Michael Spence

The Commission on Growth and Development launched the much anticipated volume on Health and Growth this week. The launch took place in Brazil at  Banco de Desenvolvimento de Minas Gerais S.A. (BDMG) on June 15th. A second launch will take place on June 17th at the Fernando Henrique Cardoso Institute in Sao Paulo, Brazil.  Former Brazilian Presidents
Fernando Henrique Cardoso  and Itamar Franco will chair the events.  Presenters and discussants from both events include volume co-editor Maureen Lewis (Advisor, World Bank), Andre Medici (Senior Economist, World Bank), Antonio Augusto Anastasia (Vice Governor, BDMG), Paulo Paiva (President, BDMG) and Alfonso Henriques (President, Fundação João Pinheiro), and Marcus Pestana, State Secretary of Health.  Danny Leipziger, Advisor to the Managing Director of the World Bank and Vice-Chair of the Growth Commission, will also present the findings of the Growth Report. Please access the health volume here.

The financial system in the USA and much of Europe had a heart attack in September 2008.  As in the case of a real heart attack, the highest priority has gone to the emergency response and to stabilizing the patient.  Once that is done and the crisis is abating and even to some extent as it is going on, it will be important (economically and politically) for some to focus on two related issues:  What created the rising risk of an attack?  And what combination of actions post-crisis will reduce the risk of a repeat in the future. 

Michael Spence details the necessary steps needed for the Geithner plan to be implemented, and addresses the current criticisms of the plan. Follow the debate over the Geithner plan and comment on Spence's analysis here.

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 an op-ed in the Financial Times’ Economists Forum on November 24th, Growth Commission Chair Michael Spence elaborates on the endogenous nature of the asset pricing problem, and its role in the current global financial crisis. The piece, entitled Balance sheets and income statements: breaking the downward spiral , highlights the uncertainty investors face in determining the intrinsic value of assets, and their consequent reluctance to enter the market.  Dr. Spence discusses the channels underpinning the decline in economic activity, and suggests that government can play a positive role in limiting the negative overshoot in assets and economic activity.  Additionally, he points to the need for a significant stimulus package and a more systematic program of purchasing assets to stem the downward spiral.

On October 10, 2008, Michael Spence, Mohamed El-Erian and Mahmoud Mohieldin discussed the current global imbalances, macro economic global governance, and the impact it will have on the developing world.  Please access the video of the discussion here.

In an opinion piece featured in the Financial Times' The Economists' Forum on October 27th, Michael Spence offers suggestions on how to avoid the deepening of an asset deflation overshoot which has already begun, and will likely get worse if not attended to by leaders in both industrial and developing economies. Key highlights include coordinated actions by the government and private sector to recapitalize banks, direct intervention in housing markets, IMF coordination of reserve surplus countries,  and private corporation stock buy-back programs. Please access the article here.

In an opinion piece that is being carried by various publications around the world, Growth Commission Chair Michael Spence discusses how the current credit crisis in the U.S. and other G-8 countries can influence growth in developing countries. In particular, Dr. Spence stresses the evolving nature of global interdependencies, and the need for proactive coordination in warding off future crises. Please read more and offer your thoughts by accessing the article here.

We are launching the Commission on Growth and Development BLOG (The Growth Blog) today, while unprecedented changes in the financial markets are underway. These changes have the potential to reconfigure financial systems in a manner not seen since the 1930s. However important those are, we should not lose sight of the longer-term, of the real economy and of the performance of developing countries-on which the prospects of millions of people depend. The report of the commission, entitled, "The Growth Report: Strategies for High Growth and Sustainable Development" deals exactly which such issues. We will also want to discuss and debate what the shifting global landscape means for effective growth strategies and how they need to be adapted to account for climate change, heightened volatility and risk, including rapid shifts in relative prices, reduced growth in the developed economies for a period of time and other factors. I believe that a broad array of policies that could be under the heading risk mitigation and management will become a higher priority in setting growth and development strategies. Notwithstanding the secular and surprising cyclical shifts, the underlying dynamics of sustained high growth and their political and policy underpinnings are not likely to change dramatically. And there are major areas of supporting policy in which there is ongoing research, continued debate and something less than complete practical guidance in the offing.