Summer is just around the corner, and the newsstands are suddenly covered with magazine covers promising to get you trim and toned for the beach. But, this year, squeezing into the swimsuit will be harder than ever. Why? We’re getting fatter.
Figures released by the OECD earlier this week show that most adults in the developed world are now overweight. More worrying, almost one in five are not just overweight but obese. In the United States, Mexico and New Zealand, that proportion rises to one in three. (If you’re wondering about your own body, you can estimate your Body Mass Index, or BMI, here. Among adults, a BMI of 25 or over means you’re overweight; 30 or over means you’re obese; and 40 or over means you’re severely obese.)
The problem is not just confined to rich countries. Worldwide, not a single developed or developing country has managed to turn the tide on obesity over the past three decades, according to findings from the Global Burden of Disease Study reported this week. Over that period, the proportion of overweight or obese adults worldwide rose about 8 percentage points to just under 37% for men and to 38% for women, and there were also big rises among children and adolescents.
So, the obesity epidemic shows no signs of going away, although there are signs that it’s levelling off in some rich countries. According to the OECD data, obesity rates are stabilising, or growing only very slowly, in around six OECD countries and regions, including the U.S., Spain and Canada. But in others, such as Mexico and Australia, they’re still galloping along.
They also look to be rising among people on the bottom end of the economic ladder, who tend to suffer higher rates of obesity in any case. The Great Recession didn’t help: In a number of countries, there are signs that families cut their spending on food, typically by replacing fresh produce with highly calorific but less nutritious processed foods – goodbye salad, hello cheeseburger.
For a number of reasons, the global rise in obesity is increasingly seen as a serious issue for public health policy. For one thing, obesity – just like cigarettes and alcohol – is a killer. People who are severely obese cut eight to ten years off their lives, while every extra 15 kilograms of weight increases the risk of early death by about 30%.
Another reason is that it’s clear that people don’t have the information they need to make good decisions about food. That’s not too surprising. We live, after all, in a world filled with food designed, quite literally, to make us go on eating – try eating just one Pringles chip, for instance. We are also bombarded by endless, and often contradictory, advice on what and what not to eat. Right now, it seems, sugar is replacing butter as Public Enemy No. 1. Neither, of course, is a “super-food” – a list of comestibles that promises to make us slim, sexy and smart and that now includes everything from blueberries and pomegranates to vinegar, cauliflower and even dandelions.
It’s no wonder people are confused.
Recent years have seen a swathe of policy initiatives to try to tackle the obesity epidemic, and a range of approaches is being taken. One of the most popular – and controversial – involves introducing higher taxes on fatty or sugary foods. Designing these taxes is not easy, however. Denmark, for example, introduced a “fat tax” on foods containing more than 2.3% saturated fat, but rescinded it after not much more than a year amid pressure from retailers, producers and politicians.
Other initiatives include better food labelling. The UK, for example, has introduced a voluntary “traffic-light” system to inform consumers about the levels of salt, sugar and fat in their food. Food advertising is also being targeted in some OECD countries: As part of its ambitious National Strategy on obesity, Mexico has banned TV advertising of potentially harmful foods during hours of the day when children are likely to be watching. Financial and other incentives are also being tried out in some OECD countries to encourage people to lose weight.
Many of these initiatives are fairly recent, so it will take time before their impact becomes clear. No doubt, some will work better than others – indeed, some may not work at all. However, there is good evidence to show that public policy really can have an impact on major health issues. Take smoking – down almost a third in just two decades in rich countries and, with luck, likely to fall still further.
OECD work on the economics of prevention
Back in 1992, the then-president of the United States took on one of his most unlikely opponents – an eccentric family from Springfield with only four digits on each hand. The confrontation came in a speech in which George H.W. Bush called for a return to what some call “traditional family values”: “We are going to keep on trying to strengthen the American family,” the president declared, “to make American families a lot more like the Waltons and a lot less like the Simpsons.”
You probably know all about The Simpsons. But younger readers may be wondering about The Waltons, a TV show set in rural Virginia about a hard-working family with seven children struggling to survive in the Great Depression. The show ran throughout the 1970s and despite – or perhaps because – of that decade’s social and economic upheaval was a big hit. When President Bush compared the crazy antics of the Simpsons with the daily struggles of the Waltons, his listeners knew exactly what he was getting at.
Ironically, these days it’s now the Simpsons who look a bit, well, old-fashioned. Increasingly, they reflect an idea of the family as we used to think about it, and not the diversity of today’s modern families. So, how do today’s families compare to TV’s most famous clan, the Simpsons?
For starters, the Simpsons model increasingly represents just one version of how we live today. Across OECD countries, just under three out of five households are made up of a mom, dad and kids, according to the OECD Family Database. People living on their own account for more than a quarter of households and single-parent households for around a tenth. The remainder is accounted for by extended families with grandparents, families living with other families and other arrangements.
By modern standards, the Simpsons family is also big. True, this family of five – mom, dad and three kids – can’t match the Waltons’ seven kids, but it’s well above the size of the “average” couple’s family, which has fewer than two children.
Marge and Homer Simpson are also striking in that, after all these years, they’re still married. In almost all OECD countries, divorce rates have risen since the 1970s. They’re highest in the US, where they were also relatively high in the 1970s, and lowest in Chile. One striking feature of the data is that, although more couples are divorcing now than in the past, they’re not – apparently – making any less of an effort to keep their marriages going. In recent decades, the duration of marriages that end in divorce hasn’t changed all that much; it typically ranges between 10 and 15 years.
Over the years, Marge has made numerous attempts to find work – she’s sold property, cleaned offices and even joined the police force. But despite this, she always seems to wind up as a fulltime mom. Again, that’s pretty unusual in OECD countries, where on average just under two out of three moms go out to work, a proportion that can rise to over three out of four in northern Europe. Still, perhaps Marge’s decision to stay at home is not too surprising: In all OECD countries, moms like Marge with three or more children are much less likely to go out to work.
Despite its early critics – and those who say it’s no longer as funny as it used to be –The Simpsons has shown remarkable staying power. It’s currently celebrating its 25th season with no end in sight: “… I can’t see why we wouldn’t go to 30 [years] … and why we can’t go to 40 or even 50,” producer Al Jean told The Daily Telegraph. How will OECD families look in 2039? Less like The Simpsons, perhaps, and more like those in another hit TV show, Modern Family. Its families include a mom and dad with kids, a second-marriage combining kids from two families and a gay couple with an adopted daughter.
What would the Waltons make of that?
OECD research on children and families
Doing Better for Families (OECD, 2011)
Today’s post is by Agustin Diaz-Pines of the OECD’s Science, Technology and Industry Directorate
The spectrum used for mobile communications in the United Kingdom alone was worth USD 48 billion in 2011 according to this study. In turn, the mobile industry also supports a supply chain of infrastructure, equipment, applications and content providers, generating revenue of around USD 32 billion a year in the UK. But if the Internet economy is to continue to develop, more spectrum will be needed to accommodate the growth in smartphones and other wireless devices.
A new OECD report looks at new approaches to enhance spectrum management to make more spectrum resources available for wireless communication services to meet current and future demand and, at the same time, increase the efficiency in its use.
The traditional approach has been to make spectrum (i.e. rights of use) available to communication providers on an exclusive, dedicated basis. The Federal Communications Commission (FCC) in the United States is encouraging broadcasters to release some of their cherished airwaves: incentive auctions. If wireless providers are ready to pay for more spectrum and broadcasters ready to be compensated for transitioning to other frequencies, or going off the air, the economic logic tells us that their incentives should be aligned. “Repacking” the released frequencies in order to clear contiguous blocks of spectrum remains the most complex task, as these blocks need to be suitable for flexible use and harmful interference minimised.
Undoubtedly, exclusive licensing will continue to play a prominent role in future communications, but evidence suggests, however, that one of the most successful technologies relies on unlicensed spectrum, such as the now pervasive Wi-Fi networks. Wi-Fi is embedded in most tablets and smartphones, and mobile traffic off-loading to fixed networks through Wi-Fi helps alleviate mobile network congestion. One report has estimated that the unlicensed Wi-Fi use provided a consumer surplus of between USD 52 billion to USD 99 billion a year globally, by enhancing the value of fixed broadband connections. As a result, making available sufficient spectrum for unlicensed use should be among policy makers’ priorities in the coming years.
In the Netherlands, unlicensed GSM spectrum (1 800 MHz band) is being used by 3 000 organisations (hospitals, stadiums and exhibition centres) to deploy their private indoor mobile networks, independent from existing mobile networks. This increases indoor coverage and avoids network congestion. But another approach is attracting interest: “licensed shared access” (LSA), whereby a limited number of users are allowed to utilise spectrum held by an “incumbent” user (a spectrum holder, which can be a government user or an operator). While incumbent users remain protected from harmful interference, the licensees are allowed to use the spectrum in a given timeframe or geographical area while respecting some rules, provided that the “incumbent” is not using the spectrum.
The European Union Radio Spectrum Policy Group has recently published an opinion on Licensed Shared Access, which seeks a more efficient use of spectrum. Candidate bands for sharing are the 2.3 GHz band in Europe and the 3.5 GHz band in the United States. The CEPT (a European technical spectrum body) is currently considering the 2.3 GHz for LSA access. Likewise, on 23 April 2014 the FCC in the United States issued a proposal to transition to a sharing regime in the 3.5 GHz band, following the recommendation of the PCAST report. Some of the PCAST report recommendations were included in the latest Economic Report of the President of the United States.
Other arrangements aimed at promoting sharing and efficiency, the report quotes, are femtocells in Japan or the nascent TV White Spaces technology (frequencies not being used at all times or at all locations) with trials in various countries, including Korea, the UK and US.
The success of incentive auctions, spectrum sharing and other related initiatives clearly relies on the ability of policy makers and regulators to set up the right rules to align the incentives of the main stakeholders. Market-based incentives, while preserving critical government services, are crucial to avoid spectrum remaining underutilised because there is no incentive to sell it or share it. In their overall assessment, policy makers should take into account that spectrum is an essential input to the global Internet economy: virtually all sectors of the economy could benefit from more widely available and efficient wireless broadband services.
United States, President’s Council of Advisors on Science and Technology, “Report to the President. Realizing the full potential of government-held spectrum to spur economic growth.”
The announcement by the lunatic who claims to lead Boko Haram that he’s going to sell hundreds of captured Nigerian schoolgirls into slavery shocked most of the world. I say “most” because what he’s proposing isn’t in fact unusual. In Nigeria and across the border in Niger, young girls are sold to men who’ve used up their authorised quota of four wives or who simply want slaves to advertise their prestige. A report by Anti-Slavery International and Association Timidria explains: “‘Wahaya’ are girls and women bought and exploited as property by many dignitaries (mostly religious leaders or wealthy men who bear the title ‘Elhadji’). The women are used for free labour and for the sexual gratification of their masters, who assault them at will when they are not with their legitimate wives.”
A wahaya costs $300 to $800, and 43% of the girls interviewed for the report were sold between the age of 9 and 11 years old, 83% before the age of 15. The girls say it is common for the “master” to force sexual relations on them as soon as they reach puberty. They receive no pay, and are never allowed to leave their family home except to work. Many are also forced to wear a heavy brass ankle ring to signify their slave status.
Tabass Aborak for example was sold three times to three different masters over 12 years, the first time when she was just seven years old. “We had to carry out orders from the master and his wives. Night and day were just the same; each moment that passes brought more work. Only speed and skill in carrying out orders allowed us to avoid the master’s punishments, especially if he was angry at us because of the tales his legitimate wives had been telling him. When this happened we’d be called ‘chegiya’, which means ‘bastard’, or ‘bouzoua’ – ‘useless slave.’” When the family travelled to visit relatives, Tabass followed the horses on foot, carrying the children on her back.
West Africa isn’t the only place where slavery still exists. The 2013 Global Slavery Index estimates that 29.8 million people worldwide are victims of human trafficking, forced labour, slavery or slavery-like practices (debt bondage, forced or servile marriage, sale or exploitation of children, including in armed conflict). Over three-quarters of the slaves live in just ten countries, mainly in Asia and Africa (in descending order: India, China, Pakistan, Nigeria, Ethiopia, Russia, Thailand, DRC, Myanmar, Bangladesh) but it’s a problem everywhere – nearly 2% of those 29.8 million are in Europe for example.
According to the FBI, an estimated 293,000 American youths are at risk of becoming victims of commercial sexual exploitation. The children generally come from homes where they have been abused or from families who have abandoned them. The girls first become victims of prostitution at age 12 to 14 on average, while for boys and transgender youth, it’s at age 11 and 13 on average.
The modern slave trade takes advantage of the increased mobility, cheaper travel and the ease of organising international networks that technology and globalisation make possible. It is reinforced by economic misery and absence or removal of social protection, and the illusions engendered by images of a better life elsewhere. How can it be fought?
The “Protocol to Prevent, Suppress and Punish Trafficking in Persons” is the leading international instrument. It goes beyond trafficking for forced prostitution and takes into account forced domestic work and commercial marriage. It recommends that governments allow victims to remain in the destination country, temporarily or permanently, ensure their safety and protect their privacy and identity. It also recommends that governments establish legal measures to award victims compensation. The authorities can help victims by protecting them even if they are not prepared to help the investigation of trafficking networks, and they can help migrant victims by not deporting them back to the country they were trafficked from.
The OECD is trying to play a part too. In 2001 already, Trends in International Migration warned that “Organised prostitution networks and illicit immigration rackets are at the root of a modern form of slavery, affecting women in particular. International measures of co-operation need to be stepped up to counter and prevent such exploitation.” However, every study into trafficking (of people, drugs, arms or anything else) states how hard it is to evaluate the scale of the problem. The OECD Task Force on Charting Illicit Trade (TF-CIT) was set up to “co-ordinate international expertise in the quantification and mapping of illicit markets”. This year the TF-CIT is focusing on three areas: mapping the economic activities of transnational criminal networks; examining the conditions and policies that encourage or inhibit different sectors of illegal trades, whether at the level of production, transit or consumption; and developing visualisation tools to help decision makers better target prevention and mitigation efforts.
In the meantime, here’s how one of the slave owners interviewed by Timidria sees things: “To be honest, because I had bought them, I strongly felt that they were slaves that I had paid for and that it was their duty to obey my orders under all circumstances. They are always visible because they are always busy, while my legal wives are housed at the back of my compound and are not accessible to just anyone, as our religion prescribes. No one is surprised by this, and everyone was happy with their situation.”
On April 3rd, the OECD Financial Roundtable (FRT) dealt with SME financing beyond traditional bank loans, emphasising the role of securitisation, private placements and bonds. In today’s post, Marcus Schuller of Panthera Solutions gives us his personal view on the meeting in this article we’re co-publishing with Panthera.
The crisis saw traditional channels of credit for SMEs drying up or becoming restricted. Deleveraging became the order of the day for governments, consumers and banks. And yet, although many SME managers think that banks won’t lend to them, a recent ECB/EC SME survey suggests that nearly two-thirds of SMEs in the EU who applied for external finance got everything they applied for. The actual bottleneck comes from increasing interest rates and even more so increasing non-interest related costs (fees, charges, commissions) which make bank loans increasingly unattractive for SMEs.
Non-bank financing alternatives need to be strengthened
So what alternative financing sources are available?
In Europe, short-term options are limited due to the missing culture of direct market financing. Bank loans account for around 50% of firms’ external financing, whereas in the US, around 80% of firms’ financing comes from capital markets (equity and debt securities). Therefore SME financing in Europe via private placements or corporate bond issuances is unknown territory for many. The German Mittelstand tries to change this by placing an increasing amount of corporate bonds (Mittelstandsanleihen) especially in the retail segment. Since 2010 about 150 issuances worth EUR 7.26 billion were offered, of which EUR 5.77 billion were placed. At a first glance, it looks like a success story. However, as this market segment lacks transparency, standardisation and creditor protection, we have seen retail investors being burnt. Almost every tenth issuer has defaulted by now, although for most of the bonds, repayment will only kick in in 2015. In short, the worst is yet to come.
Which leads to a first insight into SME financing: it lacks of standardisation. SMEs are difficult to analyse due to their heterogeneous character. Small companies have different needs than medium-sized ones. Financing differs strongly between sectors and countries.
False promises of securitisation?
No wonder the large banking institutions were lobbying strongly at the FRT for an instrument they know very well how to make money with, namely securitisation. Securitisation is the practice of pooling various types of contractual debt and selling it in various forms to investors. In theory, this sounds like an elegant solution for all parties involved. But if the term “securitisation” is now known outside specialist circles, it’s because of the disreputable reputation it acquired during the Great Recession.
The representative of a large banking institution at the Roundtable didn’t see it like this, arguing that the bad reputation was due to a conspiracy of governments and regulators, driven by a “hostile sentiment”, and that securitisation did not contribute to the severity of the Great Recession.
Others may be more persuaded by what happened to subprime mortgage securitisation, or the numerous SEC mortgage fraud settlements with large banking institutions. Thanks to the settlement culture, especially in the United States, no institution had to admit any intentional wrongdoing, which makes their claim to have changed for the better not necessarily trustworthy. To be clear, securitisation is not harmful per se. It has been misused.
If we should ever again consider securitisation as part of the solution and not the problem, investors need better tools to distinguish good products from bad. In recent years, regulators and the more reasonable industry representatives have worked on those tools. Several financial regulations and other initiatives have already been implemented in the EU. Only days after the OECD FRT, the Bank of England and the ECB published their joint paper on securitisation. The paper supports strongly the value of high quality securitisation.
Could the securitisation market in Europe be large enough to solve SME financing issues? The outstanding amount of asset-backed securities (ABS) in the EU is currently about EUR 1500 billion, or around one quarter of the size of the US ABS market. Since its peak in 2009, the outstanding amount has decreased by half, to EUR 750 billion. Apart from investor-placed issuances remaining far below pre-crisis levels, secondary market activity is thin in many segments.
Residential Mortgage Backed Securities (RMBS) form by far the largest securitisation segment, accounting for 58%; SME ABS are second, but account only for 8 % of the market. The SME ABS market volume stands at EUR 120 billion. In comparison, for the EU as a whole, the aggregate volume of credit supplied to non-financial corporations was close to EUR 6 trillion in 2011. Even with the exact amount lent to SMEs remaining unknown, it is obvious that SME ABS will not be strong enough to substitute for impaired lending channels all alone.
Information is power
Instead of elaborating on available alternatives like private placements, corporate bonds or shadow banking options (crowd-investing, SME financing via hedge funds, etc.), I sensed the necessity during the FRT to highlight a prerequisite before alternative sources can be considered. In my experience SME managers and owners are experts in their field, but not in corporate finance. They don’t know the technical vocabulary and lack knowledge about available alternatives.
And although banks like to talk about servicing clients in advising them on financing, information asymmetry between the bank and an SME representative puts the latter at a disadvantage. By not asking the right questions and not knowing the limits in negotiations, the agreement automatically favours the bank. SME managers and owners need to be supported by independent advice, no matter if it is coming from the regulator or an independent market participant.
In short, educate and empower the SME entrepreneur and manager. If this succeeds, financing options will become significantly more diverse. The single offering, be it a bank loan or something more sophisticated, will have to compete with viable alternatives. Like that, market forces on relatively level playing fields would take over again. A solution that is as desirable as it is sustainable.
SMEs and the credit crunch: Current financing difficulties, policy measures and a review of literature Gert Wehinger Financial Market Trends (OECD journal), March 2014
Jon Lomoy, Director of the OECD Development Co-operation Directorate (DCD-DAC) presents the first of two contributions to the debate on the use of randomised control trials in development economics. Diana Coyle will reply.
In her post Is economics leaving Wonderland?, Diane Coyle justly notes that development economics is ahead of the curve when it comes to “shedding the belief, at least on the part of many economists, that a single conceptual approach will deliver a ‘silver bullet’ solution or method that can be applied everywhere.”
Yet I still think we need to ask whether academic innovations in the multidisciplinary approach to economics, particularly development economics, have had an on-the-ground impact on the practice of development co-operation.
There has been a lot of discussion in academic circles, for example, about the use of randomised control trials to improve the outcome of development co-operation. While I welcome the emphasis this implies on results – and this is why evaluation has such a valuable role to play in development – like many, I wonder about the approach.
Randomised control trials in medicine make sense to me. To find out if a medication works well, you give it to one group of patients and a placebo to another. Then you see if the group taking the medication improves significantly over the group taking the placebo. Simple.
But can we take it from there to assume, as does the OECD colleague Diana Coyle quotes, that in a few years’ time randomised control trials will “turn out to have transformed the field” of development economics? Naturally, we want development that works – we want to see obvious, visible progress in poverty reduction and development. We want to validate the investment of time, money, and mental and physical energy. And where success is elusive, we want to understand quickly why we failed and learn how to do things better.
Yet the narrow, medical approach of randomised trials can, I believe, tell us very little when we need to provide information that is useful to decision makers. When it comes to understanding whether higher-level policies and programmes are working, or whether micro-successes are adding up to real progress, we need a different kind of evaluation. For example, randomised control trials can tell us whether or not an individual project for reintegrating ex-combatants worked well, but will give us little insight into the overall politics and dynamics of peacebuilding – and into how international partners can best help in settings of violent conflict. Will they help donors decide whether they can best support education by channelling money through national budgets or by financing local NGOs? Furthermore, given what we know about the diversity of development contexts, problems like this are multiplied when we try replicate positive experiences in different countries.
Evaluating development impact is not simple. The simple approach of randomised control trials can help to treat specific symptoms, but may leave larger questions of how to end “the ailment” unanswered.
Dr Coyle does well to point out “the crucial importance of the specific context.” I have seen providers of development assistance struggle to understand how their support makes a difference. How do they use findings from treating mosquito nets with insecticide to lower the rate of malaria worldwide, or from using mobile phones to improve the livelihoods of rural farmers to generate knowledge that will make development co-operation more effective at the global policy level? It’s not easy – especially when thinking about ‘global public goods’ like the environment, education, gender equality, or fair trade. With so many factors to consider, a host of different evaluation methods are needed to tackle them.
So while I very much endorse Dr Coyle’s hope that development economics has left Wonderland, I also hope that academic theory is heading for the real world – aiming to turn its incredible range of knowledge into practical insights and tools that can be used to treat the ailment rather than the just the symptoms.
There is, indeed, no “silver bullet” to cure a global problem like poverty. It is great that we recognise this – as long as it doesn’t discourage us in our quest to end poverty. And it is great that we celebrate leaving Wonderland – as long as we realize that understanding all the pieces of the puzzle, and how they fit together to guide effective action, requires a much broader approach to evaluation.
Jon Lomoy highlights a real risk in the hunt in development economics for “what works”, or in other words interventions with an identifiable and measurable impact on development outcomes. Reflecting on his comments, I agree there is a risk that economists carrying out randomised controlled trials, or field experiments, simply transfer to their new techniques their old certainties without due humility about the complexity of real situations.
In fact, the desire to demonstrate ‘impact’, along with the belief that the trials or experiments offer the tools to be able to do so, could distort assistance towards simpler interventions where cause and effect can be identified. But there is no way to be sure that these constitute the best use of resources and effort. In a context where a specific ‘impact’ has been identified, then RCTs might well offer the best way to choose between means of delivery. However, we must be careful how to generalise their results. While the conclusion that peer comparisons affect behaviour, whether that is in microcredit loan repayments in South Africa or electricity consumption in London, might have wide applicability, the incentive effects of a bag of lentils are going to be culture specific. This is an extreme example to make the point but it illustrates the need for constant sensitivity to context in using any evaluation technique, including randomised control trials.
More fundamentally, though, trials or experiments cannot answer the wider questions about which development outcomes are the most important, nor can they unpick the uncertain and complicated chains of causality and feedback in any real-world setting. Interventions with demonstrable impact might be less important in contributing to social welfare than others whose impact is hard to quantify and isolate. And the techniques themselves offer no insight into ranking priorities.
Above all, economic and social development is not a technocratic issue, but also a question of society, culture and politics. Economists alone cannot address all the problems – I wholeheartedly agree with Mr Lomoy on the need for more interdisciplinary work. Although it is a very welcome step for the discipline of economics to have embraced new empirical techniques, there is an obvious corresponding danger that economists’ tendency to hubris will simply relocate itself and end in the insistence that this is the only way to evaluate development policies.
There is a parallel danger that what should be a political or democratic debate is disguised as a technical one. Politicians like to demand answers to problems and where there is a demand, it will be met with a supply. Sometimes, it is not an answer but a decision – with appropriate accountability – that is required.
Having set out all the reasons for not becoming over-enthusiastic about the increasing use of RCT and field experiment techniques in development economics, I continue to believe they represent a huge step forward, and one that economists working in other areas of the discipline should embrace. It would be encouraging to see policymakers everywhere, not just in lower income countries, embrace the idea of trials or pilots to see “what works”. For all the need for caution, it is better than not knowing what works.