Sunday, November 30, 2008

Maoists, education tax, and private schools

Here is an article written by NYU professor Jonathan Zimmerman, who first narrates his teaching experience in a “Red” district in Nepal and then argues that Maoists’ decision to ban private schools is unjust.

In Pyuthan, the district where I taught, Maoist attacks forced private schools to close in 2001. Four years later, amid another round of violence, private schools across the country shut down. They reopened two weeks later, following a concerted campaign by parents, students, and human rights organizations.

Now these same groups are protesting the new Maoist government, which entered electoral politics two years ago and won a parliamentary majority this spring. Tired of Nepal's endemic corruption and inefficiency, voters wanted something new. They also hoped that legislative politics would moderate the Maoists, who would now have to compromise with other parties.

It hasn't worked out that way. Turning a deaf ear to protests, the Maoists are moving ahead to ban private investment in primary and secondary schooling by 2011. The goal, they say, is to reduce inequality in education.

But, there's every reason to believe that the ban would reduce education, period. At least 1.5 million Nepali children attend private schools, which now account for almost one-third of the country's 41,000 schools. If their schools are closed, where will these students go?

Some will stay home, just as they did during the first Communist attacks. Others will flood into the strapped government schools, which are already so crowded that they often hold classes outside.

So far, I don’t know if the Maoists have put out a statement saying they are planning to ban investment in private and secondary education. This might be an internal policy of the Maoists-affiliated teacher’s union and its education bureau, which is extremely is ideological and pretty much inconsistent with the advancement in science and technology in recent decades.

In this year’s budget the left-wing Finance Minister Bhattarai imposed a 5% tax on all private schools. This is a horribly bad policy. I think the main reason why he taxed the private schools was to increase sources of revenue to fund populist development projects outlined in the budget. This is how Bhattarai justifies this bad redistributive policy:

Bhattarai said the tax would be paid not by parents and students, but by educational institutions from their profits. "The operators of educational institutions have a responsibility to pay the tax from their profits. The money collected will be utilised for the welfare of children in remote areas" said Bhattarai.

The finance minister is categorizing the private education sector as a “for-profit” sector. To some extent, some private schools do act like for-profit business sector. Using this as a pretext as to impose a flat tax rate on all private schools is a misguided policy move. Also, consider the following paragraph from a commentary:

Dr. Baburam Bhattarai´s education tax policy can be relevant to those schools, which choose to pay taxes as "profit" organizations. But his call for all private schools to consider for investing in other area than education is nothing but thoughtless syndrome of totalitarian dream for state control. Dr. Bhattarai has to understand the fact that the "non-profit" organization provision of the democratic government is one of fundamental factors of mixed economy system.

The Maoists have been against the private schools because of the exorbitant tuition fees. The waged a war on the private schools and had bombed several of them. The quality of private school education exceeds the public school’s by a wide margin.

This is not the end of the story. The Maoists government has also decided to give academic credentials to all former-rebels who left school to join “people’s war”. One of my friends termed this as “Bachelor of People’s War”. No where in the world (save Nepal) you can find a finance minister who promises a degree to former-rebels based on the number of years they spent fighting against security forces! More here.

Bhattarai further stated that those without academic credentials would also receive the certificates. Why? Apparently because they possess sufficient skillls and knowledge but could not go to school because of financial or other problems.

Put another way, when this degree-for-experience (D4E) plan is carried out, the path to earning a degree will not be the old-fashioned way of studying hard to fulfill the requirements, but of having a political leader vouch that you were in the jungles of Rolpa toting a gun at a time when you should have been at school in Tulsipur.

Assuming that the D4E is not a new rung placed on the career ladder of ambitious young Maoists, it is destined to be a corruption-ridden plan. It won't help anyone in the job market. And there is a better way to teach the former rebels how to fish for themselves.

Saturday, November 29, 2008

Weekend video: Inside North Korea

Interesting video about North Korea and how a Nepali doctor led team reveals what’s going on inside the reclusive country ruled by a tyrant!

Friday, November 28, 2008

Poverty in India

Here is an article about poverty statistics for India. This is based on a revised poverty estimate by Ravallion and Chen.

The article estimates India's poverty according to both the $ 1.25 a day international poverty line and India's national poverty line of $ 1.00 a day (at 2005 PPP) to find that:

42 percent of the population were living below $ 1.25 in 2005 (24 percent below $ 1.00) as compared to 60 percent twenty-five years ago (42 percent below $ 1.00)

the number of people living below $ 1.25 rose from 421 to 456 million during 1981-2005

the number of people living in the 25 cent interval between $ 1.00 and $ 1.25 rose from 124 million to 189 million during 1981-2005

India's overall rate of poverty reduction during 1981-2005 according to both poverty lines was lower than the average for the developing world

India's share of poverty in the developing world outside China fell by just one percent since 1981

India's trend rate of poverty reduction during 1981-2005 according to both poverty lines is not sufficient to achieve MDG1 - particularly in the context of rising food and fuel prices.

Wednesday, November 26, 2008

Poverty in Focus#16: All about creating jobs

Here is a new edition of Poverty in Focus#16: Jobs, Jobs, Jobs- The Policy Challenge. The IPC publishes excellent issues focusing on poverty. This issues is about creating jobs in the developing countries and the increasing role of informal economy in reducing poverty:

Eduardo Zepeda first summarises Mexico ’s recent experience, which includes periods of crisis, of rapid growth and of stagnation. These various episodes make for a good case study of employment with relevant policy lessons for all developing countries.

Marty Chen highlights the links between informality and poverty and presents a policy framework for addressing informality in ways that will help reduce poverty.

Denis Drechsler et al. find informality to be mainly due to insufficient job creation in the formal economy and to warped incentive structures, and discuss what policy makers should do about it.

Rafael Ribas and Ana Flavia Machado study employment and poverty dynamics in Brazil and find that the informal sector has helped people move out of poverty more than the formal sector.

Louise Fox and Melissa Sekkel examine the slow job creation in Africa and draw lessons for countries wanting to realise the aspirations of their growing, mostly urban, nonfarm labour forces.

Aziz Khan analyses the linkages between employment and the relevant MDGs and proposes policy interventions to promote job-intensive growth and public investment.

Terry McKinley advocates structural policies for poverty-reducing employment, as illustrated by an IPC Country Study of South Africa.

James Heintz considers an alternative approach to macroeconomic stability that is more cognizant of the performance of the real economy and includes a coherent employment policy.

Janine Berg and David Kucera revisit the issue of labour market institutions and employment, arguing that policy makers need to take on re-regulation as opposed to de-regulation.

Per RonnĂ¥s looks at labour migration and the case of Moldova , where poverty fell rapidly thanks to the dual impact of remittances and improved domestic job and income opportunities.

Erik Jonasson considers the role of rural non-farm jobs as a pathway out of poverty; investment in infrastructure and education stand out as the foremost policy measures.

Christoph Ernst highlights the importance of youth employment as developing countries struggle with the challenge of offering decent jobs for the large number of young men and women entering the labour market every year.

Joe Stiglitz on the financial crisis

Nice piece about the reasons of the financial mess, which is threatening the global economy into a recession, from Joseph Stigltiz. In short, it’s because of faulty ideology that rests on “self-regulation” of government!

A unique combination of ideology, special-interest pressure, populist politics, bad economics, and sheer incompetence has brought us to our present condition.

Ideology proclaimed that markets were always good and government always bad. While George W. Bush has done as much as he can to ensure that government lives up to that reputation—it is the one area where he has overperformed—the fact is that key problems facing our society cannot be addressed without an effective government, whether it’s maintaining national security or protecting the environment. Our economy rests on public investments in technology, such as the Internet. While Bush’s ideology led him to underestimate the importance of government, it also led him to underestimate the limitations of markets. We learned from the Depression that markets are not self-adjusting—at least, not in a time frame that matters to living people. Today everyone—even the president—accepts the need for macro-economic policy, for government to try to maintain the economy at near-full employment. But in a sleight of hand, free-market economists promoted the idea that, once the economy was restored to full employment, markets would always allocate resources efficiently. The best regulation, in their view, was no regulation at all, and if that didn’t sell, then “self-regulation” was almost as good.

OLPC and freedom

Here is a nice piece about how One Laptop Per Child (OLPC) has failed to live up to its expectations of providing free software. OLPC violates the following freedoms, according to the author:

Freedom 0: The freedom to run the program as you wish. Some proprietary software packages come with licenses that restrict even the use of authorized copies.

Freedom 1: The freedom to study the source code—the algebra-like statements that specify what the program does—and then change it to make the program do what you wish. For instance, you could add new features to suit your taste. Or, if the program has malicious features, as Windows and MacOS do, you could remove them.

Freedom 2: The freedom to redistribute exact copies when you wish. We call this the freedom to help your neighbor.

Freedom 3: The freedom to distribute copies of your modified versions when you wish. We call this the freedom to contribute to your community.

OLPC made a big news when it was initially announced. However, frequent news of shifts in software to increase in prices have been costly to its reputation. Also, there was no such enthusiastic response in terms of demand as it was targeted for a large scale, probably government buying tens of thousands of them. Someone needs to do an evaluation of the effectiveness of OLPC program on children’s education and other aspects. I don’t see that much of a connection between having a laptop and a child increasing his intelligence. Again, crude thought!

Saturday, November 22, 2008

Does improved health necessarily raise economic growth?

Common belief is that improved health leads to increased prosperity, i.e. a healthy labor force and human resource are assets that contribute to economic growth. Sadly, this seems to be not the case according to two papers, which The Economist cites in its latest edition. The main reason: there is no clear causality between health and economic growth. Regardless of the income level of developing countries, the technological breakthroughs in medicine in the West was made possible there by the WHO, thus improving life expectancy. This has nothing to do with income level of individual countries. Moreover, improved life expectancy amidst stagnation in land and capital resources leads to low per capita, technically.

…the conclusions of two recent papers that improving life expectancy at birth (a common indicator of better health) can depress income per head for as long as two generations may come as a shock.

Beginning in the 1940s, several medical innovations involving penicillin, streptomycin and DDT made it easier to treat diseases—such as tuberculosis, malaria and yellow fever—that disproportionately affected people in developing countries. Because these ideas originated in the rich world and were spread by organisations such as the WHO, any improvements in health they led to would have been unconnected with prior improvements in the economic circumstances of poor countries.

This international revolution in public health did lead to substantial increases in life expectancy in poor countries by the 1950s. However, the researchers found that income per head actually declined when life expectancy went up and did not recover for up to an astonishing 60 years.

Researchers at Brown University reached a similar conclusion…increased population would more than wipe out any productivity benefits of better health. For the first 30 years after an increase in life expectancy from 40 to 60, income per person would be lower than it would have been if life expectancy had not improved. I think looking just at the life expectancy does not capture the whole link between health, poverty, and growth. There are some diseases like fever and cough and cold, which are so common in the developing countries, are not life threatening but helpful medication does improve enrollment rates and less absenteeism from work.

I think transfer of subsidized health services by the WHO from the West to the developing countries acts as a technological shock. The papers are reviving the famous Malthusian argument that increased life expectancy (population) will create shortage of resources and dampen prosperity later on because it assumes that land is fixed. However, given the increasingly globalized world and integration of economies (including labor mobility), technological transfer could offset this effect. The conclusion derived from the papers reminds me of Gregory Clark’s book A Farewell to Alms, where he used the Malthusian argument frequently.

Here is the paper by Acemoglu and Johnson: Disease and Development: The Effect of Life Expectancy on Economic Growth

Here is the paper by Ashraf, Lester, and Weil: When Does Improving Health Raise GDP?

So, what are the policy implications? Does the purpose of investing in healthcare be reconsidered?

Capitalism with Chinese Characteristics

Here is an interesting piece about the Chinese economic model. Professor Yasheng Huang challenges the Beijing Consensus (that incremental privatization in rural areas was the key to increased prosperity) and says that rural privatization has actually been rolled back in the past 15 years. TVEs led to helped reduce poverty by 154 million between 1978 and 1988 but after this rural privatization was rolled back by restricting loans to entrepreneurs willing to invest beyond agriculture sector and taxes were raised in the rural areas to fund urbanization. Interesting!

He argued that the reforms in the 1980s were very far reaching and substantial for private sector development, especially in rural areas led by township and village enterprises (TVEs). In the 1990s, however, those reforms slowed, and privatization was rolled-back.

From 1978 to 1988, poverty in rural China declined by 154 million people, while it only declined by 62 million people from 1989 to 1999. Huang argued that the key to the greater success in the 1980s were TVEs, which were a focus of the early reforms of the 1980s. Out of 12 million TVEs existing in 1985, fully 10 million were totally private. Along with an abundance of government loans that were easily accessible to small businesses, this strategy created rapid poverty alleviation.

In the 1990s a fundamental reversal was made in rural policy. First, there was a substantial increase in the qualifications enterprises needed for loans. Second, the government’s loan policy emphasized agricultural production instead of expanding rural entrepreneurship beyond agriculture. Farmers found it difficult to obtain money to start a non-agricultural business. Third, although most Chinese live in rural regions, a new focus was put on developing the urban regions. To pay for these urban reforms, the government heavily taxed rural citizens and reduced services in rural health and education. The result of these policy changes was a reversal that slowed down rural poverty alleviation and sharply increased the gap in urban-rural household income. 

Though Huang made a strong case for widely varying economic policies in China between the 1990s and 1980s, his explanation for the reversal, he admitted, is not based on an exhaustive review of the facts. Nevertheless, he suspects that the reason is technocratic. In the 1980s, the Chinese Communist Party (CCP) was led by individuals who grew up in rural regions, while the leadership of the 1990s came from urban areas. Furthermore, this may explain why today’s CCP leaders, like rural-born Hu Jintao, are refocusing on rural reforms.

Here is his book Capitalism with Chinese Characteristics: Entrepreneurship and the State reviewed by The Economist.

Thursday, November 20, 2008

World Development Report 2009

The World Development Report 2009 is titled Reshaping Economic Geography.The gist of the report: growth is unbalanced but development can be inclusive…to promote long-term growth policies should be designed to facilitate concentration and economic integration, both within and across countries. Overview of the report here. Full text Part 1 and Part 2

The report warns that trying to fight markets just because it is unfavorable to certain sectors and groups is tantamount to fighting prosperity. Let markets do its function and governments facilitate geographic concentration of production. That being said, governments should institute policies that make provision of basic needs- of schools, security, streets, and sanitation- more universal, the report recommends.

Four main points:

  • Economic activity concentrates as places prosper. (Take the fact that the effects of economic growth on concentration of industries and population is uneven. Examples: Tokyo is barely 4% of Japan’s total area but has 35 million people)
  • Living standards converge with development. (Estimates from over 100 living standards surveys show that households in the most prosperous areas of developing countries like Ghana and Indonesia have an average consumption nearly 75 percent higher than that in their lagging areas. In wealthy countries, this difference is less than 25 percent.)
  • Growth requires geographic transformations. (…what matters for economic growth is the ‘thickness’ of economic borders, which depends on the restrictions on the flow of goods, capital, people, and ideas. Borders between countries in Western Europe are now about one-fourth as thick as those in Western Africa.)
  • Prosperity demands mobile people and products. (Korea went from more than 80 percent rural to more than 80 percent urban between 1950 and 1990, as its per capita income grew from present-day Benin’s to more than Portugal’s. The United States, the world’s largest economy, is also among the most mobile, with about 35 million people changing their place of residence every year. In China, more than 150 million people moved to coastal areas during the late 1990s.)

“Lagging and leading places can be brought closer economically by unleashing the market forces of agglomeration, migration and specialization, as we have seen in North America, Western Europe, and East Asia, where intra-industry trade has powered prosperity,” said Justin Lin, World Bank Chief Economist and Senior Vice President, Development Economics. “How well markets and governments work together to harness these forces will determine the wealth of cities, provinces, and nations.”

Trying to spread out economic activity can hinder growth and does little to fight poverty. For rapid, shared growth, governments must promote economic integration which, at its core, is about the mobility of people, products, and ideas.

“In a world where economic concentration is a fact of life, governments should improve land policies, provide basic services everywhere and invest efficiently in infrastructure,” said Katherine Sierra, Vice President, Sustainable Development. “As the WDR shows, incentives intended to attract industry to lagging areas should be used sparingly.”

The WDR reframes the policy debates to include all the instruments of integration—common institutions, connective infrastructure, and targeted interventions. By common institutions, the report means regulations affecting land, labor and commerce, and social services such as education and health financed through taxes and transfers. Infrastructure refers to roads, railways, ports, airports, and communications systems. Interventions include slum clearance programs, special tax incentives to firms, and preferential trade access for poor countries.

This report is related to Nobel laureate Paul Krugman’s work on New Economic Geography and the discussion about increasing returns and transportation costs. I had written an Op-ed about how policies can be designed so that governments can facilitate concentration and agglomeration in the Nepali economy, which has seen massive concentration of industries in few places while leaving other areas at bay. My main policy recommendation in the Op-ed was: invest in transportation and infrastructure and facilitate credits to companies willing to invest in new areas. This report kind of challenges this argument saying that trying to “spread out economic activity can hinder growth and does little to help poverty”. Well, without investing in transportation, domestic integration is not possible in countries like Nepal. And, if money is invested in transportation infrastructure, then lower per unit transportation costs will help spread the concentration of industries. It does not necessarily mean that this will thin out already existing concentration.

In short, the report says: promote concentration and let markets work but also engage in welfare programs so that those unaffected by markets are taken care of. Let growth be unbalanced, but effective policies will make development inclusive. Also, the report flatly states that the world is not flat (on page 8 of extended summary)…I wonder how Thomas Friedman would review this report.

More about the report here and here.

Wednesday, November 19, 2008

Paul Samuelson blasts libertarians

Paul Samuelson argues that there is no alternative to market system but this is not the same thing as unregulated capitalism. Based on his “rationality and experience” he prefers taking a dynamic moving center position, i.e. ideologically, he thinks Limited Centrist State should be the model for the economy. This piece is going to make the libertarians, who he says are emotional cripples and bad advice givers, very unhappy. He blasts Hayek’s “serfdom” concept, which Hayek uses to argue that increasing role of state will lead to serfdom. The book he is referring to is The Road to Serfdom (pretty good book to read).

Based on my observations of economic history, both short run and long run, I believe that there is no satisfactory alternative to market systems as a way of organizing both economically poor and economically rich populations.

However, using markets is not the same thing as unregulated capitalism so beloved by libertarians. Such systems cannot regulate themselves, either micro-economically or macro-economically. Wherever tried they systematically breed intolerable inequalities. And instead of such inequality being the necessary price to encourage dynamic progress via technological and managerial innovations, it instead breeds dysfunctional shortfalls in what economists call "total factor productivity."

…Libertarians are not just bad emotional cripples. They are also bad advice givers. I refer of course to the views of both Milton Friedman and Friedrich Hayek. The “serfdom” they warn against is not that of Genghis Khan or Lenin-Stalin-Mao or Hitler-Mussolini. Rather, they warn against the centrist states of the modern world. Think only of Switzerland, Britain, the US, the Scandinavian countries, and the Pacific Rim. Why do citizenries there report high indexes of “happiness” and enjoy broad freedoms of speech and belief?

…Yes, public policy should regulate (rationally regulate) corporate life and should work to stabilize the macro economy. Yes, future fiscal systems can in a limited degree reduce the more glaring evils of inequality. However, a centrist system can do measurable harm if it acts too strongly to reduce inequality. My goal is the Limited Centrist State.

I am not a centrist because I can’t make up my mind about the Right and the Left. It is because each of those has proved itself to be so non-optimal that rationality and experience move me toward the dynamic moving center.

Five Nobel prize winning economists write about the global economy here. More about Samuelson here and here. Thanks to Professor Farrant for the pointer.

Tuesday, November 18, 2008

Now India wants fiscal stimulus

So, technically the EU, Japan (and the US) are in a recession. The wave of global recession is in continuum right now. The crisis sparked by sup-prime mortgage crisis emanating from the US is getting harder to contain even in the face of rock bottom interest rates. This means monetary policy is getting ineffective. The last resort: call on the government! There has already been stimulus in the US, China, and some form of this sort in the EU. In its World Economic Outlook update for November, the IMF also argued that world output growth will fall to 2.2% and fiscal stimulus is the (only) option as monetary policy is not doing anything good right now. Already, India has lost $57 billion due to the current global crisis.

Now comes India, where businessmen surveyed by the WEF called for a fiscal stimulus package to uplift the quality of infrastructure and to prop up expected downslide in growth rate, which is forecasted to slide to 7% from 9% at present.

…“contra-cyclical fiscal stimulus” through the speeding the implementation of infrastructure projects already in the pipeline would certainly help economic growth to rebound.

More here.

India Economic Summit 2008

Interestingly, some young Indian parliamentarians also argued that India now needs Obamas- not one, not two, but many!

“From our young sportsmen, our young businessmen, our young politicians,” said Rahul Bajaj, Chairman, Bajaj Auto; Member of Parliament, India, hopefully we are going to have more than one Barack Obama!”

New leadership and new ideas are desperately needed to address critical challenges faced by India. First among these, said Deepender Singh Hooda, Member of Parliament, India, is “the resurgence of divisions based on caste, religion and region.” Moreover, Hooda pointed out that, while India has enjoyed strong economic growth overall, certain sectors of society have been left behind and rising inequality is increasing class tension. Bihar is the most equal state in India: as states become more prosperous, they become more unequal. The shift from an agriculturally-based economy to services and manufacturing also increases tensions over issues like land rights.

More here.

Grim growth forecast and call for new policy stimulus

The IMF has again readjusted its global growth forecast due to rising financial sector deleveraging and dwindling producer and consumer confidence. World output growth forecast is scaled down by around 0.75 percentage point to 2.2 percent in 2009 (from 5% in 2007 to 3.75% in 2008 to 2.2% in 2009…this could go even down!). Both the advanced and emerging and developing economies are expected to further slow down. Worse, in advanced economies output is forecast to contract on a full-year basis in 2009, the first such fall in the post-war period, according to the IMF. It warns that the final outcome is highly uncertain and could much more worse than expected.

Rather than relating the magnitude of this crisis to the Great Depression, the World Economic Outlook Update from the IMF states that the current and expected contraction is “broadly comparable” in magnitude to those that occurred in 1975 and 1982.

Who will suffer the most? According to the WEO update, commodity exporters (because commodity price projects have been marked down), countries with acute external financing and liquidity problems.

In the face of worsening financial and economic conditions, markets are pricing in expectations of much higher corporate default rates, as well as higher losses on securities and loans, in part, because pressures have now broadened to emerging markets, raising recapitalization needs. Thus, financial conditions are likely to remain tight for a longer period and to be more impervious to policy measures than previously expected.

It also hints the ineffectiveness of monetary policy as interest rates are already close to zero. What’s next? Keynesianism…and fiscal stimulus!

…However, monetary policy may not be enough because monetary easing may be less effective in the face of difficult financial conditions and deleveraging. Also, in some cases room for further easing is limited as policy rates are already close to zero bound. There are condition where broad-based fiscal stimulus is likely to be warranted. Fiscal stimulus can be effective if it is well targeted, supported by accommodative monetary policy, and implemented in countries that have fiscal space.

In Sub-Saharan Africa output is expected to decrease by 0.6% in 2008 and 1.2% in 2009.

Monday, November 17, 2008

Links of Interest (11/16/08)

Back again!

What happened at the G20 Summit on Saturday? 

Bill Easterly reviews The Bottom Billion (Two criticisms of Paul Collier’s book: (i) correlation does not equal causation…military intervention does not cause reduction in civil wars and poverty level and (ii) selection bias…that Collier cherry-picks troubled nations and timeframe of growth rates to show that they are trapped in low income and low growth state. (Africa left behind by Collier here)

Rethinking the growth diagnostics approach: Questions from the practitioners

The Politics of Hunger: How Illusion and Greed fan the food crisis (Paul Collier says three policies can be helpful in solving the food crisis: expanding large commercial farms, ending the GM-crop ban, and doing away with the U.S. subsidies on ethanol)

The birth of doing business report

Macro policy in a liquidity trap

Buddha boy reappears in Nepal

The IMF in focus

Dr Keynes’s Chinese patient

Saturday, November 8, 2008

Food security: From agricultural to industrial to back to agricultural society!

Food insecurity is one of the main global issues right now and many nations are in danger of facing starving population. Here is a discussion about global food crisis.
Here is Michael Pollan writing a letter to the next President about organic food and its advantages against inorganic food. He argues that for the sake of food security, energy independence, and ecological preservation, it makes perfect sense to look for reverting back to old ways of agriculture: from the agricultural to the industrial society, and back to the same society, but with a slight variation! This is an excellent article (pretty long, but worth reading) about how the American food subsidies, increasing use of oil and petroleum products in agriculture, and the general eating habit (of consumers eating products made from a limited number of crops) is leading to food insecurity, national security problems, ecological disaster, and energy crisis. Time to change habits!

The sun-food agenda must include programs to train a new generation of farmers and then help put them on the land. The average American farmer today is 55 years old; we shouldn't expect these farmers to embrace the sort of complex ecological approach to agriculture that is called for. Our focus should be on teaching ecological farming systems to students entering land-grant colleges today. For decades now, it has been federal policy to shrink the number of farmers in America by promoting capital-intensive monoculture and consolidation. As a society, we devalued farming as an occupation and encouraged the best students to leave the farm for "better" jobs in the city. We emptied America's rural counties in order to supply workers to urban factories. To put it bluntly, we now need to reverse course. We need more highly skilled small farmers in more places all across America - not as a matter of nostalgia for the agrarian past but as a matter of national security. For nations that lose the ability to substantially feed themselves will find themselves as gravely compromised in their international dealings as nations that depend on foreign sources of oil presently do. But while there are alternatives to oil, there are no alternatives to food.

...To change our children's food culture, we'll need to plant gardens in every primary school, build fully equipped kitchens, train a new generation of lunchroom ladies (and gentlemen) who can once again cook and teach cooking to children. We should introduce a School Lunch Corps program that forgives federal student loans to culinary-school graduates in exchange for two years of service in the public-school lunch program. And we should immediately increase school-lunch spending per pupil by $1 a day - the minimum amount food-service experts believe it will take to underwrite a shift from fast food in the cafeteria to real food freshly prepared.

...Oil is one of the most important ingredients in our food, and people ought to know just how much of it they're eating. The government should also throw its support behind putting a second bar code on all food products that, when scanned either in the store or at home (or with a cellphone), brings up on a screen the whole story and pictures of how that product was produced: in the case of crops, images of the farm and lists of agrochemicals used in its production; in the case of meat and dairy, descriptions of the animals' diet and drug regimen, as well as live video feeds of the CAFO where they live and, yes, the slaughterhouse where they die. The very length and complexity of the modern food chain breeds a culture of ignorance and indifference among eaters. Shortening the food chain is one way to create more conscious consumers, but deploying technology to pierce the veil is another.

...Your sun-food agenda promises to win support across the aisle. It builds on America's agrarian past, but turns it toward a more sustainable, sophisticated future. It honors the work of American farmers and enlists them in three of the 21st century's most urgent errands: to move into the post-oil era, to improve the health of the American people and to mitigate climate change. Indeed, it enlists all of us in this great cause by turning food consumers into part-time producers, reconnecting the American people with the American land and demonstrating that we need not choose between the welfare of our families and the health of the environment - that eating less oil and more sunlight will redound to the benefit of both.

Highly recommended for those seeking an in-depth analysis of the food crisis and where's it leading us! Worth seeing the video as well. Thanks to my friend Eric Dichter for the pointer!

Monday, November 3, 2008

African Cheetahs ≠ Asian Tigers

Here is a short article from the IPC about why one should not rejoice the impressive growth rates in sub-Saharan Africa (SSA) as the growth rate (4.4% between 2000 and 2007 for the whole SSA and five countries had 7% growth rate) and  is based largely on commodity exports, not on the contribution of manufacturing sectors. The author concludes with a nice sentences: Cheetahs (high- and medium-growth economies in SSA) run fast, but no for long. Learning the lessons of history may lead them to the Tiger’s (Asian Tigers) trail.

The manufacturing value added (MVA) matters for stable growth and development, which has not been seen in Africa because MVA is pretty low; the Asian Tigers had four times higher MVA than the share of high-and medium-growth economies of SSA. Manufacturing’s share of total merchandise exports is just 1.7% in high-growth economies and 9.7% in medium-growth economies in SSA, as opposed to 83% in the Asian Tigers. The Cheetahs of SSA are Botswana, Cape Verde, Mauritius, Angola, Chad, Equatorial Guinea, Sierra Leone, and Sudan.

The author argues that though high-growth performances are encouraging, there is little sign of expansion in manufacturing activities among the “Cheetahs” in SSA. This means that countries that are relying on commodity exports (especially oil and diamonds) will have to face a low income elasticity of demand, leading to unexpected impact on growth performance due to price volatility of commodity exports; in other words, the growth rate is not reliable unless it is underpinned by increasing MVA.

Why manufacturing? It is well established that the sector is superior in productivity increases, economies of scale and spurring all-round linkages. The sector also demands and absorbs a mix of high- and low-skilled labour. This is what distinguishes the Tigers from the Cheetahs. The former reaped the benefits of industrial policy. For instance, the Tigers managed allocations of credit and coordinated its flow to the manufacturing sector. They relied more on the provision of credit-based than on equity-based financing. Manufacturers in South Korea were subsidised by as much as 75 per cent when obtaining credit.