I blogged here highlighting the obsession in international development circles with new ideas and innovations and neglect of regular development interventions and examined the reasons; here questioning the belief that there are new ideas and innovations waiting to make a transformative impact; here that policies in most of the development matter very little and it's mostly about implementation; and here questioning the conventional wisdom on impact evaluations and arguing that evaluations should focus on the use of administrative data (and surveys) coupl ..read more

It’s no hyperbole to argue that the UK water sector privatisation could be described as the Great British PPP Robbery. It may well become the canonical example of the problems with the privatisation of regulated utilities.  Consider the latest balance sheet of the water sector in UK.  Water companies in England and Wales paid £2.5bn in dividends and added £8.2bn to their net debt in the two financial years since 2021, according to research by the Financial Times. The updated figures mean that the 16 water monopolies have paid out a total of £78bn in dividends in the 32 yea ..read more

1. Contrary to conventional wisdom, in the long-run smaller companies have outperformed larger ones in generating returns.  The outsize returns of small companies relative to larger peers was documented in the early 1980s using evidence from the half-century to 1975. The idea found theoretical support. Higher returns compensate investors for taking on the greater risk of backing smaller, younger companies — though that can be minimised in a diversified portfolio... Over the long run, small-cap companies have outperformed larger ones, according to the UBS Global Investment Returns yearboo ..read more

The most important constraint in economic development is not capital, labour or other factors, but the “ability to make development decisions”. This is the point that Albert Hirschman makes in his classic book, Strategy of Economic Development, says Oliver Kim in an excellent essay on one of the truly great economists.  Rather than endlessly debate which prerequisites for growth a poor country is missing, Hirschman shifts the focus to figuring out how to make the best use of the resources it already has. But, without the guidance of a grand plan, how should policy makers decide ..read more

In one more exhibit on the problems with the privatisation of utilities, early this month, Kemble Water Finance, part of the complex financial structure constructed by Macquarie at Thames Water, the largest British water utility serving a quarter of the population and one that provides water to London, announced that it was defaulting on its £400mn bond repayments. This follows its shareholders refusing to make the promised £500mn equity infusion because Ofwat refused to agree to their demands for higher bills and in turn demanded that the shareholders reduce the company’s debt pile ..read more

1. The Times has an interesting story that points to the problems with phasing out plastics in food packaging. Plastic works well to slow the decay of vegetables and fruit. That means less produce is tossed into the garbage, where it creates almost 60 percent of landfill methane emissions, according to a 2023 report by the Environmental Protection Agency. A Swiss study in 2021 showed that each rotting cucumber thrown away has the equivalent environmental impact of 93 plastic cucumber wrappers. Food is the most common material in landfills. Ultimately the problem with such transitions lies in t ..read more

The US consumer price inflation for March came up at 3.5% year-on-year up from February and slightly higher than the forecast of 3.4%. On the same lines core inflation came up at 3.8%, up from the forecast of 3.7%. Bond yields rose and stocks fell as the likelihood of three rate cuts this year starting from June is now very unlikely. Traders had also previously seen a July cut as a near certainty, but halved their bets on that timing from about 98 per cent to 50 per cent after Wednesday’s report was released. While the markets still give a very high probability to rate cuts by September ..read more

1. Interesting analysis of foundation-owned companies. Denmark’s weight loss drugmaker Novo Nordisk is the best known example. Support from a foundation holding 77 per cent of its voting rights allowed it to invest in the then-unfashionable area of obesity research in the 1990s. It is now Europe’s most valuable company, having made its owner the world’s biggest charitable foundation. Foundation-owned firms’ financial results are comparable to those of their other corporate peers, according to research by Steen Thomsen of the Center for Corporate Governance at Copenhagen Business School. They a ..read more

I have written on multiple occasions arguing that developing countries have to navigate a development trajectory that has to constantly reconcile the often conflicting imperatives of promoting economic growth and limiting climate change.  Gaiutra Bahadur in the NYT has an excellent long read on how Guyana is forced to confront this challenge. Before oil, outsiders mostly came to Guyana for eco-tourism, lured by rainforests that cover 87 percent of its land. In 2009, the effort to combat global warming turned this into a new kind of currency when Guyana sold carbon credits ..read more

I have blogged here and here about the strong likelihood of a general trend of secular decline and stagnation of interest rates. This raises questions about the investment strategies of pension funds, which had taken a big hit from the long period of ultra-low interest rates.  A recent FT article points to multiple interesting links on the issue. A paper by academics from US universities looked at how a typical couple starting to save at 25 can hit three critical targets - amassing as much money as possible for retirement at 65, providing financial security t ..read more