Category: globalization

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

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

Yes, cell phones can make a difference in development

Via Mashable: How Mobile Technology is a Game Changer for Developing Africa.
There are a lot of initiatives out there that engage with mobile phones for development.  The most impressive I have seen is Lifelines India, in part coordinated by some friends and colleagues at Development Alternatives.  Volunteers bring the phones to villages, and for a small fee they can call a number and record their questions. Each farmer receives a reference number for the query and can call back in a day and use that reference number to access the reply. The project promised and delivered rapid replies to queries (less than twenty-four hours) and provided information of great value to farmers.  Today it reaches around 150,000 farmers in four Indian states.
This is but one of many initiatives.  The Global Adaptation Information Network project I have been part of for the past four years is heavily predicated on using mobile phones to connect communities throughout the Global South.  And Mickey Glantz has toyed with the idea of expanding Sparetime University to mobile platforms to expand access,
What this article failed to recognize, though, is the interesting boom in cell phone app development in Africa right now – app developers in Kenya are recognized as some of the best in the world at designing lightweight apps for low bandwidth networks.  For those who are fed up with lazy, bloated coding of software here in the US (why your programs run so slowly, even on new computers and fast internet connections), it may be that Africa is the future . . .

Posted on by Ed 0

Polishing a turd? Another day, another index

UNDP and the Oxford Environment and Human Development Initiative recently announced the launch of the Multidimensional Poverty Index (MPI), the newest rapid poverty assessment tool.  This is the latest effort to expand the measurement of poverty beyond indicators of economic productivity, and is being hailed (at least by UNDP and OEHDI) as a significant advance in our efforts to understand the nature of poverty.  I’m not so sure . . .
We have tried to come up with quick measures (often referred to as indicators) of things like development, poverty and food insecurity for decades.  We chase after such indicators because, if they provide us with quick, cheap understandings of the human condition in particular places, they can guide policy and program design, thus maximizing the benefit of the aid money we spend around the world.   Since the mid-twentieth century, development thought has attached to various indicators of poverty and development.  For example, one of the earliest (and still prevalent) indicators of development is the Gross Domestic Product (GDP), which measures the value of all goods and services produced in a country in a given year.  GNP per capita is the number you get when you divide this value by the population of the country at hand, thus getting a measure of average per-person economic productivity.  The presumption here is that this average economic productivity reflects wages, and thus the ability of individuals to meet their material needs.  It certainly means something that the per capita GDP of the United States was $46350 in 2008 (the last year for which the World Bank has data), while Malawi’s per capita GDP was $288 in that same year (no, that is not a typo).   But what that means in terms of people’s real quality of life, their opportunities, etc. is not at all clear.  Clearly, Malawians are far less economically productive than Americans – but to address this issue, we have to understand why this is so.  Once we start to explore the different levels of economic productivity, we find that the causes of these differences are many, leading to other questions, such as why are so many Malawians engaged in subsistence farming, while Americans are engaged in the wage economy?  In short, per capita GDP is an interesting starting point for analysis, but it does not really capture the dynamics of poverty and human well-being in a manner that allows us to do anything about these situations.
To address this issue, other indicators and indexes (indices) that aggregate various indicators into a single value have emerged.  Perhaps the most famous is the Human Development Index, pioneered by UNDP’s Human Development Reports.  The HDI blends four indicators (life expectancy at birth, the adult literacy rate, the combined enrollment rate for primary, secondary, and tertiary schools, and a purchasing power parity adjusted measure of per capita GDP) to capture three different issues (health, education and income) which are then aggregated into a single score that runs from 0 (no human development) to 1 (presumably some sort of ideal human development).  This measure of well-being certainly moves beyond the purely economic, and probably does a better job of capturing the dynamics of poverty and well-being than any single measure, economic or otherwise, might.  But still, this is a limited index – there is no way to capture things like gender disparities that greatly impact people’s well-being and opportunities.
And now comes the MPI, the latest effort to get a development index right.  The MPI has quite a few more variables, and it has moved away from any reference to the economy in its measurement of poverty:
1. Health (each indicator weighted equally at 1/6)

  • Child Mortality: If any child has died in the family
  • Nutrition: If any adult or child in the family is malnourished

2. Education (each indicator weighted equally at 1/6 )

  • Years of Schooling If no household member has completed 5 years of schooling
  • Child Enrolment If any school-aged child is out of school in years 1 to 8

3. Standard of Living (each of the six indicators weighted equally at 1/18)

  • Electricity If household does not have electricity
  • Drinking water If does not meet MDG definitions, or is more than 30 mins walk
  • Sanitation If does not meet MDG definitions, or the toilet is shared
  • Flooring If the floor is dirt, sand, or dung
  • Cooking Fuel If they cook with wood, charcoal, or dung
  • Assets If do not own more than one of: radio, tv, telephone, bike, motorbike

There is a lot to like here – moving toward standard of living, and away from income, does a lot to make different situations comparable across countries and continents.  And shifting measures of health from life expectancy, which can be compromised by any number of issues in the life cycle, to child mortality and nutrition, which are highly correlated to health outcomes, is also a good idea.  But in the end, what will the MPI really add to our understanding of the dynamics of poverty and well-being that we could not have gleaned through the HDI – or through GDP, for that matter?  Put another way, I am worried that a lot of time and effort has gone into polishing a turd.
In my forthcoming book, I make an extended argument for doing away with these indicators altogether.  They are top-down efforts to organize and classify human experience in a manner that gives the illusion of actionable information, but none of the analytic purchase we actually need to do something in the world.  A close look at the MPI and its constituent indicators illustrates my point*.  Let’s examine Standard of Living – recall that I really like this category, and this reframing of this component of human well-being.  But what, exactly, do the indicators have to do with standard of living?  For example, why are radios, tvs, telephones, bikes, and motorbikes such critical assets in this index?  First, this presumes that these commodities are proxies for people’s standard of living, which is questionable at best.  Second, even if we accept that commodity ownership is an important part of the standard of living, why are we focused on these commodities?  For example, surely cattle ownership is far more important than any of these when evaluating people’s assets in East Africa.  And why does flooring matter so much?  Yes, it is possible that worms or other insects and animals could find their way into an earth-floored house, why not focus on roofing or wall materials (which are much more important in keeping out insects, and therefore dealing with issues like malaria)?
Why did the designers of this index choose these variables?  The answer, in part, lies in their explanation for their selection of variables “The ten indicators are almost the only set of indicators that could have been used to compare around 100 countries.” (p.13)  While you have to work with the data you have, availability is not a valid criteria for evaluating the usefulness of a particular measure.  In other words, if you are using an indicator variable as a proxy for a much larger process or issue, you have a responsibility to make sure that indicator actually says something meaningful about that process.  It is not at all clear to me that these variables have a meaningful link to the standard of living in many parts of the world.
To the credit of those who designed the MPI, they note that “one of the main lessons of this first exercise of estimating multidimensional poverty for developing countries is the urgent need to start collecting information on key internationally comparable indicators at the individual level” (p.13).  I’ve been part of an effort to rethink just how we identify and access this information, by building an information network that allows communities in the Global South to communicate with one another and with “experts” in the Global North – a bottom-up collection of data on the global state of human well-being.  Our estimates suggest that this approach would, in the relatively short term, become much more accurate and cost-effective for identifying and addressing the challenges that limit human well-being around the world than current top-down efforts, as embodied in large indices like the MPI.
If indices like the HDI, and now the MPI, tell us very little about the causes, and therefore the solutions, for the problems and challenges that the global poor deal with on a daily basis, they are not useful analytical tools – at best, they are a first step in a process of inquiry that identifies an interesting trend for future analysis.  So why are they still around?  At least in part because they are great PR vehicles – they make for interesting maps that ostensibly show how bad things are for so many people, and which justify continued development efforts to donors.  That is simply not good enough to justify the continued time and effort required to refine these indices.
*I’m not going to even get into the issue of weighting – basically, every individual variable listed above is weighted equally in this index.  So, infant child mortality rates have the same impact on the MPI score as using wood fuel, having a dirt floor, and television ownership.  Stop and think about that for a second.

Posted on by Ed 1

Equality in the oddest places – or why purchasing power parity matters

My family and I are in the midst of a relocation to Washington, DC, a city with a cost of living at least 35% higher than my current home here in Columbia, SC. The rent for our (nice but hardly lavish) new place approaches double that of my current mortgage, and childcare is going to run us 50% above what we are used to here. And I am moving to take up a fellowship that grants me a 13% increase over my current salary to make up these costs . . . yes, I am going backward to take up this position, but I think this opportunity is too important to pass up. Luckily, my wife agrees.
The net outcome of this is a situation where my family will be living hand-to-mouth for a year or two, despite having two pretty good salaries under one roof. This situation reminds me of a story I use to explain the importance of purchasing power parity when comparing incomes and/or material standards of living in different places. Purchasing power parity is a measure of what your money will buy you, based on a “market basket” of goods that you might buy in each place. Since things like food are much more expensive here in the United States than they are in farming communities in sub-Saharan Africa, it makes no sense to compare incomes between these two places without normalizing for what those incomes can purchase. Which leads to my story . . .
My first year doing fieldwork in Ghana, I spent a lot of time simply hanging around, talking to people, getting my bearings and building relationships. Once the folks in Dominase and Ponkrum realized that I was 1) actually listening to them when they spoke and 2) willing to answer any questions they might have of me, I never lacked for evening conversation. This was especially true when I was buying the akpeteshi (distilled palm wine – it’s pretty serious stuff).

Fun at the akpeteshi still, 1998

One night, while I was talking about money, incomes and making a living with a group of people in Dominase, the issue of my income and net worth came up. Now, at the time I was a graduate student in Anthropology, just about to start a Ph.D. program in Geography. I was fortunate enough to have a National Science Foundation Graduate Research Fellowship, which is (by grad school standards) a very generous award . . . but it was still not much to live on. In the interest of honesty, I told them exactly what my annual stipend amounted to: $14,000*. Once someone managed to convert that into Cedis (the local currency, then trading at about 2300 to the dollar), this news resulted in shouting and amazement.
I then asked if I could explain what things cost me in America. I began to lay things out – my rent of $350/month (this provoked a near-riot, as $350 is as much as some households earn in a year in these villages). Then the cost of food – and another near riot, as the farmers began to realize that crops like the oranges they sold me for the equivalent of 5 cents were worth at least twenty times that amount in the US. I then explained about my car, gasoline, insurance, clothing, etc. Never let anyone suggest that a lack of education leads to deficiencies in mathematics – despite incomplete elementary educations, nearly every person in these villages engages in trade in markets in nearby towns. As a result, they can add and subtract large and complex sums in their heads very, very rapidly. Several of the villagers talking to me were converting the amounts I was listing into Cedis, and then adding this total up as we went along. As I came to the end, one of them looked at me and said (in Fante, via my field assistant’s interpretation) “then you have nothing!” “Yes!” I replied (in English – I did not yet speak Fante – but yes is pretty well understood in Anglophone Africa). There was a pause, and then a general cheer of “nothing!” broke out among the assembled group – and with that, most residents of the village stopped seeing me as particularly rich, and therefore much more able to understand what it meant to live from hand to mouth as they did**. At the end of each month, we all had nothing!
Here I am, some 13 years later – with tenure, and paid reasonably well. And moving into a situation where, once again, at the end of each month I will have nothing! I’m not sure if the folks in Dominase and Ponkrum will be horrified or amused. But they will understand . . .
* I should note that I was completely screwed by NSF with regard to the size of my stipend – there was no cost of living adjustment across the four years I held the fellowship. As soon as it ran out for me, though, they instituted a 50% (!!!) increase – the next year. Yes, I am still a little bitter about that.
** This is not to say that I did, in the end, completely understand what it meant to be a resident of these villages. While I tried as hard as I could to live under the same strictures as the villagers when I was in the villages, I also spent time in more comfortable settings in Cape Coast. Further, when things went wrong (such as in 1998, when the monsoon failed and a lot of the farms around these villages failed), I experienced short-term discomfort and frustration, but always knew that I had resources to meet my needs, if only I chose to walk a few miles to the nearest road and catch a cab. Thus, while I spent a few days without food in 1998, like everyone else in these villages, I always knew that if things got really bad, I could get to a road and to a store where I could buy food with money from my bank account in the US. Thus, I cannot say that I understand what it is like to live on the edge like the people I work with do each and every day – honestly, none of us really can.

Posted on by Ed 1

Development is not the same thing as adaptation

One of the most interesting and distressing trends in recent development thought has been the convergence of adaptation to global change (I use global change as a catch-all which includes environmental and economic change) and development.  Development agencies increasingly take on the idea of adaptation as a key component of their missions – which they should, if they intend to build projects with enduring value.  However, it is one thing to incorporate the idea of adaptation into development programming.  It is entirely another to collapse the two into the same mission.
Simply put, development and adaptation have two different goals.  In general, development is about improving the conditions of life for the global poor in some form or other.  Adaptation implicitly suggests an effort to maintain what exists without letting it get worse . . . which sounds great until you think about the conditions of life in places like rural sub-Saharan Africa, where things are often very bad right now.  A colleague of mine at USAID, in the context of a conversation about disaster relief and development, said it best: the mandate of disaster relief is to put things back to the way they were before the disaster.  In a place like Haiti, that isn’t much of a mandate.
All of this becomes pretty self-evident after a moment of thought.  Why, then, do we see the collapse of these two efforts into a single program in the world of development practice?  For example, what does it mean when food security projects and programs start to define themselves in terms of adaptation?  It seems to me that the goal shifts for these programs – from improvement to the maintenance of existing situations.  If a development agency was there in the first place, the existing situation is likely unacceptable.  To me, this means that this subtle shift in mission is also unacceptable.
Why am I going on about this?  I am about to take up a job as the Climate Change Adaptation Coordinator for USAID’s Bureau of Democracy, Conflict and Humanitarian Assistance.  In this job, I will have to negotiate this very convergence at the program level.  How we work out this convergence over the next few years will have tremendous implications for development efforts for decades to come – and therefore huge implications for billions of people around the world.  And I don’t pretend to have all the answers . . . but I will think out loud in this space as we go.

Posted on by Ed 5

The food bubble?

Frederick Kaufman has a very interesting piece (subscription required) on an underreported phenomena in the 2008 spike in food prices – what he calls a “food bubble” caused by commodities investment vehicles structured around wheat futures.
While I think this article is worth reading and considering carefully, it is important to recall that Kaufman is trying to make a particular point about the pervasiveness of problematic investment vehicles in our economy, and the ways in which these vehicles seem to hurt everyone but the people who invent them.  This point is well-made.  However, in making this point Kaufman underplays a couple of really important points:
1) Wheat is but one of the staples that saw a price spike in 2008.  And while price stress on one staple (wheat) can lead people to start shifting into another (corn), driving the prices of the second commodity up, it would take some serious research to substantiate the (implicit) idea that a price spike in wheat could have a dramatic impact on corn prices in Africa (where wheat is the 8th most important crop, at 3.2% of total agricultural production) (via FAOSTAT).  Wheat is important, but maize is the crop that links the world together . . . which leads to my second point:
2) There was a convergence of factors that created the price spike in 2008.  In one sentence, Kaufman acknowledges several important factors:
“By the time the normal buying season began, drought had hit Australia, floods had inundated northern Europe, and a vogue for biofuels had enticed U.S. farmers to grow less wheat and more corn.”
But this is only one sentence in the whole article.  In an effort to point out the impact of investment vehicles on global food security, Kaufman’s narrative underplays just how important these other factors were in driving up the price of other staples like corn (the extra corn was largely rerouted to biofuels, and the drought in Australia removed a great deal of expected production from the world supply).
The point here: food insecurity is enormously complex, and caused by the intersection of processes and events operating at multiple scales.  Even as we tease out some of these processes and events, we must also highlight how each specific process or event intersects with other causes to produce particular outcomes in particular places.

Posted on by Ed 9