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Capitalizing on Cap and Trade: Background

In the coming weeks, I hope to continue this series of articles regarding cap and trade legislation finally culminating in a market driven solution to United States emissions pollution. This section, part one, will describe a brief background of the issue, setting the stage for the articles to come.

Though there still exists public uncertainty regarding the overall climate change debate, there is substantial scientific consensus supporting the views of the IPCC (International Panel on Climate Change) regarding the anthropogenic origins of global warming and the potential calamitous impacts that runaway warming can bring. This scientific consensus has spurred action around the global on climate mitigation policy, most notably the European Union’s Emission Trading Scheme.

The EU-ETS was the world’s first multinational emissions trading program and maintains its notable position as the world’s largest overall “cap and trade” system. Founded in 2005 and continuing today, the EU-ETS has been met with great acclaim, with resultant emissions cuts exceeding 10% since 2005. In addition to what initially meets the eye, there is also great depth to the specific regulations that have made this program a success, which will be discussed in later writings.

The focus of this conversation will not be on specific advocacies of legislation; rather, it will mainly pertain to the history of “cap and trade” regulation in the United States and its prospects for the near future. For those who are not familiar with the term “cap and trade,” it refers to a market based emissions reductions system in which firms are allocated a specific number of permits denoting the amount of emissions they are allowed to produce. The number of permits allocated to all firms in the program is referred to as the “cap,” effectively setting a maximum for the total amount of emissions. The “trade” comes from the ability of firms to trade these permits amongst each other in order to ensure the most efficient allocation of emissions reduction spending. If Firm A is unable to abate emissions at a price X, but is able to buy a permit from a Firm B at that price, the cap and trade system ensures the emissions reductions happening occur at the lowest possible cost. Like the intricacies associated with the EU Emissions Trading System, there are many variations that are associated with generic cap and trade systems that will be discussed in a later post.

In the history of US federal policy there has been one seminal bill that almost dramatically changed US climate policy regarding carbon emissions. The American Clean Energy and Security Act of 2009, otherwise known as the Waxman-Markey Bill, was a cap and trade system closely related to the EU-ETS. The Waxman-Markey Bill was passed by the House in June of 2009, but after continuous Senate filibustering to stall voting, the bill was stopped dead in its tracks. It was this moment in US political history which marked a definite cessation of climate driven legislation passing through Congress.

Prior to the Waxman-Markey Bill, the US had seen great success in similarly structured climate legislation through the adoption of the “Acid Rain Program” amendment to the United States’ Clean Air Act. This legislation bears some resemblance to cap and trade programs, but the permits traded were for sulfur dioxide (SO2) rather than carbon dioxide (CO2). As the name implies, the program was initially founded due to fears of acid rain damage in local areas, but as was later discovered, it also dramatically helped reduce substantial respiratory health issues associated with high concentration of SO2 and particulate matter in the air. This program has been considered almost perfectly effective, leading to a 40% reduction in SO2 pollution since the 1990s.

The sad reality of climate skepticism is that it has stalled climate legislation, in particular cap and trade, thus preventing any such measures to be adopted on a federal scale. Future discussion will examine how states such as California have reacted to this lack of federal action and have implemented their own trading systems to ensure emissions reductions. Hopefully politicians will tune into economic researchers and reconsider the adoption of cap and trade policies in the hopes of spurring a shift in international emissions policy.

- Nitin Gupta 

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American Military Policy and Robotic Warfare

Regardless of the outcome of the upcoming presidential election, there exists one common future in store for American military policy, robotic warfare.

Both presidential candidates, Barack Obama and Mitt Romney, share similar viewpoints over the usage and expansion of the military robotic industry. For clarification purposes, a robot is most usually defined as, a semi-autonomous machine made up of sensors, processors, and actuators, capable of determining the surrounding environment and independently acting upon it. Under this definition, the military hosts tens of thousands of military robots, ranging from the well-known MQ-1 Predator drone, to the less-known, but equally deadly, SWORD (Special Weapons Observation Reconnaissance Detection System).

Robots have been used for reconnaissance and direct warfare since the late 1990’s, but the last few years have seen a dramatic increase in their usage. Since the US involvement in Afghanistan and Iraq, military robotics has taken center stage, hosting roughly 22,000 robots at any given time in these locations. Most recently, fleets of UAV’s, unmanned aerial vehicles, which have been stationed in Libya due to last year’s war, were used on surveillance missions in response to the terrorist attacks in Benghazi.

There are two major conflicting ideologies in regards to robotic usage. The first, in favor of robot usage, due to the tactical advantages of unmanned warfare, and the second, against robot usage due to several limitations and problems with this strategy.

The most frequently articulated advantage, and ironically, disadvantage, of robot usage is the removal of the human risk aspect of warfare.  Proponents of an increase of robotic warfare argue that this strategy is favorable due to diminished casualties, therefore putting American soldiers out of harm’s way. On the other hand, a widely accepted argument among opponents of unmanned warfare is that this decreased danger to Americans “cheapens war”, making war/violence a more likely venture. During the 2011 Libyan Civil War, the United States launched roughly 101 UAV strike missions without the fear of human causalities. Consequently, due to the intrinsic nature of robots, the United States was able to store these in surrounding areas and call upon their use at its call.

A second advantage argued by proponents of military robots is the precise and efficient nature of robots. Many articulate that as technology continues to improve, so will the infallibility of robot sensors and processors. Drone strikes have been commonly noted as “pinprick strikes” in contrast to conventional missile and bombing runs. Though there is some debate whether or not robots decrease civilian casualties of war, it is widely accepted that these precise robotic strikes are favorable to conventional tactics.

The final issues I will talk about regarding robot usage are the ethical problems associated with the control of military robots. Multiple first-hand accounts indicate that, from the pilot’s perspective, the operation of robots seems like a video game where buttons are pushed to control virtual images on a screen. Opponents of unmanned warfare find the emotional detachment of robot use to be a critical ethical dilemma associated with robotic usage due to the desensitization of operators in regards to the taking of lives. This psychological detachment has empirically spread to other individuals, causing a phenomenon called military voyeurism, the gratification of warfare. Soldiers watching an assault, streamed live by UAV video surveillance, on a terrorist location in Qatar described the event as “like a Super Bowl party”, where individuals would cheer during large explosions and enemy casualties.  Videos such as clips of people being blown up by UAV strikes have been set to popular songs and spread throughout the internet, marking an expansion of this voyeurism.

Apart from the aforementioned costs and benefits of robotic warfare, there exist countless arguments for and against robotic usage. Future reading into the subject can be done by reading Peter W. Singer’s book “Wired for War”, a thorough and well-respected take on the current expansion of military robotics. 

--Nitin Gupta

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Event Summary: The Economic Implications of the 2012 Election: An MBA’s Perspective

On Thursday, November 1, 2012, WPBA hosted a debate between two Wharton MBA students that addressed each of the presidential candidates’ economic policies.  Representing the Republican viewpoint was Grant Smith, a former Associate at Lexington Partners and Co-President of Wharton Politics and Public Policy Club.  Julia Kurnik, a Regional Field Director for the Obama Campaign in 2008 and former Director of Policy and Research for the National Women's Business Association, represented the Democrats.  We were glad to have Dr. Mark Duggan, BEPP Department Chair, Faculty Director for the Wharton Public Policy Initiative, and the former Senior Economist for Health Care Policy at the White House, moderate the panel discussion.

Both graduate student participants addressed timely issues and represented their parties’ beliefs in an intelligent way.  The debate progressed through six major economic policy areas, and the debaters’ responses to Dr. Duggan’s questions are summarized below:

Q1.  The candidates agree that economic growth and job creation is important.  Why will your candidate’s economic plan be better for the nation’s economy?

 Grant began the discussion by highlighting the relevance of Governor Romney’s private sector experience.  Citing former GE CEO Jack Welsh, he noted that Romney has the perfect skillset to turn the country’s economy around.  Grant highlighted Romney’s 59-point plan that would take advantage of our untapped energy resources, crack down on China’s trade policy and currency manipulation, and reinvigorate small business.

Julia responded by remarking that President Obama has indeed been aggressive with China, bringing more international trade suits against the country than any other president in history.  She began her argument by highlighting the fact that Obama inherited an economy already deep in financial crisis, and has made concrete progress in his attempt to recover the economy.  These successes included the financial stimulus, which created 3 million jobs, the Race to the Top program, which created common educational standards for states, and the bailout of the auto industry, which was opposed by Romney and added 100,000 new jobs while propelling the automakers to record profits.

Q2.  In fiscal year 2012, the United States had a $1.1 trillion deficit, which equates to an average of $10,000 per household.  How will your candidate’s policy reduce the deficit, and why is your candidate’s plan better than the opposition’s?

Julia began the discussion by identifying the root cause of the deficit, which she believes is the economic policy of the Bush administration.  Julia showed how Obama responded to the need for greater government involvement in the economy by working with the Department of Defense to negotiate efficient military spending cuts and developing a balanced approach to the budget by advocating for cuts in discretionary spending and the expiration of the Bush tax cuts.

Grant communicated the importance of the deficit by naming it the most important issue of the election.  Currently, he noted, the government’s total debt is equal to our GDP.  Grant reprimanded Obama for not following through on his campaign promises to cut the deficit in half and underscored Romney’s prior experience balancing the Massachusetts and Olympic budgets as an indication of his ability to do the same for the national budget.

Q3.  Entitlement programs will make it difficult to balance the budget in the future.  How will your candidate address entitlement reform?

Julia emphasized that the Obama healthcare plan would save $100 billion over the next five years.  Paul Ryan’s voucher plan, on the other hand, would not increase healthcare coverage as the cost of healthcare increases.

Grant began by stating that entitlement expansion would not be sustainable, as evidenced by our inability to manage the programs currently in place.  He believes that the problem with entitlement reform stems from Obama’s inability to negotiate with his Republican counterparts, and thinks Romney’s experience working with Massachusetts Democrats will help him create a bipartisan solution to entitlement reform.

Q4.  Taxes are set to increase substantially as the Bush tax cuts expire at the end of this year.  Why is your candidate's tax plan better for the economy, and why should voters be confident that your candidate will be able to negotiate the passage of his plan?

Grant again emphasized the importance of bipartisan negotiation in the passage of important legislation and stated that Romney has the requisite negotiation skillset.  He criticized Obama’s desire to tax the rich, saying that such policy would shrink the economy and hurt growth.  Grant believes that Romney, as a businessman, has a more fundamental understanding of risk and incentives and is in a better position to negotiate the passage of critical tax reform.

Julia responded by noting that the Republicans in Congress were united in their goal to hurt Obama’s ability to quickly pass effective legislation, making it hard for Obama to negotiate the passage of effective policy.  She argued that Romney’s tax plan would only implement cuts that affect the rich, such as the elimination of the estate and capital gains taxes.

Q5.  One in five American children lives in poverty.  How will your candidate’s policies help these children?

Here, Julia highlighted Obama’s policies that provide for education and healthcare for children.  First, she mentioned the State Children’s Health Insurance Program (SCHIP), which extends healthcare coverage for children.  Obama’s focus on common educational standards creates equal educational opportunities for children across the nation, she argued.  Additionally, Julia articulated Obama’s focus on creating job training opportunities for parents, which will create better environments for children.

Grant contrasted Romney’s proposals with the economic conditions during the Obama administration.  He observed that more people live in poverty than four years ago, and more people are on food stamps than were four years ago.  Grant pointed out that Obama was unable to fulfill his campaign promises, that conditions are worse than when Obama was elected, and Romney is in a better position to improve the economy and reduce poverty levels.

Q6.  Two in three college graduates have high levels of student loan debt, and the job market for recent graduates is plagued by 10% unemployment.  How will your candidate’s policies help college students and recent graduates?

Grant believes that student loan payments and high unemployment levels are a product of the macroeconomic conditions in the United States.  He thinks Romney’s plan, which is designed to create 12 million new jobs, will make work available for students and recent graduates and allow them to pay off debt with higher wages.  Additionally, Grant sees Romney’s track record overseeing Massachusetts’ top-ranked high school system as evidence that he is knowledgeable about implementing educational policy that will help better prepare students for employment.

Julia spoke more specifically about student debt, explaining that Obama’s plan to enhance the federal student loan system would lower interest rates on student debt and provide students with greater access to funds.  Under this plan, students would be able to pay back student loans traditionally or opt to have a fixed percentage of their future income automatically deducted as loan payments.  Julia explained that Obama plans to extend these policies to current students via an executive order.

Overall, the debate was constructive and educational, and we thank our two speakers and Dr. Duggan for participating in the event!

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Event Summary: The Presidential Candidates on Foreign Policy: A Professor’s Perspective

On Thursday, October 25, 2012, we hosted a professor speaker panel that addressed each of the presidential candidates’ foreign policies.  We were honored to have Dr. Michael Horowitz, an Associate Professor of Political Science with research interests in international conflict and security issues, Dr. Julia Gray, Assistant Professor of Political Science with research interests in the effects of international economic relations and economic organizations in emerging markets, and Dr. Alex Weisiger, an Assistant Professor of Political Science with research interests in the determinants of political decisions about the use of force, particularly the termination of conflict and the sources of variation in the destructiveness of wars, join us for the panel discussion.

The panelists were asked to provide their thoughts on the Republican and Democratic foreign policy platforms.  Specifically, they responded to several questions, including:

Can you compare the two candidates’ approaches to troop withdrawal from Afghanistan?  What are the potential effects of both approaches on the stability of Afghanistan and Pakistan?

How do the candidates differ in their approaches to US-Israeli foreign relations, particularly with respect to Iran?  What are the implications of each of the candidates’ policies for the US’s role in the Middle East region?

What are the candidates’ proposed trade policies with China?  How will these policies affect international relations between the US and China?

What actions has Obama taken or proposed to address Latin American trade agreements?  How has Romney criticized Obama’s approach?  How will the US build trade relationships with Latin American countries under each of the presidential candidates?

What are the candidates’ plans with respect to military spending?  Do the candidates support a leaner or stronger US military?  What are the effects of higher or lower military spending on the nature of our military and economy? 

The last part of the panel was devoted to a Q&A session with the students in attendance.

We thank all three speakers and those in the audience for taking the time to join us on the panel!

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Event Summary: The Future of America's Healthcare: A Student's Perspective

On Thursday, October 18, 2012, WPBA hosted a student debate panel focused on the future of our nation’s healthcare system.   Student representatives Rob Dearborn and Daniel Levinson presented the Republican and Democratic presidential candidates’ healthcare plans and debated the economic and social effects of the two plans.  The conversation was moderated by Dr. Daniel Polsky, the Director of Research for the Leonard Davis Institute of Health Economic and Professor of Medicine and Health Care Management at the Perelman School of Medicine and the Wharton School. Dr. Polsky was President George W. Bush’s Senior Economist responsible for healthcare issues from 2007-2008.

Rob and Daniel were asked a series of questions, including:

What are the biggest current challenges facing our healthcare system, and how does your party’s plan address them?

What are the economic benefits of your plan?  What are the costs?  Why is your plan preferable to your opponent’s plan?

What values are consistent with your plan?  What parts of your opponent’s plan are inconsistent with these values?

Is your plan feasible in our polarized political climate?

The audience was then invited to ask all three speakers questions during the last portion of the debate.

We thank all three speakers for participating in this lively debate.  We hope the audience enjoyed the event as much as we did!

Here are some additional photos from the event, courtesy of photographer Ann-jie Ching:

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How Much Influence does the President Have on the Economy?

A common refrain from the latest presidential and vice-presidential debates has been that Barack Obama has failed to manage the economic recovery in an effective manner. Mitt Romney touts his business experience as proof that he will do a much better job strengthening the American economy. But in reality, how much can a president really influence the direction of an economy?

In several cases, the president’s influence is negligible. Take gas prices; America consumes 20% of the world’s oil while producing 2%. Essentially, this leaves America at the mercy of the rest of the world when it comes to determining gas prices. While domestic oil production has increased in Obama’s tenure, it is certainly not enough to make America a significant player in the oil production market.

Furthermore, unlike any other era, the global market today is more interconnected than ever, often leaving the fate of the recovery in the hands of Europe or China. If one market struggles, markets all around the world are invariably affected as well. In these cases, the president can do very little to affect consumer perception. For instance, if American investors are uncomfortable with the austerity measures in Greece, there is very little the president can do to give them more confidence. 

The IMF has already cut global growth forecasts for 2012 and 2013, pointing to unwise fiscal consolidation in Europe, instability in the financial system due to the Euro, and a worldwide lack of consumer confidence. While European Leaders struggle to keep their weaker economies afloat, China is dealing with decelerating growth due to decreased demand for their exports. Regardless of who prevails in this election, it is clear that the victor will face an uphill battle to jump-start the economy largely due to global factors out of his control.

That is not to say the president is entirely helpless; he does have a certain degree of influence over economic activity, mainly in his ability to work with Congress and advocate for fiscal policies he believes in. The country looks to the president to determine the direction of the nation, so he certainly has the ability to influence both parties to work towards his preferred ideas. Needless to say, the president’s decisions in other aspects of government such as national security and healthcare have an indirect yet vast effect on the economy as well. As we have seen with the Stimulus Bill, when the president has the support of Congress and the people, he is capable of implementing his preferred policies.

But, even if the president is successful, it often takes several years after he has left office for the full effect of his policies to be felt. For example, under Ronald Reagan, inflation rates, unemployment, and interest rates all fell dramatically. However, his government had to radically cut taxes while increasing spending, saddling his successor, George H.W. Bush, with a massive national debt. While Reagan is remembered as one of the greatest presidents of all time, Bush was forced to renege on his pledge to not raise taxes in order to pay for Reagan’s debt. Largely, the economy that a president deals with in his tenure is the responsibility of his predecessors rather than his own.

Even though we may wish so, a president cannot single-handedly reverse the fortunes of our economy. Gas prices and unemployment rates are almost entirely out of his control. However, through his vision and policies, the president can take on the role of a facilitator, inspiring the people and spurring government to take action. A united administration with a clear economic roadmap could do wonders for consumer confidence and provide much-needed steadiness to the market.

--Ashwin Rao

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Summary of Iranian-Israeli Nuclear Policy

Much of the typical happened during last month’s UN General Assembly. Calls for reduced nuclear testing, massive walkouts during Iranian President Ahmadinejad’s anti-West speech, and increased tension between Syria and the rest of the Arab world headlined the agenda for this year’s meeting with over 190 representative countries.  

However, among all the chaos dividing the United Nations, from sustainable energy reform to civil wars, someone had to draw a red line. Literally.

Israeli President Netanyahu, amidst growing fears of a nuclear Iran, depicted his solution by drawing a red line near the fuse of a bomb-shaped visual. By spring of 2013, he claimed, Iran will have enriched enough uranium to create a single nuclear bomb, and that Israeli Defense Forces must surgically strike its facilities before it is too late.

It’s clear that a war between the two countries will severely hurt countries around the world. Although a global conflict is quite evident, the economic stakes are less transparent. Historically, US interests in the Middle East have been centered on democratic reform, oil trade, and proxy states. With immature renewable energy sources and an intense technological need for oil, the US economy is much too dependent on great and inexpensive supplies of petroleum. US consumption – that is, 11 million barrels of oil daily – provides a gigantic market for economies that ship out from the Strait of Hormuz. Unsurprising, then, is the United States’ need to be on friendly diplomatic terms with the oil-rich Middle East. 

In a recent October report by the Bipartisan Policy Center, numbers reveal the magnitude of economic destruction this Iranian-Israeli conflict would wreak on the United States. A war would increase both price expectations and supply reductions similar to the 1979 Iranian oil crisis, and the BPC’s models predict increases between “$11 and $27” per barrel. This, for US consumers, translates to an extra $1.40 per gallon at the pump, reducing jobs by more than one million and reducing GDP by $220 billion. With the bleak outlook of the US economy, higher gas prices and reduced jobs are not viable. 

So, what must be done? Do we advocate more economic sanctions to a point where Iranians shake confidence in their leader, and another Arab Spring-like revolution occurs? Or do we target nuclear transparency by welcoming Iran in diplomatic arms, unfreezing Iranian assets, and allowing companies to conduct business?  The soundest approach I see involves bigger talks between the UN and Iran and economic incentives – not necessarily a carrot on a stick, but something to show that the world is willing to avoid a nuclear holocaust. 

Taking the first approach would probably trace the path of Egypt, Libya, and depending on future foreign intervention, Syria. The goal of US-imposed sanctions has not been to punish Iranian citizens; rather, they have been designed to encourage change, be it economic or political. Rising dissatisfaction from more can only reach a certain point, and should Iran undergo a shaky transition resembling post-Arab Spring governments, this would lead to political schisms within Iran (as seen in Libya) and ambiguity in who really has power over the Strait of Hormuz.

The United States instead should seek a path that starts with economic reversals. According to a 2008 report by the National Foreign Trade Council, if the US were to have access to Iranian oil reserves and if Iran were able to import machinery, food, and transport equipment, the US might be able to save $78 billion from reduced prices and Iranian GDP may increase by $70 billion. Although numbers alone may not be able to change a nuclear mindset overnight, tension in this region would begin to ease, and open talks – the ultimate goal in the scheme of this plan – may begin much more smoothly. Count in sweeping attitudes toward the Western world and more prosperous citizens, and Iran might actually show more transparency than when previously under economic duress.

Bringing the last option, war, back to mind, we still haven’t factored the human toll on the theater. Considering Israel’s geographic disadvantage and Iran’s volatility with the world, the conflict would likely push Israel to consider its own nuclear devices (never officially admitted, but estimated at around 100) and Iran’s allies the same. Let’s make it imperative to draw our red line, from economic easing to nuclear transparency, before these war drums find a rhythm.

--Calvin Nguyen

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Event Summary: MBAs on Careers in International Development

We were delighted to hold an interactive career panel with first-year Wharton MBA students to discuss­ career opportunities in International Development.  MBA students candidly discussed their experiences entering the public sector, working abroad in third-world countries, and coming to Wharton to pursue their MBAs.  For everyone who couldn’t make it, here’s a summary of the discussion.

First, the MBA students had an opportunity to introduce themselves and describe their experiences to the group:

Justin Cohan-Shapiro

Justin grew up in New York City and studied Politics and Economics at Stanford University as an undergraduate student.  While at Stanford, he worked for several think tanks concerned with economic research and policy.  Justin spent his summers working for a local nonprofit organization in Ghana, the World Bank in Sierra Leone, and doing research for the Sierra Leone national government.  After graduating from Stanford, he traveled back to Sierra Leone to write speeches and conduct research for the country’s foreign minister.  Justin then went on to work for the Tony Blair African Governance Initiative, which helps build practical governmental processes and international relations expertise needed to set up institutions around the executives of third-world nations.  The goal of the African Governance Initiative, Justin said, is to construct stable governments in post-conflict and third-world countries in order to attract more foreign direct investment into these countries.  After his time with the African Governance Initiative, Justin went on to work at McKinsey for two years and is now at Wharton to pursue his MBA.

Justin offered several points of advice for students looking to become involved in international development after graduation.  First, he recommended students go abroad during school to places in which they want to work to gain knowledge and get experience working on the ground.  He said that it is important for young people to take risks, build credibility, and help small local organizations develop.  Additionally, he noted that experience working on the ground in foreign countries helps students develop skills that are important in making the transition from private sector to international development.

Josh McCann

Josh went to college in Australia, earning Finance and Law degrees.  He took a semester off to travel to Ethiopia to help with accounting for an NGO.  He then spent two years working in strategy consulting in Australia, and moved to Nigeria for 3 months to work with TechnoServe, a nonprofit that hires former bankers and consultants to build businesses and entrepreneurship in rural areas of Nigeria.  Josh then traveled to Sierra Leone and joined Innovations and Poverty Action (IPA), a nonprofit that hires economics majors out of school to manage programs in developing countries.  Josh had the opportunity to manage a country office, made up of 20 workers.  Before coming to Wharton for his MBA, he managed cash-for-work projects in Sierra Leone for the World Bank.

Sonia Mukhi

Sonia began by stressing that the time to start traveling and working in international development is right after graduation, as students have nothing to lose by going abroad.  Girl 1 began working at the Clinton Foundation as an intern, as part of the Foundation’s HIV AIDS initiative.  After graduation, she spent six months in India at a rural microfinance nonprofit.  In 2009, she joined MFX Solutions, a startup formed by microfinance leaders to solve the problem of currency risk associated with foreign aid and investment.  As firms invest billions of United States Dollars into foreign nations, MFX structures those loans in the developing nation’s local currency.  Sonia recommended that undergrads be entrepreneurial, take risks, and get field experience to demonstrate a passion for international development.

Brooke Berman

Brooke deferred her admission to Amherst to work as a journalist for a human rights organization abroad, writing about microfinance.  While at Amherst, she received a fellowship to work with professors doing microfinance research.  After her junior year, she worked for Goldman Sachs as a summer analyst, an experience which drove her away from the private sector and motivated her to work in international development.  Since graduation, Brooke has worked for IPA, which she says offers good mentorship, direct involvement in policy research, and great growth opportunities for those interested in management.  She also noted that there are plenty of opportunities in the US for international development work, but many of those opportunities require some field experience.

Alec Raia

Alec is currently pursuing MPA and MBA degrees jointly.  He noted that the international development field is a great way to get started out of college because there are countless opportunities for young people to have a meaningful management experience.  Additionally, there are many niche interests in the field, so there is something for everyone.  Alec graduated from Vassar College with a degree in Economics, and immediately upon graduation was selected to be a New York City teaching fellow.  Even though he had no prior development experience, Alec went to Ghana to volunteer at a refugee camp, where he taught children and developed the camp’s fundraising program.  Next, he worked as a grants manager for the International Rescue Committee in Indonesia managing a portfolio of funding.  He said the IRC helped him get experience writing complex proposals and taught him the fundamentals of post-conflict humanitarian aid programs.   Alec was then moved to IRC headquarters in New York to work on a regional business development team, and is now at Wharton for the MBA portion of his degree.

After the panel introductions, we opened up the floor for a question and answer period.  Here are some excerpts from the discussion:

Why are you pursuing an MBA?  What degree options are there after working in international development?

Brooke thinks that an MBA is the most useful graduate degree to pursue because it yields more hard skills than an MPA.  Effective management is key to local nonprofit organizations, and she believes that the management skills learned while in an MBA program will be able to help her manage more effectively in the future.

Alec agreed, noting that an MBA confers valuable finance and management skills.  In his experience, senior managers in international development are forced to be generalists, so a broad business education serves aspiring managers well.  Additionally, Alec finds that an MBA gives students an opportunity to transition into the private sector in the future.

Sonia added that MBAs are a scarce resource in microfinance and international development, and having a background in finance or management can help when speaking to investors.

How have you dealt with the salary constraints associated with lower-paying jobs abroad?

Josh worked for a semester and asked for donations to save up cash before going abroad, and recommends that students find opportunities that provide funds or grants to work internationally.  He noted that although the pay isn’t as good in international development, living expenses are much than they are in the US, so paid work is usually enough to cover those expenses.

Brooke highlighted the fact that there are more stable, well-paying careers at the World Bank and UN.  Although these careers pay more and offer more stability, they offer less field experience and responsibility.

Have you thought about entrepreneurial opportunities in international development?

Justin told the audience about his friends, who have started businesses abroad and raised funds to invest in local businesses in third-world countries.  He remarked that there are high barriers to entry, including capital, financing, and field experience – he recommended not to start from scratch with an entrepreneurial endeavor.

Brooke spoke about the dangers of entrepreneurial ventures in international development, explaining that there are many opportunities to misspend donated money and starting a nonprofit abroad necessitates a huge investment of time, money, and energy.

Josh cautioned students against forming an NGO, as it is very hard to avoid “failing softly” – NGOs don’t go out of business in the same way as for-profit firms, so it is possible to continue to spend money without having an impact.  In order to start an effective NGO, Josh recommended having a concrete vision before accepting funding.

Where does funding for international development projects come from?

Sonia explained to the audiene that NGOs often act as for-profit banks and fund microfinance projects.  Additional funding sources are private impact investors and grants.

Brook broke down investors into three types: those focused on social return, those concerned with financial returns, and impact investors who are interested in both.

WBPA would like to thank our guest speakers for joining our discussion and attendees for making this a great event.  We hope to see you again soon!

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WPBA Presents: MBAs on Careers in International Development

What role can business play in international development? What opportunities are there for business students at NGOs, nonprofits, and other organizations that work to promote development across the world?

Join the Wharton Politics and Business Association at a career panel featuring current Wharton MBA students sharing their experiences at places like the Clinton Foundation, the Tony Blair Africa Governance Initiative, the International Rescue Committee, and Innovations for Poverty Action.

Please join us on Tuesday, October 9 at 6:30-8 PM in room JMHH F65!

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The Local Economy and Ex-Offenders: A Look at Philadelphia

The following post is written by Cortney Charleston, former WPBA VP of Publications.  He is currently working at Nielsen, and his email address is cortney.charleston@alumni.upenn.edu.

Throughout the last four years, the City of Philadelphia, through the visionary leadership of Mayor Michael Nutter, has become increasingly preoccupied with connecting formerly incarcerated individuals to gainful employment. Looking to the numbers, it is evident that the sizeable ex-offender population in the city threatens macroeconomic and social stability. According to an Economy League of Greater Philadelphia’s there are projected to be approximately 40,000 individuals released annually from local, state and federal prisons back into the City of Philadelphia. This population stream has led to around 50,000 adults on probation or parole living within the city limits.  

Although an elementary calculation with a degree of inaccuracy, I will define the Philadelphia labor force as individuals between the ages of 18 and 64, subtracting those below the average age of high school graduation and above the age of retirement required to receive unreduced Social Security benefits. The size of that population segment in Philadelphia was 996,860 in 2010, bringing the portion of the labor force with a criminal record in Philadelphia to 5% based upon the estimate of re-entering persons.

With the employment opportunities of this population effectively limited, there is a high probability that a large portion of Philadelphia ex-offenders will find themselves incarcerated once again in the future. This trend coalesces as a semi-permanent prison population that incurs substantial societal costs, both in terms of monies appropriated to maintain and operate local and state prisons, as well as non-monetary costs to families and communities. Also, because recidivating individuals are incarcerated for new offenses, there is an additional cost related to the perpetration of these new crimes.

Taking all of the above information into consideration, should policymakers be able to devise ways of ensuring a larger number of ex-offenders are able to locate employment, it will result in a net gain for society through simultaneous reduction in prison spending and increase in tax receipts from the newly employed.

Figure 1: Estimated 2011 Former Inmate Average Annual Earnings

  Figure 2: Estimated Former Inmate Average Post-Release Lifetime Earnings

  Figure 3: Estimated Wage Tax Contributions of the Formerly Incarcerated

  Figure 4: Estimated Sales Tax Contributions of the Formerly Incarcerated

            As illustrated in the above tables, sustained employment will produce tremendous income gains for the formerly incarcerated. More importantly (for policymakers), there is a significant contribution former inmates are able to make to government coffers by way of wage and sales tax payments, provided a number of individuals in this population be able to find and maintain employment upon release. The numbers provide a very simple argument as to why we as a society should care about the reintegration of ex-offenders into society; all humanitarian concerns aside, it will save us money, and those savings can then be used for a variety of other purposes, whether it be more spending for other public goods and services or tax reductions for households and businesses.

Source: The Economy League of Greater Philadelphia

[whartonpolitics-blog]

WPBA was excited to work with Club Singapore to host a speaker event featuring the Singaporean Ambassador to the United States.  Ambassador Chan described Singapore's interpretation of globalization and democracy.  She explained that the Singaporean government rules with "soft authoritarianism," noting that the People's Action Party, which has held majority power since 1959, operates within a democratic framework of many other political parties.

[whartonpolitics-blog]

Event Summary: MBAs on Careers in Policy and Government

Our MBA panel on careers in government and public policy offered everyone a great, honest look into public policy career paths.  We had the privilege of listening to MBA students from a variety of backgrounds with a multitude of interests.  Here's a quick summary of our discussion.

The MBA students first briefly introduced themselves to the group:

Shern Frederick is from Trinidad and Tobago and completed his undergraduate education at Princeton University.  He's passionate about energy and international development.  Prior to pursuing an MBA at Wharton, Mr. Frederick traded energy, coal, and emissions, worked in commodities trading and asset management at JP Morgan, and worked on energy efficiency projects for the World Bank.  He likes working in the public sector because he has the ability to make a tangible impact on society and witness firsthand the improvements his work has stimulated.

Mars Hanna is currently enrolled in a dual MPP/MBA program at the Kennedy School and Wharton.  He has a degree in theater from Northwestern University, but holds a strong interest in international affairs.  After graduating from Northwestern, Mr. Hanna worked in the Climate Change office of the State Department, where he worked with international partners to develop a treaty to ensure low-carbon development in the Pacific.

Ely Kahn graduated from Harvard in 2001 with a degree in Environmental Policy and Government.  After his Junior year at Harvard, Mr. Kahn interned with the EPA and was part of a team tasked with figuring out how to dispose of Russian nuclear materials.  After finishing his undergraduate education, he worked at Booz Allen Hamilton as a public sector consultant, the Department of Homeland Security, and as a cybersecurity advisor for the White House.  Mr. Kahn came to Wharton to pursue an entrepreneurial technology venture.

The MBAs then talked about their choices of business and public sector careers:

Mr. Hanna chose to work in the public sector because policymaking is exciting to him and he had a strong desire to increase the overall welfare of society.  Both of his parents worked in the public sector, so he was pushed that way from a young age.

Mr. Frederick emphasized the importance of private sector experience when working in the public sector.  He made the transition from the private sector to the public sector when he moved from JP Morgan to the World Bank, and he described how important his prior experience and business mind were to his new employer.  He moved to the World Bank because he felt he could make more of a social difference working with high-level international officials at the World Bank.  As an example, he highlighted his project in Haiti after the earthquake, which provided solar-powered lanterns for victims.

The next question asked the MBAs about the role they envision their business educations playing in their future career prospects:

Mr. Kahn noted that in his experience, there are very few public sector employees with MBAs and Ivy League degrees.  This means, he said, that Wharton students have a huge advantage in the hiring process and work environment.  Advanced and prestigious degrees give their holders upward mobility in governmental agencies.  He noted that the management education Wharton provides is especially valuable in the public sector.

Mr. Hanna echoed Mr. Kahn's statements about the number of public sector workers with advanced degrees.  He told the group that the transition from college to the public sector is tough, and suggested that private sector experience is extremely valuable in the public sector.

Mr. Frederick talked about how public sector experience gave him the opportunity to identify areas of improvement in the World Bank that helped him succeed in his interview and job.  He emphasized the importance of management and leadership effectiveness as well as critical problem solving skills in the public sector.

Finally, the audience asked the panelists why they were pivoting between the public and private sectors:

Mr. Frederick told the audience that JP Morgan was too bureaucratic and had an overly negative attitude.  He moved to the public sector because he wanted to make a social impact and pursue his passion of building an international Caribbean power network.

Mr. Hanna is moving to the private sector because he realized that the United Nations and other policy organizations move slowly, and private corporations can move much more nimbly.  Additionally, he feels that public organizations are more removed from the tangible impacts of their work than are private corporations.

Mr. Kahn sees financial upside and more upward mobility in the private sector relative to the public sector.  He feels that he will be able to take advantage of new opportunities and have greater control over his finances while working in the private sector.

We'd like to thank each of our three panelists and everyone who came out to the event -- we couldn't have done it without you!

[whartonpolitics-blog]

WPBA Presents: MBAs on Careers in Policy and Government

This Tuesday, April 24, we're hosting an MBA career panel focused on careers in policy and government.  This will be a one-of-a-kind opportunity to learn about public policy careers and internships from the people who know best: MBAs who have work experience in the public sector.  The event will be held at 6:00 PM in JMHH 340.  We've invited some of the most outstanding MBA students to sit down with us and talk about public sector careers:

Ely Kahn

Mr. Kahn is a former management consultant and senior government official with deep policy experience in cybersecurity and a strong understanding of Big Data, business strategy, venture capital, M&A advisory services, and corporate development issues.

Past work experience:

Senior Associate at The Chertoff Group

Director of Cybersecurity Policy at National Security Staff, Executive Office of the President

Deputy Chief of Staff at National Protection and Programs Directorate, Department of Homeland Security

Director, Risk Management and Strategic Innovation at Transportation Security Administration

Associate at Booz Allen Hamilton

Shern Frederick

Mr. Frederick currently works in financial services, with specialties in Energy, Finance, Latin America, and the Caribbean. He graduated from Princeton University in 2005 with a BSE in Engineering, Operations Research, and Financial Engineering.  He previously worked at the World Bank, where he provided financing and expertise for energy-related international development in Mexico, Haiti, Jamaica and the OECS.

Past work experience:

Junior Professional Associate at The World Bank

Analyst at JPMorgan

Operations Associate at JPMorgan

Analyst at Calpine Merchant Services Company

Mars Hanna

Mr. Hanna has experience working in the Energy and State Departments.  He graduated from Northwestern University with a BA in Communication and Business Institutions.  Mr. Hanna is currently pursuing concurrent degrees at Harvard's Kennedy School of Government (Master of Public Administration) and Wharton (MBA, Environmental and Risk Management).

Past work experience:

Summer Intern - Office of Policy and International Affairs at U.S. Department of Energy

Special Assistant to the Director - Office of Global Change at U.S. Department of State

Project Manager - Asia-Pacific Partnership on Clean Development and Climate, Office of Global Change at U.S. Department of State

[whartonpolitics-blog]

WPBA in the DP!

The Wharton Politics & Business Associations intimate sit-down with Reggie Love was featured in the Daily Pennsylvanian, the student-run newspaper of the University of Pennsylvania. Check out what they have to say here! 

~ Cortney Charleston, VP of Publications

[whartonpolitics-blog]

For several months now, Reggie Love has been living two lives. Some days he is a part-time student at the University of Pennsylvania’s Wharton School, pursuing a master’s in business administration. On others he continues his role as personal aide, shadow, caretaker, basketball buddy and roving diplomat for the president of United States.

Reggie Love has had first-hand experience working directly with President Obama.  Now he's come to Wharton to pursue an MBA.  Naturally, his story's combination of politics and business piqued WPBA's interest -- after all, public policy is simply the intersection between these two fields.

So, we reached out to him a few weeks ago to see if he'd speak about public policy careers in Washington and his personal story.  We were flattered when he responded to our request and confirmed that he'd speak on behalf of WPBA.

This is a great opportunity to hear a first-hand account of what it's like to be the President's right-hand man.  We welcome you to join us.  The event information is below:

On behalf of the Wharton Politics and Business Association, the Penn community is invited to hear Reggie Love, President Obama's former body man, speak about his experiences working in DC under the President and his experience now as a student at the Wharton School. Mr. Love will discuss his professional pursuits post-graduation and the importance of integrating politics and business. A Q + A session will follow.

Date: Thursday March 22nd, 2012

Time: 6-7 PM

Room: JMHH G55

Free dinner will be provided.

[whartonpolitics-blog]

WPBA Presents: Behind the Scenes of the Debt Crisis in Greece

The Wharton Politics and Business Society gratefully hosted Dr. Haris Vittas, former Executive Board Member of the International Monetary Fund, Tuesday evening for an academic discussion on the Greek debt crisis.  Dr. Vittas gave a lucid and straightforward explanation of the underlying concepts of the debt crisis. His comprehensive and insightful talk covered the key causes and dimensions of the crisis, the rescue packages that have been implemented, the alternatives to these rescue packages, and why Greece’s plight is unique among worldwide financial recession.

Dr. Vittas made several important points during his discussion:

At the time of the crisis, Greek national debt was at very high levels compared to Greece’s GDP and was bound to continue rising rapidly. Getting rid of the debt (a stock) did not stop the problem of the recurring deficits, which represented a flow. The government accounts were not the only area in which there was a deficit, however. The gap between Greece’s exports and imports was more than 11% of GDP. This meant that the Greek economy was very susceptible to a changing external financial climate and the interruption of its capital flows.

“The party never ended.” In 2000, Greece entered the Eurozone in line with the requirement of a 3% budget deficit. As soon as this happened, however, the government “threw a party to celebrate” – and the party never ended. Excessive borrowing and a whole host of other policy implications led to the ballooning of Greek national debt and the inflation of the public sector. Greece’s fiscal situation started to deteriorate. Furthermore, upward pressure on wages forced a loss of productivity in the international markets for goods and services.

The first rescue package (May 10, 2010) cannot be considered a complete failure, as some critics have alleged. Dr. Vittas noted the inaccuracy of this sweeping judgment, as some important things were achieved:

Major reform of the pension system in Greece – a very sensitive political issue.

A large reduction of the primary fiscal deficit, to 8% of GDP. Relative to other advanced world economies, this is one of the largest reductions made in recent history.

A partial restoration of economic competitiveness and a modest shift of resources to the export sector.

However, this was done at the cost of a very deep recession, and the looming problems of structural reforms and debt reduction remained.

The closed nature of Greece’s economy exacerbates the effects of the already huge necessary government spending cuts on the economy. While a relatively open economy like Ireland has managed to bounce back after a short recession, less of Greece’s spending cuts are deflected onto imports. Greece has been much more affected by the multiplier effect of its spending cuts.

Additionally, irresponsible governance was one of the major causes of the crisis because it severely prolonged the resulting recession. After the first rescue package was signed, the Greek government was afraid to explain to the public the austerity measures which were necessary for recovery. Instead, it tried to shift responsibility to the IMF and other organizations by hinting that these entities were ‘forcing’ its hand. The government’s lack of ownership of the problem resulted in the poor implementation of its reforms.

On the whole, Dr. Vittas’ talk led the audience to think about the viability of the Eurozone. As he discussed various alternatives to the rescue packages – such as leaving the euro, defaulting within the euro, and a ‘temporary’ exit of the euro – the audience was motivated to think about the European Union’s broader economic implications.

So far, the Greek government has failed to maintain favorable public opinion, but has enacted sweeping cuts and austerity programs.  With the impending ratification of the European Stability Mechanism, policymakers must consider a pressing question about the relationship between austerity and economic stability:  How should governments balance unpopular austerity measures, public opinion, and economic stability?  Is such a balance even possible?  Governments around the world, who face large national debts of their own, will have to wait to find out.

Again, WPBA would like to thank Dr. Vittas for his willingness to travel and participate in our event.  We hope you enjoyed his insights as much as we did!

--Ann-jie Ching

[whartonpolitics-blog]

SOPA, PIPA, and the Future of Internet Law: A Summary

Our SOPA speaker panel was pretty incredible.  The three-person panel, made up of Professor Shyam Balganesh of Penn Law, Kat Walsh of the Wikimedia Foundation, and Eric Clemons of the OPIM department, took on a life of its own.  The speakers debated their views of copyright law and the future of content creation, and each speaker brought unique knowledge to the event.

Professor Balganesh

Professor Balganesh spoke first and examined, from a legal perspective, what the SOPA/PIPA episode means for copyright enforcement.  He made two points:

SOPA and PIPA represent a new breed of copyright laws.  He called these bills the "Second Generation" of copyright enforcement.  The First Generation, he argued, is the underlying copyright structure created by the U.S. Copyright Acts and the Digital Millenium Copyright Act (DMCA).  The First Generation laws, Balganesh suggested, have a broken fair use policy that is too unclear to provide an effective shield for content users.  Additionally, the current copyright term of life + 70 years is, in all three of the panelists' minds, excessively long and should be adjusted downward.  Unfortunately, Balganesh claimed, the Second Generation copyright laws go after the infringement facilitators, masking the flaws of the First Generation laws.

Therefore, he argued, the Second Generation laws add to the legitimacy crisis in our copyright system.  The legitimacy crisis represents the notion that copyright law is no longer effective because it is not seen as legitimate or reasonable by the population.

He emphasized that the Second Generation laws deepen some of the holes in the First Generation body of law.  Specifically, SOPA and PIPA maintain a sense of uncertainty surrounding copyright protection and fair use.  Because the rules are open-ended, people don't know if they're infringing when they make use of others' content.  Our sense of risk aversion therefore leads us to either seek to license all content used or avoid using content at all.

Balganesh also talked about how recent copyright law has been based on utilitarian economics, rather than the god-given right to ownership perceived by the founding fathers.  This new focus, he explained, makes the concept of ownership and copyright modifiable, which sets a dangerous precedent.

Kat Walsh

Walsh explained Wikipedia's decision to lead the Internet blackout to protest SOPA.  Although Wikipedia had never been used for political purposes, Walsh discussed how Wikipedians protested because they are not only skeptical of traditional copyright (they use Creative Commons licensing), but also dependent on a legal infrastructure that allows them to exist and operate cheaply.  Wikipedia would most likely not be implicated under SOPA, she said, but the additional costs of self-regulation may be too much to bear.  Walsh communicated that the real danger of laws like SOPA and PIPA are not the potential abuses of enforcement power, but rather the unintended consequences imposed by these laws.

Dr. Clemons

Clemons first told the audience a few basic facts about piracy in general: piracy is theft, and probably hurts content creators.  Clemons then suggested that we look at another question: Does the harm of piracy to the intellectual property owner exceed the harm exacted on society by copyright protection?  There must be a balance between protecting IP and protecting society's entertainment, he described.  As for his personal prescription for the crisis, Clemons argued that some IP protection is necessary, but we should severely shorten the current life + 70 years copyright term.  In Clemons' opinion, the length of copyright protection should be one "edition" -- so a daily newspaper column would be in the public domain after one day, a magazine article would be in the public domain after one month, and so on.  

Clemons agreed with Walsh that the reason SOPA is so destructive is its obscurity -- he observed that there are no clear definitions of infringement or fair use in the bill.  Finally, Clemons asserted that SOPA/PIPA are not censorship, like the Chinese government imposes on its citizens.  Rather, SOPA/PIPA are restrictive of access to infringing content.

--

In the Q&A session after the speakers' individual presentations, the speakers agreed that excessive punishment of copyright infringement motivates people to evade the law.  In many cases, people aren't even aware of the restrictions placed on them by the law.  Punishment even deters people from thinking creatively, argued Clemons.  Walsh made a great point, explaining that current copyright law doesn't mirror social norms, which is why its effectiveness is declining.  Walsh also argued that creativity is now inherently more derivative and collaborative and fundamentally different from that of previous generations.

Overall, the speaker panel was a great event, and we thank our three speakers for their participation and contribution to the discussion!