Thursday, August 21, 2008

A tour of Millennium Villages Project

Here is a nice narration of Millennium Villages Project, spearheaded by Jeffrey Sachs. Sachs' experiment-based grand plan is to pump in money, both from IFIs and private donors, to eradicate extreme poverty by 2015. The success of the project depends on a lot of factors. The reporter sums it up pretty nicely:

Along with the UN Development Program, the Marshall Plan, and USAID, Sachs's project is one of the broadest and most ambitious human experiments ever launched. In some places it may well be of lasting importance. In others, it could fail utterly. It's all a matter of luck, politics, and hard work. Sachs is an expert on the last.

Here is how Sachs wants to scale the program up:

Pull one village up out of poverty, and then, as Sachs says all the time, you can "scale up" to more villages and, eventually, a whole country and perhaps, in time, a continent.

..There are essentially two dueling models of development in the aid community today. Sachs's idea is that with large infusions of money, villages will develop the means to link their own markets with larger, more globally connected markets in urban centers, leading to greater prosperity and at the same time allowing them eventually to assume the costs of the Millennium program innovations. In theory, local governments, having seen the advantages that the project brings, will also step in to help out—with improved programs, continuing financial support, and infrastructure maintenance. Meanwhile, Sachs and many other development experts believe that only huge donations of aid can help the desperately poor.

On the Russian mess:

"The reason shock therapy—as they call it—didn't work in Russia," he says, "was because the policies were not really carried out. People who criticize my work in these places don't read the data. They don't look at data because they are not interested and because, I am convinced, they can't read it. Whereas I live on data. I love data."

Indeed, some academics blame the failure of shock therapy in Russia on Sachs's reliance on statistics at the expense of sociology and politics. One well-known specialist on Russia, Stephen F. Cohen, then at Princeton, recalls plunking himself down next to Sachs on a plane headed for Moscow when Sachs was working with the Russian government. When Cohen asked him what he was reading about Russian history and current affairs, Sachs reportedly looked at him blankly and announced that economists did not need that kind of background, because, since the laws of economics were universal, data and statistics could tell them all they had to know.

Poverty-induced ignorance:

When Sachs gets up to speak ("President Jeff Sex," Toya's mayor announces), he has to explain the project to his listeners; a Malian translates the speech into Bambara, the nation's lingua franca. "I bring many partners who are interested in Toya," Sachs tells the silent crowd. "A movie star—you can see him on television, his name is Matt Damon." Around him the faces are blank. "The Secretary-General of the UN sends his good wishes." More blank faces: Damon and Ban Ki-moon, equally unknown quantities here. "And many international businesses want to help you," Sachs tells them. "A company called Sony, which makes computers, wants to give them to you." But what do they know of Sony or computers? He tells the crowd that there are "many exciting things we'll do together in the coming years." Among these he includes introducing new seed varieties, better irrigation, veterinary health care, fishing, a new ambulance, computers for the school, and even the development of tourism as a source of revenue. These are things the people understand better.

The long article is very descriptive. Nothing especially new stuff though!

Links of Interest

The selfish hegemon must offer a New Deal on trade (by Jagdish Bhagwati)

...First, as with Japan in the 1930s, when one-dollar blouses flooded the world, India and China today are growing and exporting rapidly. They are like Gullivers in a Lilliputian world economy. They create tsunamis for specific industries where their exports concentrate.

Second, competition has intensified. As exemplified by the Boeing-Airbus saga, the margins of competitive advantage have shrunk. No chief executive or any of his workers in tradable industries leads a happy life any more as there is always someone, from somewhere, breathing down his neck. I call this new phenomenon “kaleidoscopic comparative advantage”. It leads to volatility of jobs, as you have an advantage today and can lose it tomorrow.

Third, labour-saving technical change continuously threatens assembly-line jobs for the unskilled. The assembly lines continue but increasingly do not have workers on them; they are managed from a glass cage by skilled operators whose jobs increase instead.

The agenda for institutional change has to address this fragility of jobs, enabling unskilled and skilled workers to face the new uncertainties. To illustrate: higher education will have to be recast to reduce the proportion of time spent on specialisation: this would enable an easier response to shifting skill requirements as the kaleidoscope turns. Unskilled workers will have to be helped and encouraged to acquire skills and therefore increase their ability to shift to other jobs, even as they continue to work.

Emerging markets must shift their focus in wards (by Raghuram Rajan)

...Yet years of strong growth and cutbacks in public investment, which have restored economic health to emerging markets, have also eaten up excess capacity. Any increase in domestic demand, if it is not to result in bottlenecks and even higher inflation, will have to be accompanied by a shift in production from an external focus to an internal focus. This means that emerging market currencies will have to appreciate, and the weight of output will shift from traded goods such as T-shirts and electronics to non-traded goods such as real estate and health services over the next few years.

...Labour markets will have to be more flexible, while product markets will have to be deregulated far more if profitable productive growth is sought in the non-traded goods sector. With more expenditure flowing to assets such as housing, the financial sector will have to be careful not to precipitate booms and busts, and this will mean more reform as well as better supervision. Finally, governments will have to meet the greater demand for public investment without eroding fiscal discipline, maintaining greater caution as the cushion of large foreign exchange reserves diminishes and increases their vulnerability.

Africa's food crisis the handiwork of IMF, World Bank (virtually everything under the sun that goes wrong in Africa now is being traced back to IFIs!...a very cheap shot!)

At the time of decolonisation in the 1960s, Africa was not just self-sufficient in food but was actually a net food exporter. Its exports averaged 1.3 million tonnes a year between 1966-70. But today, the continent imports 25 per cent of its food, with almost every country being a net food importer. Hunger and famine have become recurrent phenomena, with the last three years alone seeing food emergencies break out in the Horn of Africa, the Sahel, Southern Africa, and Central Africa.

...Instead of triggering a virtuous spiral of growth and prosperity, structural adjustment saddled Africa with low investment, increased unemployment, reduced social spending, reduced consumption, and low output, all combining to create a vicious cycle of stagnation and decline.

Lifting price controls on fertilizers while simultaneously cutting back on loans to farmers simply led to reduced applications, lower yields, and lower investment. One would have expected anyone to see this.
Moreover, the expected results of the withdrawal of the state in the hope that private sector would develop agriculture did not materialise. Instead, the private sector believed that reducing state expenditures created more risk and failed to step into the breach.

Zimbabwe inflation tops 11 mln pct as talks drag (the Zimbabwean economy has seen prices going out of bound...very unruly price whose cause can be traced back to Mugabe's dirty rule!)

...The Central Statistical Office said year-on-year inflation in June jumped to 11.27 million percent -- the highest current inflation rate in the world -- from 2.2 million in May. That would mean prices double about every three weeks. Many economists believe the real figure is higher still.

The central bank re-denominated the Zimbabwean dollar currency on July 30 by slashing off 10 zeros but this has had no effect on stemming the devaluation of the currency. It trades at Z$100 to the greenback, or Z$1 trillion in the old currency.