Category: development

If you are reading this, you are not in the top 1%

Slate has an amazing series on economic inequality in America – The United States of Inequality.  Beyond the interesting and clear examination of economic stratification in the United States over time, the reporting has a few visuals that are absolutely stunning demonstrations of the importance of economic policy on income equality/inequality.  Some may call it social engineering or wealth redistribution.  It most certainly is the latter, and could be the former – if one assumes that poor people in fact like seeing rich people’s incomes grow faster than their own, and would not want to change that circumstance.  And please, please don’t throw trickle down arguments at me – they have been empirically refuted repeatedly since the 70s.  How long does a failed theory get in the face of empirics, anyway?
An example of what I am talking about is this graphic (found here):

I first saw a version of this in a talk by Dick Peet – though I believe he was operating with the top 1% (see below).  My household actually fits into the decile in this figure, according to how they have defined it.  We arrived relatively recently.  As happy as I am to be here, I am not sure that I need any more tax cuts.  Even with three kids, massive daycare bills, etc.  At some point, we just have to pay for stuff like roads, schools and fire departments, and giving me a tax cut is not going to really stimulate the economy – I’m going to save the money for my kid’s college funds.
This figure is stunning (found here)

The top 1% of earners in America earned roughly 8% of all income in the US around when I was born.  Today, they earn 18%.  Where, exactly, is the justification for further tax cuts for this section of the population – their share of total income grew dramatically under Clinton, which is where the tax rate will return to if the Bush cuts expire . . . so how exactly can anyone argue that a return to slightly higher taxes (still very low by historical standards) for the top 1% will hurt even the top 1%, let alone the whole economy?
Why am I writing about this on a blog about development and the environment?  One of the big indicators of development is the GINI coefficient, which measures the distribution of incomes in an economy.  We tend to worry about countries with high or rising GINI coefficients, as it suggests that economic opportunity and development are not reaching a wide portion of the population.  This is even more acute in my current job, where we are tasked with worrying about the situations of the most poor and vulnerable.  Yet here we are in the US, with a clearly rising GINI coefficient. Sustainablemiddleclass.com has an interesting graphic on this:

We are headed in the wrong direction here, even as we chide countries on the same path.  Robs us of our standing to make this argument elsewhere, no?

Posted on by Ed 6

Nobody is paying attention, it seems . . .

The BBC has a remarkably feel-good story about Angola’s newly-refurbished Luanda-Malange train route.  While I love positive stories about Africa in any media – if for no other reason than to offset the over-reporting on conflict and poverty – this story completely  misses the important point here.  This line was refurbished through Chinese financing . . . despite the fact Angola cannot really pay the bill.  The story intimates that China was somehow surprised or dismayed at the non-payment, and held up the opening of the line until they were paid.  Really?  Anyone who has been paying attention to the growing Chinese presence in sub-Saharan Africa will find this storyline borderline hilarious.  The Chinese simply don’t care all that much about getting paid now.  Their interest is in the rich agricultural areas around Malange, and securing reliable transportation routes in and out to enable the movement of agricultural goods from this area to future Chinese markets.  In other words, they will get theirs later – this is an investment, not a repayable loan.  The new scramble for Africa has been on for nearly a decade, but nobody seems to be paying attention except the rank-and-file Africans, who grow more leery of this sort of thing all the time.  At what point will the US or another power step in to try to counterbalance the massive growth of Chinese influence in Africa?

Posted on by Ed 9

More on food prices, shortages, and riots

Sorry for the lack of posts, folks. I’m in orientation for the new position, which just swallows whole days – useful, but a bit exhausting.
So, a quick post following up on my previous comments about food prices. The Guardian has a good piece on this issue at http://www.guardian.co.uk/commentisfree/2010/sep/05/mozambique-food-riots-patel
This piece is much better than reporting from US sources, but it does have a significant flaw driven by the political goal of the author – highlighting the failures of economic/development policy and practice, and how this led to our current situation. While I agree that these are major issues, I am concerned with the way the author downplays the fact that there has been simmering discontent with the government in Mozambique for some time. The riots are locally-specific: tied to food markets, development policy and other geopolitical processes, but crystallized into action through a local lens. This is why we have riots in some places, but not others. It’s just too hard to generalize . . . and we don’t learn much when we do, I fear.

Posted on by Ed 0

The new job looms . . .

and I know it, because news stories like this one about the flooding in Niger hit me a completely different way now – previously, I would have thought about how this could be teachable, and even how it might relate to some research ideas . . . now, I recall interviews from April with people in my new Bureau at USAID where we discussed the looming food crisis in Niger.  In mid-September, this won’t be a teachable moment – this will be a fire drill for which I have some degree of responsibility.  Sobering.
Incidentally, this is another example of the challenges that face those of us working at the intersection of environment and development.  The long-term (last four-five decades) signal for precipitation is in steady decline.  It is hard to say if this is a visible outcome of climate change, mostly because we have a lot of trouble understanding the mechanics of the West African climate (for those so inclined, there are some issues with the teleconnections from ENSO and the influence of the NAO).

Dunkwa (Ghana) weather station precipitation figures 1963-2000 (source: Ghana Meteorological Service)

This figure (from my upcoming book) illustrates the real problem, though – the long-term decline is clear at this weather station (the closest one to my research area that is not parked right on the beach), but more striking is the variability around the centerline.  While this station is not showing any real trend toward greater variability, many other places in West Africa are – hence the massive, surprising flooding we are seeing in Niger, despite a long-term trend toward less precipitation in the region.  People forget that there are two key variables that shape precipitation outcomes – amount and timing.
This is probably the hardest part of the job – thinking about how to plan for increasing unpredictability and variability.  Trends are easy, assuming their mechanics are understood and therefore somewhat predictable.  If I know there will be 10% less rainfall in a particular place by a particular year, I can go about figuring out what the biophysical, economic and social impacts of that change might be.  However, it is a hell of a lot harder to plan for 10% more variability by a given year (assuming we could even quantify rising variability in such a manner).  Well, if it was easy, it wouldn’t be interesting . . . and someone else would have solved it already.

Posted on by Ed 0

The soft bigotry of low expectations, development-style

PRI’s The World ran a story today about the boom in renewable energy in the developing world.  The story itself is fine – but I’m tired of reading stories that hang their angle on how amazing/interesting it is that the global poor can be so innovative, and so capable to taking up new technologies – this angle is misguided and condescending, and does a lot to keep us trapped in the development echo chamber that tells us how the global poor would be lost without our help.
The World, like all media, has to draw the reader/listener in with unusual and topical stories.  But this story is not all that unusual – it runs parallel to the explosive growth of mobile phones in the developing world.  When I first started working in Ghana, back in 1997, barely anyone had cell phones.  Landlines were also rare, and nearly impossible to get because the switchboards in places like Cape Coast were maxed out – basically, you had to wait for someone to move or die, which would free up a land line.  The waits for land lines ranged into years.  I could make outbound calls from the Ghana Telecom building in Cape Coast, but I had no means of receiving phone calls.  When I went out to a village to do fieldwork, I effectively disappeared – there was no means of reaching me except word-of-mouth messages passed by people going to and from the village on various errands (though that method was surprisingly effective – I could get a message in well under a day in that manner).
Fast forward to 2004 -when I arrived in Ghana, I borrowed a cell phone from a colleague of mine at the University of Ghana, went out and bought a SIM and some minutes for around $15, and had a phone number within a few hours of touching down in the country.  People could call me, and I could call out, nearly all the time.  Coverage did not extend into the villages in which I was working, but if I climbed a very tall hill behind my house, I could get a wobbly signal.  In 2005, the signal was much stronger.  Since 2006, it has been possible to make and receive calls from the village itself, without having to climb the hill.  And people have adopted the phone as these advances have taken place, to the extent that while these villages do not have electrical service, I have heard a farmer take a call on a mobile phone in his field (the phones are charged on car batteries).
Why the rapid advances in mobile phone technology?  People wanted the service (badly), but the dominant technology of the late 1990s (land lines) was too expensive to extend to everyone who wanted it.  Mobile phones filled the gap . . . and now we see all kinds of innovation in mobile technology starting to emerge from Africa – such as the unique talent pool of low-bandwidth phone app programmers in Kenya.
Given all of this, I am forced to ask why anyone would find the adoption of alternative energy sources by those living in the developing world surprising.  People want and need power, but the infrastructure to bring it to them is very expensive.  Dominase and Ponkrum, the two villages in which I have focused much of my research in Ghana, are less than five kilometers from huge high tension lines carrying electricity from the Akosombo Dam to coastal cities like Takoradi to the West.  Yet they have no electricity themselves, and little hope of seeing the grid extended to them any time soon.  As the story notes:

“One reason why renewable energy is expanding is because of the inadequacy of the power supply in much of the world. Conventional power grids simply don’t reach many people. And when the price of oil goes up, people who use diesel generators start searching for other ways to get power.”

I agree that situations like this one drive innovation (the villagers can run almost anything off of a car battery), but the emergence of alternative energy as one set of innovations is therefore completely unsurprising.
The real story here, as I see it, is the rate of change.  What we are seeing is a remarkable rate of innovation in the developing world around emerging technologies.  Further, this is not all the result of development projects, education, or other capacity-building efforts supplied by advanced economies.  Instead, such as in the case of the Kenyan programmers, these innovations are local phenomenon that illustrate just how capable the people living in the Global South really are.
Perhaps we need to stop writing stories that express surprise and interest in the emergence of new technologies among the global poor, and refocus to carefully explore why some technologies emerge and others do not.  Any time we see a useful, innovative technology hit the Global South without making a major impact, or without people picking it up, we need to explore what is preventing this sort of innovation and impact.  The only reason we don’t, I fear, is because we assume that the global poor are generally incapable of such innovation without outside help.  This is a bad assumption that empowers development projects that are probably not needed or misguided – efforts that could be better spent identifying and removing the barriers to adoption so that these local innovations can flourish.

Posted on by Ed 1

Asbestos and the value of a human life

UPDATED 7-28

PRI ran a story on the global asbestos trade that is worth the read – it is a story that runs parallel to that of DDT, long-banned in the US, but still in common use elsewhere.  The DDT issue is quite contentious today, as there are many who argue that removing it from use would do more harm than good, as the number of people impacted by a rise in the mosquito population might be greater than the number of people impacted by contact with DDT.  What I find interesting about this argument, though, is that practically nobody who makes that argument suggests we should start spraying it here in the US again.  This logical inconsistency, I think, has its roots in the differential valuation of human life that operates under a lot of economic assessments of development policy.

The article on asbestos hints at this logic when it quotes John Hoskins, a scientist with The Crysotile Institute (a pro-asbestos organization).  Hoskins

believes that the health dangers are negligible. In fact, he told the CPI that “the people who would like to ban chrysotile asbestos are actually committing economic damage” especially to people in the developing world.

In other words, the cost of other insulators is so much higher that it offsets the cost in human health and mortality incurred by its use.  This, implicitly, raises the question of what a human life is worth – and implicitly suggests that we can ascribe an economic value to that life.  Of course, we do this all the time here in the US – courts routinely decide how much money to award those who have lost loved ones through negligence or other acts, in part making an assessment of what the lost life was worth.  However, when we start talking about using materials in the developing world that we would not dream of using here in the US (i.e. asbestos and DDT), we are implicitly suggesting that human lives here have greater value – for under the logic that not using these products in the developing world is more costly than using them and paying the human cost, if we are not using them here it must mean that the human cost is higher here, thus making these products unacceptable.  Suddenly, we have an economic argument for valuing the lives of the global poor less than our own . . . and we have done so in a manner that seems apolitical and logical.
Larry Summers laid this logic bare back when he was working as the Chief Economist at the World Bank.  In 1991 he wrote (or one of his staff wrote, depending on who you believe) a memo about the location of polluting industries and the value of human life.  It is worth quoting at length:

DATE: December 12, 1991
TO: Distribution
FR: Lawrence H. Summers
Subject: GEP

‘Dirty’ Industries: Just between you and me, shouldn’t the World Bank be encouraging MORE migration of the dirty industries to the LDCs [Least Developed Countries]? I can think of three reasons:

1) The measurements of the costs of health impairing pollution depends on the foregone earnings from increased morbidity and mortality. From this point of view a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.

2) The costs of pollution are likely to be non-linear as the initial increments of pollution probably have very low cost. I’ve always thought that under-populated countries in Africa are vastly UNDER-polluted, their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City. Only the lamentable facts that so much pollution is generated by non-tradable industries (transport, electrical generation) and that the unit transport costs of solid waste are so high prevent world welfare enhancing trade in air pollution and waste.

3) The demand for a clean environment for aesthetic and health reasons is likely to have very high income elasticity. The concern over an agent that causes a one in a million change in the odds of prostrate[sic] cancer is obviously going to be much higher in a country where people survive to get prostrate[sic] cancer than in a country where under 5 mortality is 200 per thousand. Also, much of the concern over industrial atmosphere discharge is about visibility impairing particulates. These discharges may have very little direct health impact. Clearly trade in goods that embody aesthetic pollution concerns could be welfare enhancing. While production is mobile the consumption of pretty air is a non-tradable.

The problem with the arguments against all of these proposals for more pollution in LDCs (intrinsic rights to certain goods, moral reasons, social concerns, lack of adequate markets, etc.) could be turned around and used more or less effectively against every Bank proposal for liberalization.

Now, this memo has been the subject of a lot of controversy, with some arguing that Summers was effectively a sociopath masking his tendencies in the language of economics.  And on first read, way back when I was in grad school, I had a similar thought.  However, many years down the road, and having seen Summers intentionally provoke controversy time and again (such that he managed to get sacked from Harvard), I have little doubt that Summers wrote (or signed) this with any other intent than to provoke the economists at the Bank who were making less obvious, but equally egregious, assessments of the impacts of structural adjustment.  I mean, honestly, do you really think a man like Summers would ever have WRITTEN THIS DOWN if he meant it?  It screams “leak me!”  He’s not that dumb – he wanted to provoke, and he might have wanted the leak so as to publicly embarrass some of these economists.  Sadly, most people seem to have missed the point.
Salient to this post – Summers is making the same argument about pollution and development, via sarcasm, that I am making about asbestos (and DDT).  If someone is going to suggest that people elsewhere should “be allowed” to use materials that we have banned here for reasons of public health, then they should also have to address the implicit valuation of human life that makes such a political statement appear “logical” and apolitical.
Now to see if the folks at Environmental Economics let me have it over this . . . they are, after all, real economists.
UPDATE: They did not let me have it – and I am almost disappointed.  But I think John ended up agreeing with me that we are indeed valuing human lives differentially in the “developed” and “developing” worlds – further demonstrating Nullius in Verba’s point (in the comments below) that we run into problems when we start using “universal” measures like money in realms where the moral is pretty important.

Posted on by Ed 7

Dead on

Blogger Ansel has written a wonderful post that will probably get attention for the pointed way in which it lays out the formulaic, and therefore ultimately useless, character of the vast majority of reporting on post-earthquake Haiti.  I find it interesting because it screams out for one of my pet projects – the need to connect the global poor to one another and to those in wealthier countries in an unfiltered manner.  Nearly-useless journalism is a huge problem if it is the only source of information emerging from a given place.  The impact of this same problematic journalism, however, can be greatly lessened by the presence of many voices reporting from many angles on the same subject.  At this time, despite the various platitudes about the wonders of mobile phone technology and the internet that are repeated in development circles, the enormous potential of these tools has yet to be realized.  We need to be more honest about this, lest it sound like the technology is there and the only problem is the backward people who won’t use it.
I wonder, though, how comfortable the development industry will be with the gradual, inevitable emergence of many voices through these technologies.  What will we do when the people in whose names we are ostensibly working start telling us no and begin to call out our failures – and do so in a public forum?

Posted on by Ed 2

The difference between debt forgiveness and bailouts – no moral hazard here

In the news, recently, was the IMF’s decision to forgive its portion of Haiti’s debt  – a substantial $268 million (BBC, CNN)  However, it should be noted that this is hardly complete debt relief.  According to the World Bank, Haiti owed $1,935,265,000 in 2008.  So this relief really just lowers the debt from $1.9 billion to $1.67 billion – not a particularly huge thing, in the grand scheme of things.  This outstanding chart from the World Bank shows who holds Haiti’s debt, and makes clear what a tiny sliver the IMF held (see the bottom of page 2).  Certainly, the IMF was right to do this – but it won’t matter all that much to Haiti.
There are some who would argue that debt relief raises the specter of “moral hazard”, that much-discussed issue in the wake of the financial bailout in late 2008.  However, applying this argument to debt relief in general is a terrible mistake resting on a faulty understanding of the sources of debt.  On Wall Street, the bailout raised the issue of moral hazard because the money went to the very people who made the bad investments and created the problematic investment vehicles – in short, encouraging these people to take risks in the future, knowing that if they failed again the government would step in, rather than letting the economy tank completely (For an outstanding take on this, see Simon Johnston and James Kwak’s 13 Bankers – link below).  This, I think, does raise a significant issue about who has to absorb risk when people take big chances with their (and other people’s) money – the bailouts we have seen, under both Republican and Democratic leadership, risk has been outsourced to taxpayers, many of whom did not benefit from (hell, they suffered greatly from) the very investments that they are now being asked to bail out.
Debt relief, by and large, is something entirely different – there are a lot of reasons why we should drop the debts of countries in the developing world, not least of which being that these debts are anchors that will never allow these economies to rise on the global economic tide.  For example, in the late 1990s, Ghana was sending roughly half of its annual revenues overseas to service its totally unsustainable debt.  In simple terms, this meant that every year, $500 million worth of schools, hospitals, roads and electrical grid could not be constructed because that money was being hovered out of the country to pay for a debt incurred before much of the population had ever been born.
This, to me, is why we need to drop many countries’ debts – including that of Haiti.  These debts were not accrued in the name of the people of these countries, but in the name of particular leaders who often misused the funds.  If you need an example, Google Mobutu Sese Seko in Zaire (today the Democratic Republic of Congo) – the United States (and the international community, at the behest of the US) dumped money into Mobutu’s hands in the form of development loans, knowing he was both stealing this money and killing a tremendous proportion of his own population, because we did not want him turning to the Soviets.  So it takes a lot of gall to demand that the current population of the DRC pay back the debts incurred by Mobutu (who managed to die of cancer in 1997 before he could answer for any of this).  There is no moral hazard in offering debt relief here – the current population of the DRC had little or nothing to do with accruing this debt, and the lenders always knew the loans were really bribes.  Haiti is really not all that different from the DRC – Haiti too has a history of problematic leaders propped up by “loans” from the developed world.  However, here there is a wider guilt, as a good portion of why the country is so poor is because the US has forced its economy to open to global markets where small Haitian farmers cannot compete with the economies of scale of large, multinational agribusinesses.
It shouldn’t have taken an earthquake to put debt relief on the table for Haiti.  There are many other countries, equally deserving of relief, who wait.  It shouldn’t take an equivalent disaster for them to make it happen.

Posted on by Ed 5