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The Answers Are Out There [1]

['Fp Contributors', 'Esfandyar Batmanghelidj', 'Zep Kalb', 'Michael Kugelman', 'Robbie Gramer', 'Jack Detsch', 'Jeremy Wallace', 'Alice Hill', 'Michael Pettis', 'John Delury']

Date: 2018-01-16  

Unlike in 1979, much of the Iranian working class is precariously employed—and they have more to lose than their chains by joining the protests.

Contrary to conventional wisdom, solutions to many of the world’s toughest problems already exist — you just need to know where to look for them.

A rescue worker searches for survivors on March 24, 2011, after a tsunami struck in the wake of a 9.1 magnitude earthquake, in Sendai, Japan. (AFP/Getty Images)

Think Small to Weather Big Storms By Alice Hill At two minutes to noon on Sept. 1, 1923, the ground began to tremble in Tokyo and nearby Yokohama. A 7.9 magnitude earthquake had struck Japan. The shaking lasted for nearly five minutes, causing gas stoves to topple, which in turn ignited thousands of wooden buildings. The fires eventually claimed more lives than the quake itself — more than 140,000 people died in all. Although Japan had experienced earthquakes in the past, this one was different and for a singularly important reason: It inspired the Japanese to focus intently on disaster preparedness. Almost nine decades later, that readiness was put to the test in extreme fashion. On March 11, 2011, a 9.1 magnitude earthquake struck Japan. Within 10 minutes, a tsunami — which in some places towered as high as a 10-story building — crashed into the coast and swept as far as six miles inland. Unlike in 1923, however, this time Japan’s government and its citizens were ready. As soon as the shaking began, the Japan Meteorological Agency issued alerts on TV and radio while cell-phone providers sent warnings to their customers. These notices gave people precious seconds to seek shelter. Japan’s famed bullet trains automatically stopped mid-track to prevent derailment. Thanks to changes in Japanese building codes after a 7.4 magnitude earthquake in 1978 — many newer skyscrapers were built on flexible pads allowing them to move slowly and gently in the midst of a quake, and older buildings were retrofitted with extra steel bracing to protect them — high-rise buildings emerged almost unscathed. In the coastal town of Kamaishi, in the northeastern corner of the main island of Honshu, almost all of the nearly 3,000 schoolchildren followed their training and outraced the tsunami, reaching higher ground and safety. The Japanese call their escape the “miracle of Kamaishi.” Four years after the 2011 earthquake, Japan hosted the U.N. World Conference on Disaster Risk Reduction, which led to the Sendai Framework for Disaster Risk Reduction, which states that countries need to invest in preparedness as disasters increase in impact and complexity. Globally, experts say 2017 saw the highest level of economic loss from natural disasters ever recorded in a single year. The United States experienced more disasters costing at least $1 billion than ever before. Thanks to booming populations, rapid urbanization, and accelerating changes in our climate, the costs related to heat wave disasters will almost certainly keep rising, as will the frequency of intense hurricanes, recurrent flooding, and raging wildfires. These records won’t hold long. Thanks to booming populations, rapid urbanization, and accelerating changes in our climate, the costs related to heat wave disasters will almost certainly keep rising, as will the frequency of intense hurricanes, recurrent flooding, and raging wildfires. Countries around the world need to make the kinds of investments that Japan has. Fortunately, a number of them already are. Take Bangladesh, a desperately poor country with at least 160 million people crammed into an area roughly the size of Iowa. Because of the country’s susceptibility to frequent flooding, it is also vulnerable to the spread of diarrheal diseases, such as cholera. When flooding struck in 1988, such illnesses caused 27 percent of the resulting deaths in one rural area in the country. Yet when Bangladesh was hit by unprecedented floods in August 2017, which damaged or destroyed nearly 700,000 homes, there were virtually no deaths from diarrheal diseases, according to the website Third Pole. The reason? More effective public health measures, including better-equipped medical facilities and greater awareness of the need for preventive action. The health ministry said it ensured the widespread availability of water purification tablets, and the government warned Bangladeshis about the dangers of water-borne diseases and promoted awareness of the fact that oral saline cures diarrhea. During the floods, the government and other nonprofit organizations said they made sure that shelters provided potable water and sanitizing bleaching powder. France showed a similar resilience last summer. Having learned a bitter lesson in 2003, when the worst heat wave since 1540 killed some 15,000 people there, the country was prepared when a heat wave nicknamed Lucifer stuck Europe in August. Temperatures reached a record-breaking 106.9 degrees Fahrenheit in parts of southern France. The country mobilized for action, activating its National Heat Wave Plan. The national weather agency, Météo France, issued heat alerts, including cell-phone messages in English to tourists visiting the affected regions. Tourist offices in Nice advised people to stay off the beaches and drink plenty of water. Local governments implemented crisis management plans, deploying the local Red Cross and placing health care facilities on alert. Letter carriers checked on seniors and other vulnerable community members as they delivered the daily mail. In Marseille, town officials hired local students to check on the elderly. Use of public transportation was encouraged, and fees for street parking were waived. There were no reported deaths in France during the Lucifer heat wave, and the United Nations has cited France as a model for how other nations should respond when temperatures spike. Morocco, one of the most hazard-prone countries in the Arab world, regularly suffers earthquakes, droughts, floods, and locust invasions, which cost it close to $800 million per year. In an effort to reduce its vulnerabilities, the country has taken a different but equally important approach: focusing on financing risk reduction rather than recovery. With help from the World Bank and others, the Moroccan government has set up a national resilience fund that provides money to communities and government agencies to invest in preparedness measures. Disbursements depend on whether the project measurably reduces losses on the ground. Morocco was the first country to use this type of results-based financing approach. In 2016, it passed legislation that required the inclusion of disaster insurance in all property and automobile policies. It also established a solidarity fund designed to compensate victims who are not insured. The new fund covers not only personal injury damages but also supplies an allowance for home repair and even rent for up to six months. Such efforts carry great promise. Together, they are a tacit acknowledgement that miracles like Kamaishi don’t just happen — they require planning, preparation, and lots of investment. Luckily, there are plenty of blueprints emerging all over the world showing just how to do it. Alice Hill is a research fellow at Stanford University’s Hoover Institution and a member of the Center for Climate & Security’s advisory board.

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Why Beijing Should Dump Its Debt By Michael Pettis China’s economy is in deep trouble. A decadelong overreliance on overinvestment in manufacturing capacity and infrastructure has generated crushing debt. Tremendously powerful vested interests in control of state-owned enterprises and provincial and municipal governments, meanwhile, are blocking Beijing’s efforts to break up existing monopolies and stimulate growth. Because it creates uncertainty about allocating future debt servicing costs, the debt will force down growth. While this can result in a debt crisis, in China it is more likely to lead to several lost decades of very low growth, as occurred most famously in the Soviet Union after the early 1960s and in Japan in the two decades after the early 1990s. In both countries, the share of global GDP dropped precipitously. Mainstream economists from China and abroad, along with institutions such as the World Bank, have a standard solution. They want China to strengthen the role of markets in the decision-making process, including liberalizing legal, financial, and other institutions governing the economy; freeing up trade and investment flows; unshackling the exchange rate; and easing capital controls. These reforms, they claim, are not only useful for increasing overall growth prospects but will boost productivity enough to allow China to outgrow its debt before the financial crisis that they see as the main threat hits. But this is the wrong answer. The liberalizing reforms that attempt to channel resources into higher-productivity investments implicitly assume that businesses and investors are constrained mainly by low savings and institutional distortions. But this is not the case in China, where the constraints arise out of a deeply unbalanced economy. The financial sector is dominated by corruption, speculative investment, and capital flight while heavy state influence distorts corporate governance and protects insolvent companies. China has previously been able to avoid financial crisis precisely because its banking system is closed and regulators can restructure liabilities at will. The proposed reforms would weaken the government’s defenses against disaster. Under such conditions, liberalizing reforms could further accommodate distorted behaviors and would most likely worsen investment misallocation. The infamous malpractices of U.S. savings and loans institutions in the 1980s show how liberalizing a highly constrained, insolvent banking system increases abuses and multiplies the eventual cost of solving the issue. This is a dangerous risk for Beijing to assume. China has previously been able to avoid financial crisis precisely because its banking system is closed and regulators can restructure liabilities at will. The proposed reforms would weaken the government’s defenses against disaster. The real solution is deleveraging. In recent history, dozens of countries weighed down by debt attempted similar policies, but none of the plans succeeded — no matter how forcefully the reforms were implemented — until they also substantially reduced debt by forcing the cost onto one sector of the economy or another. Mexico restructured at a discount in 1990, for example, thereby pushing the cost onto creditors, while Germany inflated its debt away after the end of World War I, forcing the cost onto pensioners and others with fixed incomes. If it is to grow sustainably, China, too, must force through a deleveraging process in which local governments are forced to absorb a share of debt servicing costs, whether they like it or not. Only forceful action from the top, as when China itself pushed through reforms in the 1980s while moving away from the planned economy, can overcome local barriers and restrain the country’s debt. A more liberal China may be desirable in the abstract, but not before a more centralized and more controlled China gets debt under control. Michael Pettis is a nonresident senior fellow at the Carnegie Endowment for International Peace and a finance professor at Peking University.

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People walk past images showing North Korean missile test launches on display outside a railway station in Pyongyang on Sept. 22, 2017. (Ed Jones/AFP/Getty Images)

Normalize the Hermit Kingdom By John Delury The North Korean conundrum did not start with Kim Jong Un’s intercontinental ballistic missile tests in July and U.S. President Donald Trump’s fiery rhetoric in August. The story dates all the way back to the Korean Peninsula’s division in 1945 and the ensuing civil conflict that erupted into the Korean War in 1950. Decades of mutual hostility and alienation will take decades to solve. Yet Pyongyang’s dramatic advances in 2017 in missile technology, coupled with its massive hydrogen bomb test in September, make Kim’s nuclear challenge the most pressing national security crisis facing the Trump administration going into its second year. Despite this sense of urgency, there is no military solution to the North Korean problem. Pyongyang’s nuclear capabilities are far past the point of being vulnerable to a surgical strike, and its political system, led by Kim, is unified, consolidated, and impervious to regime change. If attacked, North Korea would almost certainly retaliate — causing massive civilian bloodshed without eliminating the threat. The unpalatable truth is that there is really only one serious path out of the quagmire: normalization of relations between the United States and the Democratic People’s Republic of Korea. Since signing an armistice agreement in 1953, the United States has had no official diplomatic relations with North Korea and has pressured other countries to limit their ties to Pyongyang. This approach has not proved to be an effective punishment. Instead, Washington’s refusal to pursue a normal relationship has prevented the Americans from playing the most valuable card in their hand. The idea of normalizing ties with North Korea might sound outlandish, especially in the current atmosphere, but a look back to 1971 suggests a precedent. The idea of normalizing ties with North Korea might sound outlandish, especially in the current atmosphere, but a look back to 1971 suggests a precedent. That year, President Richard Nixon and his national security advisor, Henry Kissinger, initiated a process of rapprochement with China despite conditions that could scarcely have seemed propitious. While the worst of the Cultural Revolution had passed, the intensely anti-Western, anti-imperialist movement would continue for another five years, and Washington still recognized Taipei as the legitimate seat of government for mainland China. But under that surface of mutual disdain, both governments were shifting their thinking to reflect a new balance of power. In October 1964, China staged its first atomic bomb test, joining the elite club of nuclear weapons states, while growing hostility between Beijing and Moscow opened up an opportunity to leverage a “tacit alliance” (as Kissinger called it) with the former as a check on the latter. By seizing the opening created by Mao Zedong’s interest in doing the same thing — using the Americans against the Soviets — Nixon pulled off a strategic realignment that helped the United States win the Cold War while also bringing peace and stability to East Asia. Now, a similarly bold approach is required to break the decadeslong impasse and endless cycles of brinkmanship on the Korean Peninsula. A breakthrough with the United States would allow North Korea to begin normalizing economic relationships with its neighbors, building on a transformation that is already quietly underway. The North Korean economy is estimated to have grown at nearly 4 percent in 2016. Kim made economic development a top priority, and the United States should help him pivot from guns to butter. In the initial phases of this process, Kim will have to be allowed to maintain his nuclear deterrent — while agreeing to halt improving and expanding his arsenal and the missiles to deliver it. Over the long run, a gradual process of dismantlement could lead to denuclearization as the sense of mutual threat is eliminated. If Mao, who talked of nuclear war as a real possibility that China could survive, and Nixon, who built his career on fighting communism, could bury the sword in the interests of geopolitical stability, why can’t Kim and Trump? They can. And they must. John Delury is an associate professor of Chinese studies at Yonsei University Graduate School of International Studies in Seoul.

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Break Corruption With Bitcoin’s Backbone By Tomicah Tillemann Corruption, according to the United Nations, is a $3.6 trillion industry — and business is booming. The U.N. estimates that money stolen or paid in bribes each year now tops 5 percent of global GDP. Fortunately, these abysmal statistics may be poised for a turnaround thanks to a transformational new technology: blockchain. Originally invented to power digital currencies such as bitcoin, blockchain allows users to transfer assets or anything of value directly from one person to another without going through a bank. Instead of relying on financial institutions, blockchain transactions are validated by mathematics and computational power with extremely high levels of security and transparency. Despite a popular perception that blockchain is anonymous, the system is actually only pseudonymous, and law enforcement is watching. U.S. prosecutors have used blockchain evidence to secure guilty pleas from federal agents who stole digital currency and then tried — unsuccessfully — to cover their tracks. At its core, blockchain is just a digital record — but with two important innovations. First, the system is distributed. Identical copies of the record are stored on thousands of computers around the world, and anyone on the network can see all the information entered into the system. Second, the record is permanent. Roughly every 10 minutes, new data blocks are mathematically linked into a chain — hence, the name. Information in the chain can be updated but never erased. Even if a government or corporate actor wants to, it can’t wipe out data stored on the system. Despite a popular perception that blockchain is anonymous, the system is actually only pseudonymous, and law enforcement is watching. U.S. prosecutors have used blockchain evidence to secure guilty pleas from federal agents who stole digital currency and then tried — unsuccessfully — to cover their tracks. Put it all together, and blockchain provides a massive opportunity to improve governance around the world. Historically, official records and systems have only been as dependable as the individuals who maintain them. In most countries, a well-placed bribe can make evidence of a crime disappear or alter the outcome of bidding on a public construction project. In recent years, public frustration with such scams, always profound, has intensified, and trust in public institutions has collapsed to unprecedented levels around the world. In the most recent edition of the Edelman Trust Barometer — an annual survey of global confidence in business, government, nongovernmental organizations, and the media — only 15 percent of those polled said “the system” in their country was working. Harnessing blockchain’s transparency and permanence could help reverse this trend. Several governments are already racing to do so by developing the next generation of blockchain-based accountability tools. In 2017, the republic of Georgia, once a warren of corruption, earned a coveted top-10 spot on the World Bank’s ease of doing business index, in part by moving some government services onto blockchain. For example, some 200,000 Georgian property titles now reside on a blockchain system that will prevent corrupt bureaucrats from manipulating real estate deals. Sweden is working on a similar system. In October 2016, Dubai announced a goal of moving every one of its official transactions onto blockchain by 2020. Estonia, home to one of the world’s most advanced e-government systems, is transferring health records to blockchain. Last September, Ukraine started auctioning government-seized assets on blockchain as a prelude to moving the entire national government onto the system. This shift will not only help protect Ukrainian citizens from endemic public corruption but also harden government ministries against Russian cyberattacks. Blockchain can also help improve governance in the private sector. In South Asia, the prevalence of graft has had a devastating impact on economies and ecosystems as producers engage in illegal practices — such as dumping antibiotics into fish farm water supplies — knowing they can simply buy their way out of trouble. To help solve this problem, the Tata Trusts (a multibillion-dollar charitable endowment established by India’s Tata family) is building a blockchain-based supply chain system that will track and monitor seafood through every stage of the production process. Thanks to such tamper-proof safeguards, importers and customs officials will be able to collate and review information from sensors, testing labs, and spot inspections to detect signs of malfeasance among producers, shippers, and wholesalers. Blockchain won’t be able to solve every governance challenge. Ultimately, many solutions will depend on the quality of data that’s fed into the platform. That said, the technology already promises to provide the most powerful new anti-corruption tool to appear in decades and could help turn the battle against one of the world’s most expensive problems. Tomicah Tillemann is a co-founder of the Blockchain Trust Accelerator at New America, chairman of the Global Blockchain Business Council, and serves on the advisory board to the to the BitFury Group, which works with the Ukrainian government on Blockchain.

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Pseudomonas aeruginosa, one of a dozen bacteria the World Health Organization named a major global health threat in 2017, viewed under a scanning electron microscope. (BSIP/UIG via Getty Images)

Inoculate Against a Global Vaccine Crisis By Laurie Garrett On Feb. 27, 2017, the World Health Organization (WHO) named a dozen bacteria as major global health threats, underscoring the surge in antibiotic resistance and paucity of vaccines that, combined, now render incurable the infections caused by those germs. There is plenty to fret about on the microbial front at the moment: Several scary strains of flu are circulating, and Australia’s winter 2017 flu season was one of the country’s deadliest in recent years. Any hope of protecting the world, generally, against the resurgence of old microbes, as well as the emergence of new ones — man-made biological menaces, for example — hinges on resolving the breakdown in the manufacturing of vaccines and moving the best, most applicable pharmaceutical innovations into the commercial pipeline for affordable access. Ever since the 2014 Ebola epidemic in West Africa claimed 11,000 lives, global health experts, including those at Doctors Without Borders, have insisted on WHO reforms and an overhaul of the ways governments respond to outbreaks. But topping the list of needed changes is the speed with which the pharmaceutical industry develops new vaccines to guard against everything from Zika virus and tuberculosis to Ebola and drug-resistant bacteria. But the reality is that ... the world faces an even bigger problem: shortages and completely diminished stores of older but highly effective vaccines and a shrinking pool of manufacturers that can produce them. This search for new protections against infection captured attention at the World Economic Forum in Davos, Switzerland, in January 2017 and at the G-20 summit later in July. It’s certainly appealing to imagine that pharmaceutical innovation fueled by Wall Street investments could lead to the quick creation of technological solutions to ward off outbreaks. But the reality is that, as 2018 begins, the world faces an even bigger problem: shortages and completely diminished stores of older but highly effective vaccines and a shrinking pool of manufacturers that can produce them. In an average year between 2011 and 2015, data submitted to WHO and UNICEF showed that one-third of 194 countries ran out of a vaccine for a month or longer. Nearly 13 million infants received no vaccines at all in 2016, and by 2017 supplies of vaccines that target yellow fever, hepatitis B, cholera, meningitis C, diphtheria, whooping cough, tetanus, hepatitis A, and tuberculosis were critically low. And these shortages are acute in both poor and rich countries, with 77 percent of European nations telling WHO in 2015 that they had depleted supplies. By September 2017, Switzerland was experiencing shortages of 16 essential vaccines, prompting Daniel Desgrandchamps, an infectious diseases expert at the University of Geneva, to say, “This isn’t a Swiss problem — it’s an international problem.… I can’t remember a situation like this in my 30 years of professional life as a vaccination expert.” The global pharmaceutical market is worth more than $1 trillion a year, but the vaccines portion of it is trivial, amounting to merely $24 billion — or about 2.4 percent. Yet the tried-and-true ways of targeting viruses and bacteria to prevent infection garner less industry interest. Though low profit margins, despite high demand, have long blocked the vaccine pipeline, the situation is worsening and now has impact on new product development. Few solutions have been suggested, but one country — Brazil — was able to handle a potentially catastrophic shortage better than any other because it manufactures its own vaccines in a unique public-private arrangement that fulfills the country’s constitutional requirement of providing health care for all of its citizens. The government sets production priorities and purchases from local pharmaceutical manufacturers, avoiding the unreliable international market. In 2016, outbreaks of two mosquito-spread viruses — yellow fever and Zika — exploded in Angola and Brazil, respectively. The yellow fever outbreak spread to nearby Democratic Republic of the Congo as the entire world supply of yellow fever vaccine dwindled dangerously toward zero. The irony is that the vaccine is almost 100 percent effective and a full dose protects patients for life. But the drug had become so cheap — by 2008, it cost a mere 60 cents for each vaccine — that few companies were interested in making it. With tens of millions of African lives at stake, WHO took a big gamble, diluting donated vaccines from countries such as Brazil — which donated 18 million doses — by 5 to 1 and hoping they would still work. Briefly, by January 2017, the epidemic seemed to be under control. But then it began to sweep across Brazil and the region, with cases popping up in the states of São Paulo and Rio de Janeiro. As the disease continued to spread, placing the global supply under further strain, stockpiles at the U.S. Centers for Disease Control and Prevention (CDC) disappeared. The CDC now estimates that its supplies won’t be replenished until the end of 2018, perhaps not until 2019. The Zika epidemic and vaccine invention offer a cautionary tale of how these contradicting interests culminate in a less-than-desirable scenario. Before Zika first surfaced in Brazil in 2015 and then spread across the Americas, it had been too obscure to draw pharmaceutical industry interest. But once it hit Puerto Rico and Florida, the industry raced to create a vaccine, and the manufacturer Sanofi developed one that seemed safe and almost completely effective. Officials sighed in relief. But in 2017, when an epidemic in the wealthy United States failed to materialize, Sanofi shut down its Zika vaccine program. And as the year closed, another manufacturer, Merck, failed to apply to the U.S. Food and Drug Administration for approval of its Ebola vaccine — a product supported by strong clinical data — even after signing a $5 million advance purchase commitment with Gavi, the global vaccine alliance. The challenge for 2018 will be finding a way to keep the pharmaceutical pipeline flowing, both for vaccines against 20th-century threats such as measles and cholera and for 21st-century challenges including SARS, MERS, new forms of deadly influenza, and the unknown microbes lurking out there. Many things have been tried: creating pots of gold for guaranteed bulk purchases, improving global shipping and delivery systems to better target limited supplies, and promoting the entry of vaccine manufacturers from emerging economies. These measures have acted like fingers in a dike, holding back a flood of further market failures. But Doctors Without Borders and many global health leaders fear that nothing less than a change to the capitalist underpinnings of the pharmaceutical industry will resolve the vaccine crisis — a step so extreme that only Brazil and a handful of left-leaning nations have dared put in practice. Laurie Garrett is a Pulitzer Prize-winning writer and global health policy analyst.

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[1] Url: http://foreignpolicy.com/2018/01/16/the-answers-are-out-there-natural-disasters-china-north-korea-corruption-economy/#health

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