Yeah, this relates to development . . .

Hey, I’m a geographer by training, inclination, whatever . . . so this story in the New York Times is very cool.  Think of it as a very early GIS (geographic information system) plotting social data (number of slaves) on a map so they can be read spatially.  Basically, it is an early choropleth map (odd the historian writing about this did not use this term*) where shading of different areas represents different concentrations of whatever is being measured (here, the percentage of the population of a given county that was enslaved).  You can see how this map presented information about slavery that made it easy to see that secession was about preserving a labor system (as opposed to more noble principles about State’s rights).
That said, the South was fighting for its life – it was already an agrarian, raw-material supplying cousin to the Northern states, dealing with massive income inequality and poverty issues.  Which should remind people of the situation in much of today’s developing world.  The Southerners who were wealthy needed slaves to stay that way . . . the entire South risked becoming, in effect, an underdeveloped area if slavery was abolished.  And if you look at post-civil war history, that is pretty much how it turned out.  Industry concentrated in the north until the Northeast moved on to biotech, education and other services, pushing the dirty production to the poorer South.  Now even that production is headed overseas.  That the Southern US is generally poorer and less educated (and therefore with fewer options) than much of the rest of the country is therefore not an accident, random or something inherent to Southerners themselves (my children are all Southerners, after all) – the South started off as a massively unequal raw material production zone, and it has been struggling with that legacy for the past 150 years.
And we expect countries that only emerged from colonialism 50 years ago to somehow do better?
*Geographers, why the hell is a historian writing our history, dammit?  We are better than this – surely we have covered a bunch of this already, but seriously, can we reclaim our disciplinary history from the people unclear on the concept of a choropleth map?
(h/t to Micah Snead)

Thousands of ways to get this done

Well, the Cancun Conference of the Parties (called COP for short) is upon us, where everyone will sit down and accomplish pretty much nothing on a global climate change agreement.  There is real concern circulating in the diplomatic world that this meeting could see the fracturing of the push for a global agreement such that it never happens – at least from this framework.  This outcome is problematic in all sorts of ways, not least of which in the chaos it will unleash in the development world, where a huge amount of money was slated to be used for adaptation to climate change under what amounted to a glorified memorandum of understanding coming out of Copenhagen.  If the whole process bites the dust, it isn’t very clear what happens to that money or the programs and projects under development to use it.
That said, if it all goes totally bad in Cancun it doesn’t mean that we are beyond creating meaningful paths toward a lower-emissions future that might be manageable.  Indeed, one might argue that the death of the global framework might be the only way forward.  States like California, and cities like New York, are now starting to implement policies and programs to cut their own emissions without a national mandate.  They are creating locally-appropriate policies that maximize environmental benefit while minimizing the local “pain” of the new policies.  This is all well and good for these cities, but what I find interesting is that there is some evidence – however loose- that this city-by-city, state-by-state approach might actually be more efficient at achieving our climate goals than a global agreement.
I was part of the Scenarios Working Group for the Millennium Ecosystem Assessment – my group was tasked with running four future scenarios for ecosystem services (the goods and processes we get from ecosystems) under different future political, economic and social conditions.  Once we got our baselines and assumptions for each scenario in place, a team of modelers ran the scenarios for various issues (temperature change, water availability, etc.) and then we attempted to link the model runs to meaningful statements about how ecosystems might fare under each scenario.
This is relevant here because, interestingly, we had a “global orchestration” scenario that, to some extent, looks like what the world was going for with Copenhagen and Cancun.  We also had another scenario called “adapting mosaic”, which assumes decentralized control and adaptive management of environmental resources.  Neither scenario was a clear winner – each had strengths and weaknesses.  An “adapting mosaic” approach is great at managing new and emerging environmental challenges, whether from climate change or other issues.  It might also serve as the very legitimate basis of a bottom-up approach to an eventual global accord on climate change.  However, this approach risks ignoring global commons like fisheries, which often leads to the loss of that resource through overuse.  There is a real risk that inequality will go unaddressed, at least across countries and at the global scale, but at the same time economic growth will not be as robust as under other scenarios.  Global orchestration is good at maximizing income.  While I dissented from this view*, the group argued that under global orchestration a Kuznets Greening Curve would kick in (as people get wealthier, they pay more attention to the environment – thus, economic growth and consumption can result in better environmental quality), and we would have strong global coordination on everything from trade to environmental issues.  However, this approach is much more reactive, and focused on the global scale – thus it is not very good at dealing with local surprises.  In my opinion, adapting mosaic looks better, over the long run, than global coordination (especially if you factor in my concerns about the Kuznets Curve assumption).
In short, in the efforts of California and New York we are seeing the emergence of a de facto adapting mosaic as the global orchestration efforts of Cancun and Copenhagen fall by the wayside.  This actually might be a good thing.
In uncertainty, there is hope.
*the Kuznets curve rests on a key assumption – that with enough wealth, we can undo the damage we do while building wealth to the point that we start caring about the environment.  Kuznets has no answer for extinction (a huge problem at the moment), as that is gone forever.  Further, the Chinese are starting to provide an object lesson in how to blow up the Kuznets curve by damaging one’s environment so badly that the costs associated with fixing the problem become overwhelming – and those are the fixable problems.  Basically, assuming a Kuznets Greening Curve allowed those framing these scenarios to put an overly-happy face on the global orchestration scenario for political reasons – they wanted to provide support for a global effort on climate change.  A more honest reading of the data, in my opinion, would have made adapting mosaic look much better.

Page proofs . . .

are killing me.  But, the book is here, and I am cleaning it up.  I hate page proofs.  Deeply.  This is the sort of detail work I loathe – combing back through 90,000 words looking for misspellings and erroneous punctuation.  It is taking days, because you can only focus that hard for so long.  And at the same time, I am cleaning up the index.
Oh, and that is on top of the article that was due back in today – I worked with two of my Ph.D. students, Mary Thompson and Manali Baruah, to produce a paper that examines how REDD+ functions as a form of unacknowledged environmental governance (defining legitimate terms and actors within debates over how to implement terrestrial carbon sequestration projects in forest areas).  We’ll see how it does in this round of peer review.
And then there is the talk I am supposed to be giving at UNC – Chapel Hill on Friday.  I’ll be discussing how we think about livelihoods in development, how current framings might have carried us as far as they are going to, and what a new framing might look like.  Yeah, it is coming together, but not as quickly as I’d hoped.
But, without further ado, the first few hundred words of Delivering Development:

Global food prices again . . . but maybe a solution!

New Scientist has an interview with the authors of a recent report that blames food price shifts on financial market manipulation and speculation.  Worth reading – they are quite clear in their argument.

Is this another crisis like the one we had in 2008?

Not quite. Maximo Torero of the International Food Policy Research Institute (IFPRI) in Washington DC notes that oil, the real driver of food prices and of the 2008 crisis, is relatively cheap, at around $75 a barrel, not over $100 as it was in 2008.

In 2008, both immediate grain prices, and the prices offered for future grain purchases in commodities markets, climbed steadily for months, whereas now they are spiking and dipping more unpredictably, which economists call volatility.

“The market fundamentals – supply and demand – do not warrant the price increases we have seen,” says Torero. Not all harvests have been bad, and after 2008 countries rebuilt grain stocks. “There are enough stocks in the US alone to cover the expected losses in Russia.”

The food riots in Mozambique were not due to world grain prices, he says, but because Mozambique devalued its currency, making imported food more expensive.

So what has been happening this year?

Markets are responding nervously to incomplete information. First there was a series of shocks: Russia’s export ban, lower maize forecasts, then, days later, a US ruling to allow more bioethanol in fuel which seemed likely to further reduce the maize – the main source of bioethanol – available for food. Meanwhile there was no reliable information about grain stocks, which is strategic information that most countries keep secret.

The result was nervous bidding and sporadically surging prices in commodity markets. And that attracted the real problem: investors wielding gargantuan sums of speculative capital and hoping to make a killing. When speculation exacerbated the price crisis of 2008, Joachim von Braun of the University of Bonn, Germany, then head of IFPRI, predicted that it would continue causing problems. “We saw that one coming and it came,” he says. “Food markets have new design flaws, with their inter-linkages to financial markets.”

Volatility also makes it harder to solve the long-term, underlying problem –inadequate food production – by making farmers and banks reluctant to invest in improved agricultural technology as they are unsure of what returns they will get. “Investment in more production alone will not solve the problem,” says von Braun. As long as extreme speculation causes constant price bubbles and crashes, either farmers will not get good enough returns to continue investing in production, or consumers will not be able to afford the food.

“Without action to curb excessive speculation, we will see further increases in these volatilities,” he says.

h/t to Resilience Science

This is very interesting, but what I found intriguing about this article was the researchers’ suggestion for how to address this uncertainty – transparency and information about supplies via remote sensing:

All the major producers already use remote sensing technology to watch each other’s fields. If countries would reveal just once what stocks they hold, says Torero, the satellite images can be used to calculate whether those stocks have risen or fallen, as growing conditions change. “All we need to know is the baseline,” he says. Reliable information about stocks could offset unwarranted jitters about crop failures, such as the ones that are contributing to the current market volatility.

Von Braun goes farther: he says there should be a global technical organisation that keeps track of world grain stocks and production, and which decides, using complex computerised models of world food markets, what range of grain prices are actually warranted by real supply and demand. Then if speculation starts to drive prices up out of this band, countries could intervene on markets, buying and selling just enough to counter speculative pressure. “This doesn’t stop speculation, just extreme speculation,” he says.

He thinks it would take a fund of $20-$30 billion to do the trick. In September the World Bank extended a $2 billion fund to respond to food price crises, but that is aimed at helping the poorest survive price spikes rather than intervening to stop them happening.

You may or not like the idea of a global organization or fund, but the idea of actually monitoring the supplies of the commodities to examine if pricing reflects actual market dynamics (supply/demand controlled for expected future conditions) is fantastic and already possible.  The only people who would lose here are those whose only skill set is in exploiting the uncertainty and lack of information in the market for their own profit – especially those willing to exacerbate uncertainty and opacity to generate larger profits.

Well, maybe . . .

UNDP has launched its 20th anniversary edition of the Human Development Report.  In the report, they argue that development is working better than we realize – and use this to argue that aid is therefore working better than people think.  However, there is an important caveat in the report which calls this general claim into question.  As the BBC reports “There has been most progress in the areas of health and education, sectors which have received most focus in development assistance.”
This is a huge caveat.  These are the sectors that are easiest to measure – at least through traditional indicators.  Development programs have been designing programs around clear indicators and pumping money into achieving those indicators for some time – the same indicators used by the human development report.  Of course literacy rates are up.  Of course life expectancy is up.  These are low-hanging fruit.  But what does this really mean for the quality of life of people living in the Global South?  Are they living better, happier lives?  Or are they living longer, in greater misery than ever before?  Are any of these gains sustainable, or are they predicated on continual flows of aid?  There is no answer here – and it is an answer we need to obtain not through indicators, but by getting out there and talking to those we intend to help with development.  Get on your boots, and get out of the SUV/Mission Office!
I do, however, like that this report is trying to make an evidence-based case for the persistence of market failures around public goods.  We have seen, time and again, that when governments fail to provide security, access to healthcare, and education for their populations, the markets DO NOT step in to fill the gap.  A lot of poor, vulnerable people get left behind.  (Given recent trends and this week’s election results, it is entirely likely that South Carolina will empirically demonstrate this  can happen even here in the US, at least in the area of education, over the next four years).

Wait, how did they come to this conclusion?

Remember the Flash Crash – the May 6 “unexplained” stock market dive?  Well, the Securities and Exchange Commission and the Commodities Futures Trading Commission now say they have found the cause, and nobody did anything wrong to cause it.  According to the NY Times, these commissions

“found no evidence of market manipulation. Instead, the temporary crash resulted from a confluence of forces after a single fund company tried to hedge its stock market investment position legitimately, albeit in an aggressive and abrupt manner” via NYTimes

This . . . is . . . insane.  I mean, read the rest of the report, and this conclusion seems like an almost willful departure from reality.  According to authorities, here is what happened:

  • A single mutual fund, Waddell and Reed, decided to sell $4.1 billion in futures contracts.  That’s a lot, but hey, it happens.
  • The sale of these funds, however, is insane.  To quote the Times, “The mutual fund started a program at about 2:32 p.m. on May 6 to sell $4.1 billion of futures contracts, using a computer sell algorithm that over the next 20 minutes dumped 75,000 contracts onto the market, even automatically accelerating its selling as prices plunged.”

In plain English, they decided to dump at all costs, without regard for losses or market impact.  The firm claims it was dumping the contracts because it was concerned about the European financial crisis spreading to the US – they found themselves long on a lot of trades in the contracts in question, and decided to get out while they could in the face of what they expected would be a reversal in the contract values.  OK, so maybe they got a bit jumpy . . . but the logic here comes apart when you look at the sale mechanism – they basically started dumping these contracts onto the market, creating an oversupply which would drive the contract price down . . . and they would keep pumping contracts into the market even as they exacerbated this problem.  In other words, they tried to offload these contracts to avoid losses when their value dropped, but the way in which they offloaded the contracts ensured their value would drop.  This is where the whole thing turns really nuts – they set up their sale algorithm to sell everything in 20 minutes.  They dumped $4.1 BILLION DOLLARS OF CONTRACT ONTO THE MARKET IN 20 MINUTES!  What the hell did they think would happen?  Hell, the only rationalization I can come up with here is that they hoped to dump it all so fast that they would actually beat the market collapse they were likely to trigger.
You cannot tell me that the folks running this fund did not understand what this sale, executed in this manner, could do to markets.  The justification of the sale structure is itself illogical on its face.  And the fact that these guys still have jobs, and have not been beaten to death (metaphorically speaking) by other funds for what they did (like many of those who shorted the 2008 financial crisis) makes me really wonder what the hell went on here.
But the SEC and the CFTC have turned into Officer Barbrady from South Park: “Move along, nothing to see here”
Which reminds me of a classic South Park exchange (South Park, season 2, episode 2):

Mayor: Officer Barbrady, let’s pretend for one second that we had a competent law enforcer in this town. What would he do?
Officer Barbrady: Hmmm. That’s a good question, Mayor. Let me get right on that, with thinking.

Hang on, here we go!

Via Resilience Science:
International wheat prices are up 60-80% since July.  And according to the Food and Agriculture Organization of the United Nations (FAO), this price increase is not a standard market function – despite some crop failures, “Global cereal supply and demand still appears sufficiently in balance” to have much more stable prices.  So what, pray tell, is driving the increase?  Well, the FAO blames “national policy responses and speculative behaviour.”
Garry at Resilience Science does a great job of covering the obvious rebuttal: “Oh, the FAO is another organization out to demonize markets – this argument isn’t based on evidence.”  Um, not so fast . . . in a discussion paper for the International Food Policy Research Institute (IFPRI) – and by the way, the US is a major funder for IFPRI – Bryce Cooke and Miguel Robles appear to have demonstrated quantitatively that various proxies for speculation and activity on futures markets best explain the dramatic price rises for food in 2008.  To quote:

“Overall, we conclude from our time series analysis that when taking the four commodities analyzed here there is evidence that financial activity in futures markets and/or speculation in these markets can help explain the behavior of these prices in recent years. Other explanations are only partially supported for the particular case of one agricultural commodity or not supported at all. We do not claim, however, that these other explanations should be disregarded; all that we can say is that in using the variables considered in this study and the particular time series models herein, we do not find such evidence.”

Well, looks like Frederick Kaufman (see this earlier post) was at least partially right . . . in this case, the futures markets are causing more problems than they are solving.  Put another way, these studies demonstrate empirically that the manipulation of these markets is killing people – literally.  This is not market failure, people.  This is human moral failure.  But we wouldn’t want to regulate those markets, now would we?
Sigh.

I'd be worried, but they're pretty much always wrong . . .

Well, the International Monetary Fund (IMF) says we are headed into an extended economic slump.  AAAAAAAHHHHHHHHH!
Wait, don’t go all Glenn Beck, buying gold and arming yourself.  The IMF has a staggering history of getting country-specific analyses completely wrong.  From structural adjustment to currency stabilization, the IMF has packed quite a bit of failure into its (just over) sixty years of existence.  They are better at the regional to global level, which is where their real purview is anyway.
The IMF was set up in the dying days of World War II to ensure global economic stability, which gave it a mandate at the global and regional levels.  However, it really lacks a mandate at the national level (though it can influence the credit ratings of individual countries), and it shows in their often-faulty analysis . . . simply put, they don’t do fieldwork.  They have absolutely no idea what is really happening in the countries they analyze and on which they pass judgement.  So I tend to ignore their statements about individual countries.
I find it funny that the Telegraph’s article quotes Joseph Stiglitz on the likelihood of an economic “death spiral” in Europe. After all, Stiglitz has referred to the IMF as a bunch of third-rate economists from first-rate economics departments . . . in other words, the ones who couldn’t get jobs in finance.  And look what the “good ones” got us into . . .
Which leads to another thought – how bad do the economists have to screw things up before people finally start doubting them as fonts of truth?