
Most consumers in America have purchased products made with sweatshop labor at one point or another. However, very little attention has been focused on the psychological mechanisms that enable consumers to propagate a system that implicates harm. Although many people say they care about ethical issues such as humane labor conditions, demand for products that guarantee it remains low. According to some estimates, there are hundreds of thousands of sweatshops still operating today. HBS doctoral student Neeru Paharia and professor Rohit Deshpandé examine whether people may be motivated to morally disengage in the presence of harmful attributes such as sweatshop labor when desire for a product is high. They found that research participants were significantly more likely to agree with statements such as: "The use of sweatshop labor is okay because companies must remain competitive," and "Sweatshops are the only realistic source of income for workers in poorer countries," when confronted with a hypothetical pair of shoes with a higher appeal, versus shoes with a lower appeal. The researchers also found that moral disengagement can drive people to like products they believe to be made with sweatshop labor even more. The authors suggest that since we are confronted with conflicts between our desires and our moral standards on nearly a daily basis, this research calls into question the foundation from which our moral judgments rest on. If our moral judgments are likely to vary based on our affective desires, any moral standards we may hold ourselves to are dubious at best.
Published in 2007
Medical tourism—traveling far and wide for health care that is often better and certainly cheaper than at home—appeals to patients with complaints ranging from heart ailments to knee pain. Why is India leading in the globalization of medical services? Q&A with Harvard Business School's Tarun Khanna.
It is a paradox that in a globalizing and "boundaryless" economy, factors associated with local communities—such as interpersonal networks, laws, and tax rates, among others—remain important for understanding organizational behavior. As Marquis and Battilana argue, communities influence organizational behavior not only as local markets and resource environments, but also through a number of institutional pressures. Focusing on communities as institutional environments provides fresh theoretical insights into organizational behavior, in addition to offering a more unified perspective to the diverse set of research that is emerging on local communities.
What difference has civil society activism made to the World Bank? More specifically, how and to what extent have civil society actors furthered the accountability of the World Bank to its constituents? The case of the World Bank is important for 2 main reasons: The Bank has not only been a major target of civil society activism, but it has also been comparatively responsive in developing various forms of engagement with civil society, possibly more than any other multilateral institution. This paper describes key accountability challenges facing the institution and reviews accountability mechanisms currently in place at 4 different organizational levels. It then explores efforts from civil society groups to increase accountability, and notes the successes and failures of these reform efforts.
In poor rural communities, public goods such as health and education services, clean water, electricity, and transport facilities are remarkably scarce. Within this picture of overall inadequacy there is considerable variation both across countries and inside national boundaries. How can these variations in public goods be explained? This paper surveys theoretical and empirical research on the characteristics of groups and the ability of members to act collectively to promote group interests. There remain many missing pieces in the public goods puzzle and there are important policy implications as a result.
Foreign aid is viewed as a transfer of resources that can be used to generate meaningful growth in the recipient country's economy. How this aid is ultimately spent, therefore, determines how effective it is in achieving its purposes. Yet economists to date possess little understanding of how foreign aid trickles through a country's economy. This paper examines a foreign aid windfall that poorer Muslim countries have systematically received from rich, oil-producing Arab states. When the price of oil skyrocketed during the 1973-1986 oil crisis (and again after 2001), OPEC nations took a substantial portion of the money they received and gave it away as foreign aid, mostly to Muslim nations. When the price of oil crashed and income plunged in the oil-producing countries, the aid dried up. Werker, Ahmed, and Cohen examined the short-term effect of foreign aid on aggregate demand, the components of gross domestic product, and the balance of payments.
If the world's large corporations really are the greatest drivers of wealth creation, it only seems reasonable that their capabilities and resources can be focused on global poverty, says professor emeritus George C. Lodge. Here's the case for a partnership between business, the United Nations, and NGOs.
Published in 2006
Microfinance may offer a window on new methods for widening access to healthcare for the poor, says Harvard Business School's Michael Chu. He and colleagues at the Harvard School of Public Health have embarked on a new project to serve this critical sector. Bringing together public healthcare and market forces "could have huge impact," he says.
Without knowing it, we have already heard a great deal about "dependency ratios." We can expect to hear a lot more, both at the level of nations and individual firms. What is the answer to a dilemma that we are going to be confronting more and more frequently?
Before 1945, many thinkers believed cartels brought widespread benefits. But following the spread of antitrust ideas after 1945, Adam Smith's verdict on cartels as "conspiracies against the public" prevailed. The cartel question highlights important issues about the benefits and risks of competition. This working paper maintains that, for better or worse, cartels have shaped economic and business history since the late nineteenth century. Big business must recognize how, up until the 1980s, the activities and influence of cartels affected technological development, corporate strategy, and organizational change.
What role should business play in ameliorating poverty and addressing inequality? Linda A. Hill and Maria Farkas, a doctoral student, examine this question against the backdrop of post-apartheid South Africa. Focusing on the efforts of one successful black executive to recruit and develop other minority managers and integrate blacks into the mainstream economy, Hill and Farkas explore fundamental ethical and business issues affecting companies and society at large.
A World Development Corporation could help business, government, and non-governmental organizations collaborate more effectively to ease global poverty, believes George C. Lodge, HBS professor emeritus. He discusses recent developments.
Published in 2005
What are the moral consequences of economic growth? It’s a subject that political economist Benjamin M. Friedman tackles in a new book. Growth numbers may move markets, but do they also lull us into a false sense of satisfaction and security?
Countries are adopting stronger intellectual property rights to entice international corporate investment. But who really benefits from IPR? Should multinationals feel secure that their secrets will be protected? A Q&A with professor C. Fritz Foley.
There is a lot of talk these days about a level playing field, sparked in part by Thomas L. Friedman's bestseller, The World is Flat. But what is a level playing field in the world today, and does everyone play by the same rules?
Do you think the forces of globalization are here to stay? Harvard professor Niall Ferguson says nothing is for certain. Consider what happened to the "first age of globalization" in 1914—and then look around at the world today.
How should you handle corruption in your markets? On the heels of a recent Harvard Business Review fictional case study on corruption, HBS professor Rafael Di Tella lays out the not-so-black-and-white issues in this Q&A.
Published in 2004
How should the world (and firms, and countries) best adjust to an age of more expensive energy? Among the possible alternatives for tackling the problem, three seem to stand out.
It looks like productivity increases in the U.S. are accommodating growth with little increase in the number of jobs. Doesn’t it suggest that the jobs that people do hold must be getting better?
Published in 2003
You may not enjoy being targeted by a non-governmental organization, but you better learn how to manage that relationship, say HBS professor Debora Spar and Lane LaMure.
Does your U.S. brand play well overseas? If so, heed the words of Harvard Business School professor John Quelch: A swelling anti-American tide could wash away the international popularity of U.S. brands.
Quick, name the country with the highest sustained growth in real output over the last forty years. The surprising answer: Botswana. Harvard Business School professor Debora L. Spar discusses the dynamics behind this little-reported story.
Published in 2002
Can an international alliance of global corporations win a war on poverty? Yes, if such an alliance is well planned and formed soon, according to HBS professor emeritus George C. Lodge.
What's it like doing business in Islamic countries today? Harvard Business School professor Samuel L. Hayes III and Harvard Law School professor Frank E. Vogel recently gave students the real deal.
What’s nationalism got to do with it? If you’re talking about the world economy, then the answer is quite a lot, says HBS professor Rawi Abdelal. In a conversation about his new book, Abdelal describes the power nationalism has over new countries—and its very far-reaching effects.
Published in 2001
In the wake of the deadly terrorist attack, America has begun to learn some lessons it should have already learned about the New Economy, the role of government, and how the country is viewed elsewhere, says HBS professor Debora Spar.
Published in 2000
The experience of three states of the former Soviet Union in the shadow of post-Soviet Russia, says HBS Professor Rawi Abdelal, shows that nationalism plays a far greater role in economic policy than has generally been recognized.
Published in 1999
