Links of Interest

All you have to know about the Obamanomics

(this is so true and pragmatic)

So what we need to bring about is the end of the era of unresponsive and inefficient government and short-term thinking in government, so that the government is laying the groundwork, the framework, the foundation for the market to operate effectively and for every single individual to be able to be connected with that market and to succeed in that market. And it’s now a global marketplace.

Who is a Southasian?

The Maobaadi prime minister (Interview with Prachanda, the former rebel leader turned prime minister of Nepal)

Available options to Maoists-led government: Binding constraints to growth

Widening access to growth opportunities is possible when support policies are designed for facilitating the priority sectors. Hydropower, for example, is one of Nepal's top priority sectors to expand opportunities for growth. Even in a 1 MW construction site, fairly good employment opportunities can be created to displaced and landless populations. About 500 to 1000 people are normally needed per site in such a labor-intensive infrastructure projects. 

Opportunities can also be created in tourism sector.  It is the second largest sector after agriculture, which employs about 600,000 people with the estimation of generating US $205 million during 2007/08. Tourism can offer growth opportunity provided that serious efforts are made to increase its competitiveness in price index, human tourism, infrastructure, environment, technology, human resources, openness and social index. 

The other areas for widening the growth opportunities include data processing; software development and computer consultancy services; generation and transmission of electricity; manufacture of paper and paper products; manufacture of motorcycles and scooters and parts thereof; and establishment and management of educational and health institutions.   

Manmohan Singh's vision

Power and Roads for Africa: What the United States Can Do

Charles's fantasy farming won't feed Africa's poor (Paul Collier argues for genetic modification of crops to tackle global hunger; organic peasantry will not be enough)

...Organic peasant agriculture is a solution for the angst of affluence, but not hunger. Its apotheosis is the ban on GM crops.

...The GM ban has three adverse effects. It has retarded productivity in European agriculture; grain production could be increased by about 15% were the ban lifted. More subtly, because Europe is out of the market for GM technology, the pace of research has slowed. GM research takes a long time to come to fruition, and its core benefit - the permanent reduction of global food prices - cannot fully be captured through patents. European governments should be funding this research, but it is entirely reliant on the private sector. Private money for research depends on the prospect of sales, so the ban has not only blocked public research - it has reduced private research.

However, the worst consequence of the European ban is that it has terrified African governments - with the exception of South Africa - into banning genetic modification. They fear that growing modified crops would shut them out of European markets. Because Africa banned GM, there was no market for discoveries pertinent to the crops that Africa grows, and so no research. In turn, this has led to the critique that GM is irrelevant for Africa.

Africa cannot afford the GM ban. Its cities, fed by imports, need global prices to be low. Without cheap food the children of the urban poor will be malnourished. Africa's farmers, broadly self-sufficient, need higher productivity. Productivity per acre has stagnated, so rising production has depended on expanding the area under cultivation. But with population growth this option is running out.

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.

 

Times up for garment industry

That's the title of my latest Op-Ed published in The Kathmandu Post. This piece's main point: don't foster ailing industries by seeking preferential treatment in the international market. In Nepal's case, it is the garment and textile industry, which once was the largest foreign currency earning exportable commodity. Now, it has lost almost 80% of jobs and 98% of firms. Why? Because of its inability to withstand competition in the international market, especially after the end of Multi-Fiber Agreement (MFA) in 2005. Interestingly, for Nepal, the year 2005 can also be labeled as 'the Great Garment Depression of 2005'.I favor market competition, which probably is the best way to induce incentives among individuals and firms.

In light of these widely known reasons but scarcely mentioned by the bureaucrats, a new high level delegation, composed of Commerce Secretary and FNCCI and GAN members, is heading to the United States to lobby for preferential treatment of or duty free access to Nepali garments in the US market, which is the largest importer of readymade garments made in Nepal. What surprises me the most is the fact that our leaders and garment sector entrepreneurs have not yet realized the value of competition and the stark truth that the Nepali garment sector cannot simply compete with the big producers, who continue to take an advantage of agglomeration economies, from Cambodia, China, India, Vietnam, and Mexico, at least not in the current situation.

Instead of rectifying defective economic policies considering the changed circumstances in the market brought about by globalization, the bureaucrats are too bogged down and intent on getting the preferential treatment in the US market. It shows how misguided our economic priorities are and how ignorant and unyielding our policymakers are to change the course of economic policy for good.

The prevailing illusionary notion among the policy-makers and garment sector entrepreneurs -- who are already battered hard by the depression in the garment sector -- is that the industry can recoup lost jobs and revenues if they are able to secure special treatment in the US market.

However, what is hard to swallow is the fact that no such recouping would occur and greater revenue generation would just be a dream, unless a miracle happens in favor of Nepali products in the international market. After the end of the MFA, Nepal already has lost market pie to big producers from China, India, Cambodia, and Vietnam, among others.

Read the full Op-Ed here. Here is a previous post about carpet industry, preferential treatment, and poverty reduction (in reality, it is a modern day myth!). Related to this post is this news piece about "carpet exports roll down by 14%" this fiscal year.

Also, this time there is a pic of mine with my Op-Ed. Below is an embedded link of how the Op-Ed page looks like on the actual print version (what could be a better way to advertise myself than this! How much of rationality and selfishness is in question here?)

Links of Interest

Poverty in Focus: Cash Transfers : Lessons from Africa and Latin America (good edition on all you need to know about CCTs, its effectiveness, complicated issues related to exit strategies, and challenges.

Are Matlhus's Predicted 1798 Food Shortage Coming True? (Jeffrey Sachs says we still don't know for sure).

Ethiopia's new famine: 'A ticking time bomb' (Ethiopia faces a 'toxic cocktail': drought, global inflation, armed conflict and assorted plagues).

Economic costs of cheating on a spouse differ for men and women 

(Hmm... this is interesting: Men are 7 percent more likely to cheat than women)

According to lead author Bruce Elmslie, professor of economics at the UNH Whittemore School of Business and Economics and co-author Edinaldo Tebaldi, assistant professor of economics at Bryant University, the behaviour of men and women toward infidelity differs substantially, as men and women respond differently to the perceived costs and benefits of an affair.

For women, biological and socio-economic factors like men who are good candidates to father a child and who have the education and financial stability to provide for a family are significant factors women consider when deciding to have an affair. These factors do not come into play for men who, overall, are 7 percent more likely to cheat than women.

The likelihood of a man having had an affair increases with age and reaches a peak when a man is about 55 years old. It then decreases with age. For women, the peak is 45 years old, which the authors say is logical when considering the biological reasons why women cheat.

Globalization and health: Importing Competition

Carpets, duty free treatment, and poverty reduction-- a modern day myth!

Here is call for duty-free treatment of carpet made in Nepal for the sake of poverty reduction. Again, a call for inefficiency!

Nepal needs duty-free treatment of carpets and shirts in India, China, Europe and the US.

It should be noted that almost 98% of the garment and textile firms have gone out of business, especially after the end of MFA in 2005. And, over 80% of the jobs are already lost. Why? Because Nepali exporters never learnt how competition works and were always smug with duty free access in the West. Neither the government nor the entrepreneurs looked into enhancing our industry's capacity, competitiveness,quality, and market access. After all quota restrictions were phased out in 2005, big producers, who enjoy large agglomeration economies and offer cheaper products of the same quality, from China, India, Cambodia, and Vietnam took over the Nepali market pie in the West.

Given this reality, why would Nepal still need duty-free treatment in the West? Nepal is not going to recoup the market pie already lost the its international competitors. Also, the dream of poverty reduction through duty-free treatment is just a myth because already over 80% of the workers are out of jobs! The developing countries like Nepal were already given ample time to enhance their competitiveness in this sector; the first phase out began in 1995 and since then it is more than a decade-- ten years is a lot of time to enhance competitiveness of this sector by increasing investment in capital, quality, marketing, labor skills, etc. No such step was taken, hence this sorry fate! No regrets!

Forget about aiding this sector. It is high time Nepal prioritized other sectors like tourism and hydropower.

Women may be uneducated but not ignorant!

What a nice sentence:

Women may be uneducated but apparently they are not ignorant.

Short and sweet sentence that speaks volumes against the argument that state provision of reservation/allocation of a certain percentage of seats, be it in the parliament or jobs in government agencies, to women is not good in terms of potentiality and efficacy. True in an ideal, perfect job market but not in a semi-market where there is a nexus or series of male dominance in almost all level and structure of political, economic, and social sphere. If we acknowledge that women empowerment has positive effect on the major indicators of development, then we should not hesitate to make decisions considering history, where women were never allowed to rise above the social ladder, irrespective of their qualifications, and were always kept under male dominance.

The trend of male dominance should be broken and it has to be done in such a way that women are given equal footing right from the beginning of reform process. This might also mean that incompetent women may land in positions they are not supposed to be if we consider merit. However market unfriendly it might seem, we have to realize that imperfect markets should not flourish on top of deep social discrimination against women.

If reforms related to representation, which should have a clear cut sunset clause, can temporarily overstep the logic of merit in the job market, and in the long run could lead to a more optimal solution than the existing sub-optimal one, then it is perfectly rational to implement that reform. Read my commentary on the economics of reservation published in January 2008 here (alternative like  here). I support temporary reservation of government jobs and parliament seats to the marginalized groups, including women. The government of Nepal had recently made a provision to allocate 33 percent of jobs in government agencies and in the parliament for these marginalized groups.

Here is a nice article about mainstreaming women.

...The CA holds approximately 33 percent women. Though it fails to fulfill righteous 50 percent—women consist of half of the population—it is still the giant stride from previous six percent women in the last elected parliament. Increasing number of women in politics is an encouraging sign but the question of their potentiality remains crucial, their voices might vanish into the shrill voices of males.

...When the women like tailors, domestic help were nominated as CA members, the media started publishing nonsense. They swept the ethic by blatantly portraying women as banal. News came with loathsome tendency: CA member while sewing cloths, or while washing others utensil. The intention behind this news was, look what has become of our country? Those low profile women have risen. What would those uneducated morons do? 

We cannot or must not undermine efficacy of women saying they are uneducated. Of course, they do not know many things but they can raise a voice for grass root level. They will give points that can be coded as law by the expert CA members. Women may be uneducated but apparently they are not ignorant.