In association with the International Commission of Jurists

November 2010

23 Nov

Dr Jean-Marc Coicaud is one of the more thoughtful and reflective UN officials, and his response shows why. Broadly speaking, I agree with all three of his comments The conceptual, political and operational relationship between law and legitimacy will be treated differently by political and legal theorists. For some, lawfulness is both a necessary and a sufficient condition of legitimacy. For...

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23 Nov

[Dr Jean-Marc Coicaud is the Director of the United Nations University Office at the United Nations in New York.] Professor Thakur highlights what he claims to be today the weak legitimacy of the United Nations. He does so not only by stressing the gap between the principles upon which the legitimacy of the UN is meant to be based and reality,...

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23 Nov

[Ramesh Thakur is a Distinguished Fellow at the Centre for International Governance Innovation, and Professor of Political Science at the University of Waterloo in Canada.] The UN is the site where power should be moderated by lawful authority. Legitimacy connects authority to power. The greater the gap between power and justice in world affairs, the greater the international legitimacy deficit. The...

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22 Nov

If you are a member of a nation's regular or reserve armed forces (not just the US military), think about submitting a paper to the American Society of International Law's annual Lieber Society Military Prize paper competition.  The submission for the 2011 prize is due by December 31, 2010.  Details below the fold.
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22 Nov

So thinks James P. Rubin in an Op-Ed in today's NY Times.  His argument comes in two parts.  First, a minority of the Senate plays an obstructionist role, which means that the United States simply doesn't join important treaties:  For much of the world, treaty ratification is a simple matter. In parliamentary systems like those in Britain and France, ratification is virtually automatic,...

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21 Nov

Here's an interesting story from FP's The Cable: Several dozen countries can't get checking accounts with which to operate their embassies in Washington.  Angola is the lead example: the Bank of America shut down its accounts here and no one else appears to want its business. The Angolans, frustrated and running out of options, are considering reciprocity measures, such as closing...

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20 Nov

I have done a fair amount of work in microfinance and closely related areas (development finance involving business clients with larger-than-microfinance loans) in the developing world, and am overall a big fan.  As many people are.  The question that has long loomed, however, is whether it can or should scale upwards to become a full-fledged part of the global capital markets, or whether it should remain a highly subsidized development activity for very poor people or, most plausibly, some of both.  I wrote about this problem in an article in 2002 — asking whether sufficient attention had been given in the conceptualization of microfinance to the question of whether it was supposed to serve as:
  • a genuinely economic connection between very poor people and the capital markets, or instead
  • a kind of “faux-market” in which the tools of the market were deployed as a form of artificially sustained discipline over the efficient use of resource, but nonetheless massively subsidized and, in that sense, never genuinely part of the global capital markets but instead always some sort of philanthropy.
I, like everyone else I have known in this field, have wanted to see some of the first, some of the second and, most crucially, some kind of “venture philanthropy” merger of the two that would somehow combine:
  • the discipline of genuine capital markets to induce efficient use of capital to promote geniune economic growth;
  • access to much larger pools of capital than are available to government aidagencies or NGOs, through the commercial capital markets;
  • subsidies or guarantees to facilitate the entry of for-profit entities into the sector, in order to help them gain experience with loan-making, monitoring, default, and other costs of microfinance, and to overcome the problem of microfinance’s problematic diseconomies of scale compared to other commercial lending;
  • the many social benefits of microfinance for both very poor people and not-so-poor but still poor people as separate groups; and above all,
  • scalability.
So, back in the 1990s, I proposed internally to the Open Society Institute structures of credit guarantee facilities that would allow a consortium of philanthropic and government aid agencies to offer part-guarantees to banking institutions seeking to enter the sector, with the aim of doing all the above good things.  At the time — and in most situations in which I’ve inquired about this since, with the very particular exception of India — the response from the microfinance organizations was, well, that’s nice — but as a matter of fact, at this point we don’t suffer from a general lack of capital.  We can get capital at a zero or negative capital cost in the form of interest free loans from governments or straight out donations.  We don’t need to tap the capital markets, even in a subsidized form at this point, thanks very much.  Maybe someday; not now. The reasons why this is so are important.  The microfinance providers with whom I was speaking were generally in the business of microfinance for poor people in which the transaction costs were clearly extraordinarily high for the size of the loan and possible rate of return, if one took into account all the monitoring and active involvement with the borrowers, etc., etc.  And that was leaving aside completely the transaction costs of the foreign donors and any other upstead costs; it was just the narrow cost of a local NGO engaging in microfinance loans.  Everyone likes to tout — or anyway did like to tout — the fantastic repayment rates of these microloans as evidence of client creditworthiness .  But within the sector, practitioners have always been very clear that this is on account of large investments at the front end of monitoring and reliance upon the heavy hand of social stigma and joint and several liability (as a substitute for material collateral) of other members of a “lending circle” as disciplinary mechanisms to ensure repayment. This is nothing new; microfinance practitioners, although sometimes evangelical in their zeal for it as a development tool, have a pretty decently practical streak, and recognize that this is a subsidized — heavily subsidized — activity when it comes to most clients.  It is another instance of the problem that much of development, as William Easterly tirelessly points out and Jeffrey Sachs seems gradually to be acknowledging, is not a scalable activity.  It takes place at the capillaries, and the blockages are not the mass flows of capital — it is what happens in the “last mile.”  Talking with a finance academic who has decided to start teaching in this area — he remarked somewhat ruefully, I can’t get my students interested in this because the whole point of finance is scalability.  But there are many extraordinarily bright and experienced finance experts, people who perhaps made some money on Wall Street and decided to do something more personally satisfying in the last fifteen years, who have been bringing an immense amount of sophistication to the problem of applying finance to development.  Parts of it have worked, and parts of it are showing the problems, which is a somewhat understated way of stating the current banking for the poor crisis in India.
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