Diplomacy & Defense Think Tank News

Social cohesion has recently gained increasing attention in academic and policy circles. Apart from being a necessary feature of stable societies per se, social cohesion is also a key factor for sustainable economic development. One potential  means through which social cohesion could foster economic development is by enhancing financial development. In this paper, I examine whether social cohesion is significantly associated with firms’ access to finance in Africa. To this end, I use a  recently constructed dataset on social cohesion in Africa, which contains indices for the three pillars of social cohesion – trust, inclusive identity and cooperation for the common good. Combining this dataset with that of the World Bank Enterprise  Surveys, I build a sample which covers more than 12,600 firms and 27 African countries. The results show that all three components of social cohesion are positively associated with at least one measure of firms’ access to external finance. In  particular, trust – but not inclusive identity and cooperation for the common good – is significantly associated with the likelihood that firms have a checking or savings account, or are financially constrained. When we measure access to finance with  respect to having a line of credit or a loan from a financial institution, all the three pillars of social cohesion, including inclusive identity and cooperation for the common good, are related to access to finance. The results are robust to addressing  endogeneity concerns using a heteroskedasticity-based identification strategy.

Social cohesion has recently gained increasing attention in academic and policy circles. Apart from being a necessary feature of stable societies per se, social cohesion is also a key factor for sustainable economic development. One potential  means through which social cohesion could foster economic development is by enhancing financial development. In this paper, I examine whether social cohesion is significantly associated with firms’ access to finance in Africa. To this end, I use a  recently constructed dataset on social cohesion in Africa, which contains indices for the three pillars of social cohesion – trust, inclusive identity and cooperation for the common good. Combining this dataset with that of the World Bank Enterprise  Surveys, I build a sample which covers more than 12,600 firms and 27 African countries. The results show that all three components of social cohesion are positively associated with at least one measure of firms’ access to external finance. In  particular, trust – but not inclusive identity and cooperation for the common good – is significantly associated with the likelihood that firms have a checking or savings account, or are financially constrained. When we measure access to finance with  respect to having a line of credit or a loan from a financial institution, all the three pillars of social cohesion, including inclusive identity and cooperation for the common good, are related to access to finance. The results are robust to addressing  endogeneity concerns using a heteroskedasticity-based identification strategy.

Social cohesion has recently gained increasing attention in academic and policy circles. Apart from being a necessary feature of stable societies per se, social cohesion is also a key factor for sustainable economic development. One potential  means through which social cohesion could foster economic development is by enhancing financial development. In this paper, I examine whether social cohesion is significantly associated with firms’ access to finance in Africa. To this end, I use a  recently constructed dataset on social cohesion in Africa, which contains indices for the three pillars of social cohesion – trust, inclusive identity and cooperation for the common good. Combining this dataset with that of the World Bank Enterprise  Surveys, I build a sample which covers more than 12,600 firms and 27 African countries. The results show that all three components of social cohesion are positively associated with at least one measure of firms’ access to external finance. In  particular, trust – but not inclusive identity and cooperation for the common good – is significantly associated with the likelihood that firms have a checking or savings account, or are financially constrained. When we measure access to finance with  respect to having a line of credit or a loan from a financial institution, all the three pillars of social cohesion, including inclusive identity and cooperation for the common good, are related to access to finance. The results are robust to addressing  endogeneity concerns using a heteroskedasticity-based identification strategy.

Marcel Fratzscher, Präsident des Deutschen Instituts für Wirtschaftsforschung (DIW Berlin), zur angespannten Lage im Bankensektor:

Niemand kann zu jetzigen Zeitpunkt ausschließen, dass die Turbulenzen im Bankensektor auch in Deutschland und Europa zu signifikanten Beeinträchtigungen bei Wachstum und Wohlstand führen. Finanzkrisen sind per Definition kaum vorhersehbar, aber wir dürfen sie auch nicht herbeireden. Die systemischen Risiken im Finanzsystem sind heute deutlich geringer als während der Lehman-Pleite im September 2008. Viele Finanzinstitute verfügen über mehr Eigenkapital und Absicherungen. Aktuell ist meine größte Sorge, dass es zu einer Panik auf den Kapitalmärkten kommt, da niemand weiß, welche Banken noch in Schieflage geraten könnten. Eine solche Panik könnte zu sogenannten selbsterfüllenden Prophezeiungen führen. Dies bedeutet, dass die Sorgen um die Liquidität des Bankensektors auch die Existenz von solchen Banken gefährdet, die ansonsten solvent wären.

Der Fall von Credit Suisse zeigt deutlich, dass auch systemrelevante Banken in Schieflage geraten können. Daher sollte auch kein deutscher Finanzminister leichtfertig Entwarnung geben, da er ansonsten droht, seine Glaubwürdigkeit aufs Spiel zu setzen. Die Politik muss offen und ehrlich kommunizieren, darf Probleme nicht klein reden, sollte aber auch darauf verzichten, weitere Ängste zu schüren. Die Bundesregierung, allen voran Bundeskanzler und Finanzminister, muss nun den schwierigen Balanceakt bewältigen, einerseits transparent mit dieser schwierigen Lage umzugehen, andererseits glaubwürdig zu versichern, dass sie alles Notwendige tun wird, diese zu beruhigen.

Es gibt auch in Deutschland bereits Anzeichen für erhebliche Verluste bei Finanzinstituten, wie die Abschreibungen der Sparkassen in den vergangenen Wochen zeigen. Die Verluste werden sich mit jedem Zinsanstieg der Europäischen Zentralbank weiter verschärfen. Daher halte ich die Zinserhöhung der EZB vom vergangenen Donnerstag im besten Fall für eine riskante Entscheidung und im negativen Fall für einen schwerwiegenden Fehler. Es wird sich diese Woche zeigen, ob die US-Notenbank der Zinserhöhung der EZB folgen wird oder ihren Fokus auf Finanzstabilität legt und davon absieht. Die EZB befindet sich in einem Dilemma, da sie einerseits die Inflation mit Zinserhöhungen in den Griff bekommen muss und andererseits Zinserhöhungen die Finanzstabilität schwächen. Eine Eskalation der Situation und eine Bankenkrise sind derzeit die größte Gefahr für die Preisstabilität in Deutschland und Europa. Sie könnten die Wirtschaft empfindlich schwächen und die Arbeitslosigkeit erhöhen, weil sie die Kreditvergabe an Unternehmen noch stärker beeinträchtigen würden.

Wie EU-Kommissionspräsidentin von der Leyen bei ihrem Besuch im Weißen Haus ankündigte, will die EU ihre Exportkontrollen für Dual-Use-Produkte und neue Technologien erneuern und enger mit US-Maßnahmen abstimmen. Da die EU-Staaten China zunehmend als sicherheitspolitische Bedrohung wahrnehmen, wäre die An­wendung von Exportkontrollen gegenüber Peking folgerichtig. Die von der Biden-Regierung im Oktober 2022 gegenüber China erlassenen Executive Orders für den Handel mit leistungsstarken Halbleiterchips, deren Produktionsmaschinen sowie mit hochleistungsfähigen Computern wirken sich bereits auf die EU aus. Um Rechts­sicher­heit für europäische Unternehmen zu schaffen, sollten die EU-Mitgliedstaaten schnell entscheiden, wie umfassend sie eigene Ausfuhrkontrollen modernisieren und ausweiten wollen. Dazu gehört auch eine Strategie, um gemeinsam mit anderen Staa­ten das multilaterale Wassenaar-Arrangement zumindest zeitweise zu ersetzen.

South Korea has been late to embrace the concept of the Indo-Pacific. Its strategic approach developed from initial neglect to mere tactic acknowl­edgment and careful engagement under the Moon administration (2017–2022), to the now clear support for a distinct Indo-Pacific strategy under the Yoon administration (since 2022). While South Korea’s Indo-Pacific strategy represents an important step in formulating its own interests in the region, its implementation will be influenced by the larger strategic environment, the dynamic relationships between a network of different actors in the region, and the coordination of its approach with like-minded partners. Despite the Yoon administration’s closer alignment of its Indo-Pacific strategy with that of the US, there are ample opportunities to strengthen cooperation between the EU and the Republic of Korea (ROK or South Korea) on the Indo-Pacific. This is a consequence of overlapping interests regarding the Indo-Pacific region, which are expressed through strong similarities in the respective strategy papers of South Korea and the EU. Building on a solid existing basis of bilateral cooperation enabled by their strategic partnership, cooperation between the EU and the ROK should now be deepened beyond their already well-developed bilateral frameworks within the economic realm to the wider field of security cooperation. As South Korea’s and the EU’s Indo-Pacific strategies highlight similar areas of action, economic security, maritime security and cyber security are the most likely issue-areas in which the two sides will expand their links.

Over the new year, tensions between Serbia and Kosovo rose once again. This occurred in the context of negotiations on a new European Union (EU) proposal – also known as the Franco-German or “European” proposal aimed at formalising relations between Belgrade and Pristina, much along the lines of the 1972 Basic Treaty between the two Germanys. On 27 February, there was a breakthrough in the negotiations: Both sides agreed on the text of the proposal, although it has not yet been signed. Additionally, the prioritisation of individual issues in the so-called implementation map has not yet been determined, which could cause further disputes. To ensure the adoption and full realisation of the agreement, the EU should not only assess its progress in the con­text of the EU accession negotiations of both countries. It should also estab­lish specific implementation and monitoring mechanisms that will secure more modest interim targets for the implementation of individual issues in the agreement. This is the only way to successfully implement the new agreement.

The Global Tax Expenditures Database (https://GTED.net/) collects national reports on tax expenditures for 101 countries for the period from 1990 to the present. Based on these data, the development of tax expenditures in the 38 OECD countries between 1999 and today is examined. A look at the data shows that even in countries with high GDP and comprehensive tax coverage, reporting is often incomplete. For a subset of 16 OECD countries for which (relatively) continuous reporting over the period is available, we look at the development of tax benefits for households and firms. We can show that data availability improves over time. For the development of business tax expenditures, a weakly significant positive trend can be identified in terms of tax revenues foregone, driven mainly by the Netherlands and Ireland. Both countries are known for wanting to strengthen their business location through generous tax expenditures for businesses. Tax expenditures for private households, which are on average higher than the level of tax expenditures for businesses in the countries under review, do not show any significant time trend, even though they were increasingly used to relieve the burden on private households and businesses during the financial crisis of 2008/09. In order to compare tax expenditures between countries and to better assess their effectiveness, regular reporting at the national level, transparent definitions and ideally uniform standards would be helpful. Regular monitoring by a commission of experts could contribute to the consistency and comparability.

The Global Tax Expenditures Database (https://GTED.net/) collects national reports on tax expenditures for 101 countries for the period from 1990 to the present. Based on these data, the development of tax expenditures in the 38 OECD countries between 1999 and today is examined. A look at the data shows that even in countries with high GDP and comprehensive tax coverage, reporting is often incomplete. For a subset of 16 OECD countries for which (relatively) continuous reporting over the period is available, we look at the development of tax benefits for households and firms. We can show that data availability improves over time. For the development of business tax expenditures, a weakly significant positive trend can be identified in terms of tax revenues foregone, driven mainly by the Netherlands and Ireland. Both countries are known for wanting to strengthen their business location through generous tax expenditures for businesses. Tax expenditures for private households, which are on average higher than the level of tax expenditures for businesses in the countries under review, do not show any significant time trend, even though they were increasingly used to relieve the burden on private households and businesses during the financial crisis of 2008/09. In order to compare tax expenditures between countries and to better assess their effectiveness, regular reporting at the national level, transparent definitions and ideally uniform standards would be helpful. Regular monitoring by a commission of experts could contribute to the consistency and comparability.

The Global Tax Expenditures Database (https://GTED.net/) collects national reports on tax expenditures for 101 countries for the period from 1990 to the present. Based on these data, the development of tax expenditures in the 38 OECD countries between 1999 and today is examined. A look at the data shows that even in countries with high GDP and comprehensive tax coverage, reporting is often incomplete. For a subset of 16 OECD countries for which (relatively) continuous reporting over the period is available, we look at the development of tax benefits for households and firms. We can show that data availability improves over time. For the development of business tax expenditures, a weakly significant positive trend can be identified in terms of tax revenues foregone, driven mainly by the Netherlands and Ireland. Both countries are known for wanting to strengthen their business location through generous tax expenditures for businesses. Tax expenditures for private households, which are on average higher than the level of tax expenditures for businesses in the countries under review, do not show any significant time trend, even though they were increasingly used to relieve the burden on private households and businesses during the financial crisis of 2008/09. In order to compare tax expenditures between countries and to better assess their effectiveness, regular reporting at the national level, transparent definitions and ideally uniform standards would be helpful. Regular monitoring by a commission of experts could contribute to the consistency and comparability.

Droughts are among the leading causes of livestock mortality and conflict among pastoralist populations in East Africa. To foster climate resiliency in these populations, Index Based Livestock Insurance (IBLI) products have become popular. These products, which allow herders to hedge climate risk, often utilize remote-sensed data to trigger indemnity payouts, thus ameliorating moral hazard issues associated with standard insurance products. We study how one such program, implemented in the southern Ethiopia, impacted the experience of violent conflict among participating households. Using causal mediation analysis, we show first that there is a strong link between rangeland conditions and violent conflict; a one-unit decrease in the standardized normalized difference vegetation index (zNDVI) in the previous season is associated with a 0.3-1.7 percentage point increase in the likelihood of conflict exposure. Within the mediation framework, we leverage a randomized encouragement experiment and show that insurance uptake reduces the conflict risk created by poor rangeland conditions by between 17 and 50 percent. Our results suggest that social protection programs, particularly index insurance programs, may act as a protective factor in areas with complex risk profiles, where households are exposed to both climatic and conflict risks, which themselves may interact.

Droughts are among the leading causes of livestock mortality and conflict among pastoralist populations in East Africa. To foster climate resiliency in these populations, Index Based Livestock Insurance (IBLI) products have become popular. These products, which allow herders to hedge climate risk, often utilize remote-sensed data to trigger indemnity payouts, thus ameliorating moral hazard issues associated with standard insurance products. We study how one such program, implemented in the southern Ethiopia, impacted the experience of violent conflict among participating households. Using causal mediation analysis, we show first that there is a strong link between rangeland conditions and violent conflict; a one-unit decrease in the standardized normalized difference vegetation index (zNDVI) in the previous season is associated with a 0.3-1.7 percentage point increase in the likelihood of conflict exposure. Within the mediation framework, we leverage a randomized encouragement experiment and show that insurance uptake reduces the conflict risk created by poor rangeland conditions by between 17 and 50 percent. Our results suggest that social protection programs, particularly index insurance programs, may act as a protective factor in areas with complex risk profiles, where households are exposed to both climatic and conflict risks, which themselves may interact.

Droughts are among the leading causes of livestock mortality and conflict among pastoralist populations in East Africa. To foster climate resiliency in these populations, Index Based Livestock Insurance (IBLI) products have become popular. These products, which allow herders to hedge climate risk, often utilize remote-sensed data to trigger indemnity payouts, thus ameliorating moral hazard issues associated with standard insurance products. We study how one such program, implemented in the southern Ethiopia, impacted the experience of violent conflict among participating households. Using causal mediation analysis, we show first that there is a strong link between rangeland conditions and violent conflict; a one-unit decrease in the standardized normalized difference vegetation index (zNDVI) in the previous season is associated with a 0.3-1.7 percentage point increase in the likelihood of conflict exposure. Within the mediation framework, we leverage a randomized encouragement experiment and show that insurance uptake reduces the conflict risk created by poor rangeland conditions by between 17 and 50 percent. Our results suggest that social protection programs, particularly index insurance programs, may act as a protective factor in areas with complex risk profiles, where households are exposed to both climatic and conflict risks, which themselves may interact.

The concept and mainstream approaches of development cooperation (DC) have been criticised since the early beginning of their existence. Post-development (PD) scholars have been criticising international DC since 1990 for both its Western perspective and the lack of reflection on asymmetrical power structures. Since also today DC has to face a variety of criticisms, we perceive PD approaches as a starting point for efforts towards change. We asked (1) to what extent and how elements of post-development approaches are reflected in the current policy initiatives of international DC, and (2) what potential do PD approaches have to reform DC. We analysed three examples: German feminist development policy (FemDP) as a relatively new idea of transformation, the locally led development approach as a long-standing concept and Global Public Investment (GPI) as an approach towards a new concept of international cooperation. By means of a content analysis, four commonly used PD elements were selected and slightly adapted to examine whether and how the three policy initiatives acknowledge PD aspects in order to reform DC: (1) the concept of alternatives to development, (2) pluralism of knowledge and power dynamics, (3) user-centred approaches and a critical stance towards the established scientific discourse and (4) the promotion of grassroots movements and local ownership. We discovered a variation in the use of the different PD elements. Although aspects related to power relations, post-colonial structures and knowledge management are prominent in all three initiatives, elements such as grassroots movements are given less consideration in all three cases. Even though FemDP does not focus on an alternative to development, as defined by PD approaches, it puts a strong emphasis on a transformative approach when it comes to its user-centred empowerment and tackles power imbalances by approaching decolonisation. Subsequently, the efforts of German Development Minister Svenja Schulze do not just describe a rhetorical reorientation but involve actual transformative efforts. However, further implementation efforts need to be analysed. The locally led development approach seems to be a suitable springboard for the inclusion of local knowledge and grassroots movements. Whereas the approach mostly uses descriptions of change as a means to reach its objectives, the GPI concept in particular uses PD elements as a reformative approach, as per the PD definition, putting the objective of the transformation of international public finance in international cooperation at its centre. Valuing PD approaches, we conclude that they do influence public initiatives in one way or another. In the future, if inner-systemic change should become an option, we see the greatest added value when PD scholars succeed in underpinning their approaches with instruments that can be used as tools in DC practice.

The concept and mainstream approaches of development cooperation (DC) have been criticised since the early beginning of their existence. Post-development (PD) scholars have been criticising international DC since 1990 for both its Western perspective and the lack of reflection on asymmetrical power structures. Since also today DC has to face a variety of criticisms, we perceive PD approaches as a starting point for efforts towards change. We asked (1) to what extent and how elements of post-development approaches are reflected in the current policy initiatives of international DC, and (2) what potential do PD approaches have to reform DC. We analysed three examples: German feminist development policy (FemDP) as a relatively new idea of transformation, the locally led development approach as a long-standing concept and Global Public Investment (GPI) as an approach towards a new concept of international cooperation. By means of a content analysis, four commonly used PD elements were selected and slightly adapted to examine whether and how the three policy initiatives acknowledge PD aspects in order to reform DC: (1) the concept of alternatives to development, (2) pluralism of knowledge and power dynamics, (3) user-centred approaches and a critical stance towards the established scientific discourse and (4) the promotion of grassroots movements and local ownership. We discovered a variation in the use of the different PD elements. Although aspects related to power relations, post-colonial structures and knowledge management are prominent in all three initiatives, elements such as grassroots movements are given less consideration in all three cases. Even though FemDP does not focus on an alternative to development, as defined by PD approaches, it puts a strong emphasis on a transformative approach when it comes to its user-centred empowerment and tackles power imbalances by approaching decolonisation. Subsequently, the efforts of German Development Minister Svenja Schulze do not just describe a rhetorical reorientation but involve actual transformative efforts. However, further implementation efforts need to be analysed. The locally led development approach seems to be a suitable springboard for the inclusion of local knowledge and grassroots movements. Whereas the approach mostly uses descriptions of change as a means to reach its objectives, the GPI concept in particular uses PD elements as a reformative approach, as per the PD definition, putting the objective of the transformation of international public finance in international cooperation at its centre. Valuing PD approaches, we conclude that they do influence public initiatives in one way or another. In the future, if inner-systemic change should become an option, we see the greatest added value when PD scholars succeed in underpinning their approaches with instruments that can be used as tools in DC practice.