Eldis Poverty
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Thursday, August 11, 2011
Two Problems With CSR
The Business Ethics Blog
There's plenty of confusion about what CSR is. Indeed most of the definitions you'll find online don't even read like definitions. They'll tell you what CSR (Corporate Social Responsibility) is "about," or what it "relates to," but they won't tell you what it is. Any definition worth its salt ought to take the words in the term seriously, and note that the term "CSR" refers to some kind of responsibility, and then explain just what kind of responsibility it is. But good luck finding such a definition. And this failure of definition isn't just a matter of semantics. It's critically important, because a sloppy understanding of the term gives the appearance of unifying under a single banner people who actually hold vastly different views of what a corporation's responsibilities are.
Various definitions out there seem to coalesce around the idea that business should be "giving back" to the community — and typically not via antiquated methods like corporate philanthropy. The goal, generally, is to make sure that a company's net impact on society is positive. Let's take that as our point of departure.
The following two problems form the Scylla and Charybdis of CSR. If you avoid one, you run right into the other. Both spell doom.
Problem #1: CSR is too easy, if taken literally. If all that's at stake is making sure your net impact is positive, wow, that's pretty easy: just sell a decent product that people want, and don't hurt any bystanders. It's a fundamental principle of commerce. Start with individual transactions. Those, if voluntary and well-informed, always have a positive impact. A customer gives you $1.00, and you give them a pound of bananas. They're happy, and you're happy. Don't step on any bystanders' toes, and there you go: positive net impact. In fact, as long as your customers are happy enough, you can afford to hurt people along the way (e.g., by mistreating employee) and your net impact will still be positive. (And of course, claiming to adhere to CSR is even easier if you use a mushier definition, one that only asks that you "manage" your social impact, rather than aiming at any particular objective.)
Problem #2: On the other hand, CSR is unfairly burdensome, if really taken to heart — that is, if you really think that the pursuit of social contribution ought to take over a manager's entire way of thinking. It means that a company that makes a good product, treats employees well, deals fairly with suppliers, etc., still has to ask itself, "yes, but how are we giving back to the community?" Look in the mirror. What's your net impact on society? What good are you — other than the fact that you put in an honest day's work, take care of your kids, and given a few bucks to charity now and then? (Hint: that's a rhetorical question.) The joint-stock corporation, on the other hand, is arguably one of the most welfare-enhancing inventions of all time. For such organizations, failure to have a positive impact is the exception, rather than the rule. Asking one to risk its productivity by obsessing over something it's already doing is silly.
Now, there's absolutely nothing wrong with the idea that companies are responsible for their behaviour (and that the individuals who work for companies are responsible for their behaviour, too). And for some people, that's all that CSR means. That's just fine. In fact, such responsibility is absolutely morally fundamental. Companies should try to make an honest living, just like individuals like you do. They should avoid hurting people, just like you do. They should clean up their messes, just like you do. That's basic ethics. And if they're doing those things, calling it something as mushy as "CSR" adds absolutely nothing to the equation.
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Jan Pronk: Internationale noodhulp is het ondergeschoven kindje van de globalisering
Vice Versa - vakblad over ontwikkelingssamenwerking
Over de manier waarop noodhulp wordt gegeven valt veel te zeggen. Hoe moet de hulp worden georganiseerd? Hoe professioneel zijn hulpverleners? En welke lessen worden meegenomen voor toekomstige crises? Vice Versa geeft het startschot voor een serie artikelen waarin prominenten uit de ontwikkelingssector hun mening geven over noodhulp. Vertrekpunt voor deze serie is onderstaande column van Jan Pronk, die reeds eind 2010 in Vice Versa werd geplaatst.
Overstromingen, aardverschuivingen, aardbevingen, bosbranden, stormen, ontploffingen en milieurampen waren de afgelopen jaren talrijk. Of het er meer waren dan vroeger, weet ik niet. Of er meer slachtoffers zijn gevallen, evenmin. Maar de aantallen zijn groot. De economische groei in de wereld, de technologische vooruitgang en de verbeterde communicatiemogelijkheden hebben niet geleid tot minder rampen en minder slachtoffers. Dat had wel gemoeten.
Sommigen zeggen dat de drie genoemde factoren de aantallen catastrofes en slachtoffers zelfs hebben verhoogd. De economieën zijn kwetsbaarder geworden, de bevolkingsconcentraties dichter en het menselijk handelen riskanter.
Overstromingen in Pakistan zijn deels het gevolg van falend waterbeheer. Bosbranden in Oost- en Zuid-Europa worden mede veroorzaakt door onachtzaamheid, net als industriële explosies in China, mijnongelukken in Rusland en olierampen op zee. Zelfs wie klimaatverslechtering als een puur natuurlijk verschijnsel beschouwt, kan niet ontkennen dat klimaat- en (on)weergerelateerde calamiteiten tegenwoordig wel erg veel slachtoffers maken.
Ik vrees dat de aantallen rampen en slachtoffers groter zullen worden. Om dat te voorkomen dan wel binnen de perken te houden en om de gevolgen op te vangen is beter beleid nodig, op tal van gebieden: bos- en waterbeheer, milieu- en energiebeleid, verduurzaming van de economie. Voorkomen is beter dan genezen.
Maar toch: slachtoffers moeten worden geholpen. De meeste daarvan hebben part noch deel aan het ontstaan van de ramp en waren al arm voordat die zich voltrok. Toch schiet de noodhulp bijna altijd tekort. Er moet om geld worden gebedeld op speciale internationale conferenties en via nationale liefdadigheidsacties. Er wordt altijd te weinig opgehaald. Het merendeel van de opbrengst wordt bestemd voor herstel en wederopbouw. Die zijn noodzakelijk, maar de directe hulp aan slachtoffers mag geen uitstel lijden. Echter, die hulp komt bijna altijd te laat, is te gering en vindt niet goed gecoördineerd plaats.
De internationale noodhulp is het ondergeschoven kindje van de globalisering. De capaciteit van internationale ontwikkelingsorganisaties is met de globalisering meegegroeid. De coördinatie is verbeterd en de samenwerking met binnenlandse ontwikkelingsorganisaties en het particuliere bedrijfsleven eveneens. Ontwikkeling, zo weten we, moet van binnenuit komen. Van buitenaf kan alleen een beetje extra worden geholpen. Bovendien, ontwikkeling is een langdurig proces en wanneer middelen enige tijd tekortschieten, kunnen plannen worden bijgesteld en kan de uitvoering over langere tijd worden uitgesmeerd.
Dat alles geldt niet voor de noodhulp. De meeste slachtoffers van rampen vallen de eerste twee dagen. In die tijd is men aangewezen op hulpcapaciteit die dichtbij in het eigen land beschikbaar is. In arme landen is dat weinig en dat weinige is deels zelf door de ramp onklaar geraakt. In tegenstelling tot ontwikkelingshulp is internationale noodhulp niet iets extra's, maar een kwestie van leven of dood.
De meeste VN-organisaties – met uitzondering van het Wereldvoedselprogramma – leggen zich toe op ontwikkelingshulp, niet op noodhulp. De VN-noodhulporganisatie OCHA (Office for the Coordination of Humanitarian Affairs) heeft zelf geen uitvoerende capaciteit. OCHA financiert en coördineert noodhulp die door anderen wordt verleend. Ook ECHO, opererend vanuit de EU, is een makelaar van hulp.
De feitelijke uitvoering is in handen van binnenlandse en internationale ngo's. Zij doen prachtig werk en hebben goede netwerken opgebouwd binnen getroffen landen. Maar hun capaciteit is onvoldoende. Zij hebben nauwelijks turn key-capaciteit, zijn te klein en te afhankelijk van charitas. De meeste ngo's gebruiken derden voor logistiek en transport, maar dat vermogen komt te laat beschikbaar.
De internationale noodhulp moet op de schop. Er zullen fondsen en kredietlijnen beschikbaar moeten komen die direct kunnen worden aangesproken, zonder voorafgaande instemming van donoren, zonder bedelacties. De VN heeft een eigen fysieke hulpverleningscapaciteit nodig, een staand leger hulpverleners – dus niet alleen hulpadministrateurs – aangevuld met direct oproepbare hulpverleners uit afzonderlijke landen. Zij moeten onmiddellijk kunnen beschikken over transportcapaciteit, niet pas na enkele dagen. Militaire transport- en genie-eenheden van afzonderlijke landen kunnen daarbij niet gemist worden, direct oproepbaar en onder VN-commando. De VN zal verantwoordelijk moeten worden gehouden voor het plannen en monitoren van die capaciteit, en bevoegd moeten worden om mensen en materieel direct in te zetten. Dat is een grote stap. Het is niet realistisch daarvoor thans te pleiten, hoor ik tegenwerpen. Maar als het niet eens mogelijk is daadwerkelijke capaciteit op te bouwen om mensenlevens te redden, kunnen we een effectieve internationale aanpak van andere crises wel vergeten.
Jan Pronk
Jan Pronk was minister voor Ontwikkelingssamenwerking in de kabinetten Den Uyl (1973-'77), Lubbers III (1989-'94) en Kok I (1994-'98).Van 2004 tot 2006 was hij speciaal VN-gezant in Soedan. Momenteel is hij hoogleraar aan het Institute of Social Studies in Den Haag.
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Directeur Artsen zonder Grenzen over noodhulp: ‘Het is zaak het kaf van het koren te scheiden’
Vice Versa - vakblad over ontwikkelingssamenwerking
Foto: Michael Goldfarb / MSF
De noodhulpserie van Vice Versa is gisteren van start gegaan met de column van Jan Pronk, waarin hij stelde dat noodhulp het ondergeschoven kindje van de globalisering is. De komende tijd zullen meer prominenten hun gedachtes over dit onderwerp laten gaan. Vandaag is het de beurt aan Arjan Hehenkamp, directeur van Artsen zonder Grenzen. Vice Versa stelde hem vijf vragen over noodhulp.
Als u kijkt naar de situatie in de Hoorn van Afrika, en de reactie van hulporganisaties daarop, waar bent u dan het meest kritisch over?
Ik ben kritisch over het beeld dat wordt geschetst. Het lijkt alsof er hongersnood is uitgebroken in de Hoorn van Afrika, en dat deze is veroorzaakt door een klimatologisch probleem. Er is echter geen sprake van hongersnood in de hele Hoorn. In Somalië is wel sprake van een nutritionele crisis, noodhulp is daar dan ook van toepassing.
De kritieke situatie in Somalië is echter niet alleen door droogte ontstaan, maar ook door oorlog, geweld, en obstructie van de hulpverlening door al-Shabaab rebellen. Het gevolg van het schetsen van een irreëel beeld van de crisis is dat de nuances onzichtbaar zijn. Naar aanleiding van het huidige beeld is in Nederland een debat ontstaan over het waarom en hoe van noodhulp. Dit debat is gebaat bij specifieke kennis, bijvoorbeeld over het feit dat de politieke situatie in Somalië het verstrekken van noodhulp ernstig bemoeilijkt.
En waarover bent u het meest positief?
Voor de inzet van de mensen van Artsen zonder Grenzen, die ondanks de moeilijke omstandigheden trachten hulp te bieden, heb ik veel bewondering, Ook ben ik positief over het feit dat landen zoals Kenia vluchtelingen opnemen, al zouden ze hierin nog genereuzer moeten zijn. Het principe dat mensen hun land mogen ontvluchten moet immers ondersteund worden. Toch ben ik vooral bezorgd over de situatie, met name over die in Somalië. De eerstkomende maanden voorzie ik geen verbetering, eerder een verslechtering daar, omdat de volgende regen waarschijnlijk op zijn vroegst in november zal vallen.
Jan Pronk beweerde eind vorig jaar in Vice Versa dat noodhulp een ondergeschoven kindje is binnen de wereldpolitiek. Noodhulp komt volgens hem bijna altijd te laat, is te gering en vindt niet goed gecoördineerd plaats. Voor die coördinatie stelt hij voor dat de VN de hulp centraliseert en eigen capaciteit opbouwt. Sluit u zich bij de uitspraken van Jan Pronk aan?
De analyse van Jan Pronk onderschrijf ik gedeeltelijk, de oplossing niet. De afgelopen crises toonden dat de internationale noodhulpindustrie onvoldoende in staat is om effectief op te treden in kritieke situaties. Ik zie de VN als onderdeel van dit probleem, niet als oplossing. Momenteel bestaat er een wirwar aan coördinatie-mechanismen, die weinig doet voor mensen in crisissituaties. Artsen zonder Grenzen gelooft in coördinatie met een positief effect op de kwaliteit van hulp.
Dit vergt een nieuw systeem, waarbij organisaties die een waarachtige capaciteit en toegevoegde waarde hebben in crisisgebieden vanuit een bottom-up perspectief samenwerken. Dit bleek tijdens de crisis in Haïti, toen in het kader van het VN clustersysteem alle organisaties die íets met gezondheidszorg doen aan tafel mochten schuiven om hierover mee te praten. We zaten met meer dan 200 organisaties in een zaal, dat is onmogelijk te coördineren. Het is zaak het kaf van het koren te scheiden. Overleg voeren met alle betrokken organisaties, groot en klein, is niet te doen.
Noodhulp staat onder tijdsdruk en vergt snel handelen. Is er binnen zo een situatie volgens u voldoende ruimte voor professionalisering van medewerkers?
Artsen zonder Grenzen besteedt hier bij uitstek veel aandacht aan. In Somalië is het op dit moment helaas zo onveilig dat we alleen met nationale staf werken. Dat hebben we besloten nadat er in 2008 een aanslag werd gepleegd op onze internationale medewerkers. Hopelijk kunnen we er binnenkort terugkeren. Tot die tijd bieden we training en ondersteuning aan onze Somalische medewerkers. Doordat zij goed voorbereid zijn is het voor ons mogelijk ons werk in Somalië uit te breiden.
Waar loopt de organisatie van de Hoorn van Afrika-actie momenteel tegenaan en kan hierbij geleerd worden van ervaringen uit het verleden?
Het is nog te vroeg om conclusies te trekken, maar een positieve ontwikkeling is dat de internationale gemeenschap politieke restricties wegneemt die eerder golden voor hulp in gebieden die door al-Shabaab gecontroleerd worden. Deze restricties waren contraproductief omdat ze in de ogen van de rebellen bewijs leverden voor de politieke aard van ontwikkelingshulp. Onder andere daardoor voelden zij zich gerechtvaardigd om hulp voor hulporganisaties te weigeren. Het is nu tijd om de wederzijdse beperkingen weg te nemen, zodat de hulp terecht komt bij degenen die het nodig hebben.
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What Now?
Aid Thoughts
"What now? Let me tell you what now. I'mma call a couple of hard, pipe-hitting development economists ..."
In an e-mail exchange, Matt and I agreed that there haven't been any really interesting and engaging development debates recently: this has been one reason (among many) for our recent relative silence. It's worth looking at this calming of the intellectual waters around development a little further. There are a couple of interesting points about the way in which the debates have died down.
The first point to notice is that the debates have not died down because any kind of consensus has been reached. Bill Easterly and Jeffrey Sachs are not running down the beach hand in hand, singing about sunshine and Millennium Villages; nor is Dambisa Moyo finding support from, well, anyone. Debates have died down precisely because the prime movers in them have been so intellectually intransigent. Sachs has refused to address in any systematic way the myriad issues with his 'big push writ small' model; and Easterly continues to maintain a largely false dichotomy between planners and searchers; likewise, Dambisa Moyo (and her more considered fellow aid critics) did not precipitate a retrenchment of aid policy – though the pre-existing value for money and 'beyond aid' agendas became better defined and became more prominent.
This is worrying. For our thinking to progress, we generally need either a process of intellectual creative destruction – whereby new ideas replace old ones they render obsolete – or a process of refinement and 'bargaining' between different ideological camps to generate a more nuanced approach to development theory. Right now neither of these seems to be happening. The main intellectual debates about how development should proceed have been deadlocked (with the exception of a few of the more thoughtful writers), and while the critiques of whether aid or non-aid methods of development assistance should be used has progressed, this is really about the means of implementing policy visions rather than the visions themselves.
This has caused three problems that I can see. Firstly, there's a lack of coherence in current development policy; some policies based on a libertarian 'searchers' agenda (unconditional cash transfers to individuals for example) are pursued and assessed on a micro-level basis, coexisting alongside interventionist social-level policies, potentially compromising both broad approaches. This is not to say the correct approach would not incorporate elements of both, but that this should be by design and not because two camps are pushing their own agenda irrespective of the bigger picture.
Secondly, the failure of the different development agendas to find a common ground or even to respond effectively to each other has led to stasis in the generation of new ideas. The big thinkers and big ideas are so far apart from each other, and so fundamentally opposed, it seems that they are not being forced to reassess their own positions. This manifests in a shortage of new 'big question' thinking about development. This might not be such a bad thing – big question thinking hasn't provided any unambiguous solutions and there might not be any grand theory of development, but the constant search for them has been strengthening our understanding, despite the imperfections of each one.
The third problem with the current development discourse that I see is that for the first time in my memory, the issue dominating the field is not a theory or an idea, but a research method: randomized evaluation. There has been some excellent writing about RCTs (the Development Impact blog is easily the best thing to happen to the blogosphere in the last year or two), but it is curious that more debates spring up about how well they can provide generalizable conclusions than about the kinds of intervention they are assessing. It's symptomatic of an ever-increasing dominance of a micro-approach to development interventions, which has many benefits, but does not contribute enormously to discussion of the optimal array of interventions and sequencing issues. It is also ill-suited to assessment of macroeconomic issues and policies.
Development thinking tends to follow trends very closely, a phenomenon that was the subject of one of my first blogs at Aid Thoughts. In that piece, I suggested that we need to move away from constant jumping from hot issue to hot issue and use a more holistic approach to development thinking: an approach which gives due consideration to Governance, agriculture and infrastructure; planning where it can and should be used and decentralized decision making where this makes sense, all without forgetting that aid is only one aspect of intervention and macro-issues are generally not aid-related. The shift in thinking towards methodological debate and micro-interventions represents a failure to embrace this sort of holistic thinking – instead it focuses our attention narrowly on those interventions that can be monitored in specific ways, and by consequence on ever more specific development packages. The ideas being expressed remain interesting and valid, but we're no closer to coalescing the good that has been learnt from the various approaches tried and discarded in the past.
So, what now? In the field of history, there have been two relatively recent publications which were extremely ambitious in their attempts to draw together vast amounts of research, theory and analysis and form a coherent statement of our best knowledge and clearest explanation and analysis of the big questions in history, namely The Birth of the Modern World by Chris Bayly and Strange Parallels by Victor Lieberman. Both are staggering works, widely recognized among the best in their fields (I have yet to make a stab at Strange Parallels, but it has received the highest praise possible from people whose opinion I put great stock in). Development is waiting for its equivalent. I don't see a much better time for its genesis than now. I just don't know who is well placed to write it.
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Monday, August 8, 2011
What If Funders Really Acted Like Purchasers?
SSIR Opinion & Analysis
In my previous article, I argued that funders should think and act like purchasers rather than investors, and that doing so would address one of the key drivers of the nonprofit starvation cycle. Thinking of the work of funders as akin to that of a purchaser or customer initially may not seem as attractive as the funder-as-investor analogy. "Making an investment" in a cause or social good sounds much more meaningful than being a customer of a nonprofit. However, in addition to offering a clear rationale for avoiding the starvation cycle, the funder-as-purchaser model provides a powerful lens for critically re-examining many of the current practices of funders. It also offers new frameworks and nomenclature to spur new thinking and advancements in the nonprofit sector.
Re-examining Current Practices
If a true purchaser-seller relationship between funders and their grantees were established—where funders are able to let go of micromanaging the use of grant dollars—there ultimately would be no need for grants that fund the internal operations of nonprofit organizations. In a true purchaser-seller scenario, nonprofits would presumably be able to negotiate a profit margin in grant funding above the actual costs to deliver results. Because nonprofits are not able to distribute any proceeds to individual owners or investors, they would use these gains to expand the reach of their programs; internally fund new programs; and invest in infrastructure, staff, and technology to position the organization for future success.
Therefore, grants that fund the internal operations of nonprofits, such as capacity-building grants—which are currently the en vogue means for funders to support nonprofit investments in infrastructure and back office operations—would no longer be needed, because the restrictions to fully fund these needed expenses would be removed. In fact, all grants that purport to fund nonprofit operations (including capital grants, which fund construction of facilities) rather than the results they produce theoretically would not be needed.
Another current practice to re-examine using the funder-as-purchaser model is the rule among some funders to cut off funding to nonprofits after a certain number of years. The rationale for refusing to fund a nonprofit after three to five years is that funders do not want to have grantees too dependent on their funding. Examining this practice from a purchaser perspective exposes the faulty reasoning behind such policies.
Purchasers pay for services or goods because they are presumably getting the best bang for the buck or the highest quality they can afford. Purchasers who have chosen a seller based on these criteria would continue to buy from this seller until someone else was able to offer better goods for the same price or the same goods for a lower price. Paternalistic concerns of the seller's welfare would not be a valid consideration in the decision-making process. Employing this rationale would ensure that high-performing organizations continue to be funded and not arbitrarily cut off, while helping funders squarely focus on what should be the most important criteria—results.
Employing New Frameworks
In addition to re-examining current practices, funders can utilize new frameworks offered by the funder-as-purchaser model to spark new ways of thinking about their roles and impact within the nonprofit sector. For instance, funders could more precisely explore the issue of how innovative program models gain wide adoption and funding within the nonprofit sector through a purchaser's perspective. Rather than thinking of themselves as "venture capitalists," funders who support start-up organizations or new program ideas can view themselves as "innovator" or "early adopter" purchasers along the Rogers' new innovations diffusion curve. Using this framework, funders can better analyze questions such as, "How do innovative program models gain wide adoption by the mainstream?" or "How can 'early adopter' funders better leverage their position as opinion leaders within the nonprofit social system to influence adoption by the majority?" Or, "How can influential funders organize and create mechanisms within their social system to identify and vet the best new innovations, and give these ideas their best shot at success?"
Another line of inquiry could be to examine how powerful purchasers, such as Toyota, influence the management practices of their vendors. An integral component of the legendary just-in-time production concept is the establishment of supplier keiretsu—a close-knit network of vendors that adopt the same production and management best practices of the company to work in harmony with the company's processes. Can funders use lessons from automakers to influence the operations and management practices of their suppliers of social good? And more expansively, can funders use the principles of supply chain and value chain management to coordinate a large and complex web of social good producers to target some of society's toughest and most diffuse challenges such as homelessness, air pollution, or education reform? In coordinating and organizing the activities of a wide array of suppliers of social good, do funders then transform themselves from being passive purchasers to actual producers of social good?
The questions that arise are myriad and vast. What would the nonprofit world look like if funders really acted like purchasers?
Paul Park is the general counsel and secretary of the Cesar Chavez Foundation, overseeing all legal matters related to the Chavez Foundation's affordable housing, nonprofit radio, after-school tutoring, and conference center programs. Paul previously worked as a corporate attorney for the law firm O'Melveny & Myers LLP, and holds a JD and MBA from the University of California, Los Angeles, and an AB in History from Cornell University.
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Sunday, August 7, 2011
So What? Part Two
The Baseline Scenario
By James Kwak
So, Standard and Poor's went ahead and downgraded the United States yesterday, apparently because we have a dysfunctional political system. Who knew?
As I said before, I don't think that S&P has added anything new to the world's stock of information. In the short term, the most worrying thing about a downgrade is what I called the "legal-mechanical consequences": the possibility that investors, who value their own opinions more than S&P's anyway, might have to dump Treasuries because they are no longer AAA. Apparently, this is not going be a huge problem. Binyamin Appelbaum of the Times says that (a) many of the rules place Treasuries in a different category from other AAA securities to begin with and (b) since the downgrade only affects long-term debt, money-market mutual funds are safe.
Still, I think the whole thing is preposterous. S&P downgrading the United States is like Consumer Reports downgrading Coca-Cola. Consumer Reports is a great institution. For example, if you want to know how reliable a 2007 Ford Explorer is going to be, they have done more research than anyone to figure out the reliability history of every single vehicle. Those ratings are a real public service, since they add information to the world. But when it comes to Coke and Pepsi, everyone has an opinion already, and no one cares which one, according to Consumer Reports, "really" tastes better. When S&P rated some tranche of a CDO AAA back in 2006, it meant that some poor analyst had run some model fed to her by an investment bank and made sure that the rows and columns added up correctly, and the default probability percentage at the end was below some threshold. It might have been crappy information, but it was new information. When S&P rates long-term Treasuries AA+, it means . . . nothing. And if any serious buy-side investor were tempted to take S&P's rating into account, she would be deterred by the fact that the analysis that produced the rating included a $2 trillion arithmetic error.
When it comes to sovereign debt issued by major countries, investors already use their own judgment instead of following credit ratings. These are the current ten-year yields for fifteen countries that had AAA ratings on Friday:
- Switzerland: 1.17
- Singapore: 1.79
- Germany: 2.34
- Sweden: 2.34
- United States: 2.56
- Denmark: 2.58
- Canada: 2.63
- Norway: 2.63
- United Kingdom: 2.68
- Netherlands: 2.77
- Finland: 2.90
- Austria: 2.97
- France: 3.14
- New Zealand: 4.50
- Australia: 4.64
(Data from Bloomberg: I couldn't find Liechtenstein or Luxembourg.) That's a pretty big spread for fifteen securities that are supposedly equally risk-free. Part of the difference is probably due to inflation rates, but higher inflation expectations should affect sovereign credit ratings anyway, since inflation is the most likely escape hatch for any country that issues debt in its own currency. You see the same disparities for 5-year credit default swap spreads, from Switzerland at 35 basis points to France at 144 (with the United States at 55).
Felix Salmon says that the United States doesn't deserve a AAA rating anyway, and when a significant minority of Congress (with disproportionate political power) actually wants to default on the debt, it's hard to argue with him. But I don't see what point there is in credit rating agencies rating Treasury debt when it doesn't help investors and can only create confusion and increase borrowing costs through mechanical factors. Instead, I think S&P should have just said:
"We have decided to long longer rate sovereign debt issued by the United States, Germany, the United Kingdom, Japan, and other countries whose debt is closely followed by all major investors already and for which underlying fundamental information is widely available. We recognize that our opinion is no better than anyone else's, and certainly no better than that of the market as a whole, but because of our status as a credit rating agency, it cannot help attracting attention it does not deserve and triggering consequences it does not merit. We will focus on our core mission, which is providing new information to the market about securities that are not already heavily analyzed by all the investment community."
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