If the Asian Growth Model is not Working Anymore

In 1981 poverty rate in China was 64% of the population, in 2004 the rate was 10%: it means that 500 million people stepped out of poverty (look here and here). China and South-East Asia economies were propelled by export demand and by someone else’s debt. What now? In the words of FT columnist Michael Pettis

The assumption that implicitly underlay the Asian development model – that US households had an infinite ability to borrow and spend – has been shown to be false. This spells the end of this model as an engine of growth.

It seams like bad news for economists pointing at free trade and export-led growth as a practical receipt for development.  It seams like bad news for everybody. People in developing countries need to increase their income, and it is difficult to think how they could find the money in their neighborhoods.

Economic Gains Do Not Mean Political Gains

In this post Dani Rodrik explains why trade theories suggest that the U.S. should liberalize trade for agricultural products (especially cotton and sugar) and abolish visa restrictions on on highly-skilled foreign workers. This will produce gains for the U.S. society as a whole and probably for the poorest part of the world population, that happens to be made up of farmers. (Of course India will probably see some of its engineers flee the country, but that is not exactly a win-win game).

But countries are not ruled by trade theories. Usually they are ruled by people seeking to keep power as long as possible. And sometimes people rely on minority groups within their society to keep themselves in power.  Have a look at this paper, “The Diminishing Effect of Democracy in Diverse Societies” by Gilat Levy and Oriana Bandiera (London School of Economics and Political Science). Indeed, this can explain why western Europe heavily defends its farmers (4-5% of the population) sacrificing the common good.

An interesting theory should consider not how much a single group benefit or not from trade liberalization but how much influence the group affected by the new policy has on the decision making process. A reduction of trade barriers can help to tackle chronic poverty (have a look at the “Industrial Development Report” by the United Nations Industrial Development Organization). But barriers are not where they are because governments think they are irrational from a political (not economic) point of view.

The Dirt Floats

The Kosovo Liberation Army (Albanian acronym UÇK) supposedly run, during the conflict of 1999, torture camps in northern Albania. According to an investigation conducted by Altin Raxhimi, Michael Montgomery and Vladimir Karaj and published (here) by the Balkan Investigative Journalism Network at least 18 people were killed in one of those, a factory compound in Kukës, Albania. Eyewitnesses say prisoner were mainly alleged Kosovo Albanian collaborationist. But as well Serbs and Roma were held in the camp.  And women.

Kosovo’s Prime Minister, Hashim Thaçi, who was then the political director of the KLA, and Agim Çeku, former Prime Minister and former chief of the KLA headquarters, told the BBC they were not aware of any KLA prisons where captives were abused or where civilians were held.

The same sources that witnessed the base in Kukës, told us that the interrogators in Kukës were KLA officers who had been involved in the capture of suspected collaborators.
Both our sources concerning the base, identified several KLA officers involved in the abuses at
Kukës.
One of them is currently in a top position in the judicial system in Kosovo.

After ten years, the history of the ex-Yugoslavia conflicts (so far mainly written by journalists) is still incomplete. Because the people who fought those wars are now ruling that very same land (nationalism is still an effective language to speak). And because the Balkans are the very same mirror and unconscious of Europe (Rada Iveković, 1999). The 1990s wars tell Europe where its own states are coming from: murders and  deportations. And Dorian does not like portraits.

WikiPrices

Erik Hersman, has recently created a site called Africa Signals. And it is not just a site: it is a wiki site. The site aims to collect and share mobile phone and Internet rates across Africa. (I have found about this site here)

Now. In my experience, one of the many reasons that makes poor a poor farmer is coping with a non-functioning market (I said it two posts ago). So I can just imagine how helpful would be to have a tool to make market work better.

Creating a wiki page to collect and share the price of one particular agricultural product in one particular time in one particular place would be great. But succeeding in integrating such a site with the mobile phone network would be even better.  How to do this? The government of Rwanda is moving in the very same direction without creating a wiki site. (It is difficult to imagine a government managing wikis). But bureaucracy is not something we usually associate with the words efficiency and effectiveness, especially in poor countries. And in any case we do not really need a government to make a site like this work.

Just think about a wiki site collecting and sharing data through sms. Actually Twitter, without the wiki interface, is doing it right now. So, think about a farmer receiving a message with updated price information the night before market day and, on this information, taking his/her decisions. And think about a farmer sending via sms the price information to the wiki site after leaving the market.

We can imagine the farmer to pay for the sms he or she receives and, on the contrary, we can imagine sending sms back to the site to be completely free.  And we can imagine some volunteers to be the administrators of the site (just like Wikipedia).

Hard Numbers, Hard Times

In a report published today, Oxfam predicts that by 2015 the average number of people affected by climate-related disasters every year will increase by 54%. The projection is based on a forecasting model that uses data, collected by the Centre for Research on the Epidemiology of Disasters, going back to 1900. Oxfam’s researchers have noticed that climate-related disasters have been increasing in frequency and severity during the last years so they expect that by 2015 375 million people (or 132 million more than in 2007) will be affected. Jeremy Hobbs, Oxfam International’s Executive Director, said that

The humanitarian system works as if it’s a global card game dealing out aid randomly, not based on people’s needs. The response is often fickle – too little, too late and not good enough. The world barely copes with the current level of disasters. A big increase in the numbers of people affected will overwhelm it unless there is fundamental reform of the system that puts those in need at its centre.

And this supposedly happens while NGOs are downsizing their budgets because of the crisis. According to Le Monde, many organizations have seen a significant decrease in private donation during 2009. More deadly predictions on the way?

Information Flows on Mobiles

The idea to use mobile phones (here and here) to help economic development in the most remote corners of the world is fascinating and definitely smart. For one thing, mobile phones have already reached the Bottom Billion. In 2007 there were 45 subscribers per 100 inhabitants in the developing countries. That means that we can now expect to have one mobile in every family. Everywhere. As well in communities where services like water, electricity, hospitals, schools or transportation are still far away.

What poor people mostly need are functioning institutions. And market is one of these. If market is not working, farmers will pay higher prices for what they buy and got less money for what they sell.  Moreover they could buy or sell at the wrong time and possibly in the wrong place. In the words of the government of Rwanda,

the success of these farmers has been greatly affected by lack of access to pricing information. Many times, farmers speculate what crops to grow and what prices to charge at harvest. Some farmers depend on middlemen to dictate the prices and in most cases the latter exploit the former. For any farmer to earn a decent living from agriculture, easy access to information on market prices is of paramount importance.

Making information flows on mobile phones could

empower farmers to enable them make more informed market pricing decisions and ultimately more successful farming.

The idea of mobile banking goes in the same direction: making a  service so critical for development accessible to almost everyone. That will not end poverty, but  will probably make the task easier.

Human Rights in Guatemala

The United Nations High Commissioner for Human Rights has published the Annual Report 2008 on Guatemala. And hardly could have been worse. Last year murder rate was of 48 homicides per 100.000 inhabitants, almost a world record for a country at peace. Extra-judicial executions were reported. The number of people who died in custody increased. Irregular militas were responsible for episodes of the so-called “social cleaning” where victims were tortured and finally executed. Over the year 722 women where killed. 56 people were lynched. According to the High Commissioner the Government should

refine the legislative framework for the protection of human rights (…);
improve criminal investigations carried out by the National Civilian Police, on the basis of an appropriate organizational structure, trained personnel, an adequate territorial deployment, and the availability of technical and scientific resources (…);
strengthen areas of civil jurisdiction, in order to prevent civil conflicts becoming criminal matters (…);
adopt special measures to combat discrimination in all areas, and in particular to overcome the conditions of inequality which impede indigenous peoples’ access to economic, social andcultural rights (…);
strengthen measures to increase the understanding and application of the new Law on Femicide and Other Forms of Violence against Women (…);
promote a comprehensive tax reform, enabling an expansion of fiscal resources and an increase in tax collection.

Understanding Capitalism

Nobel-winning economist Amartya Sen argues, in an article published on The New York Review of Books, that the way out from the crisis passes through a better understanding of the ideas that contributed to build the actual economic system. Adam Smith, John Maynard Keynes, Arthur Cecil Pigou, should be read, not just quoted. And I quote

Smith viewed markets and capital as doing good work within their own sphere, but first, they required support from other institutions—including public services such as schools—and values other than pure profit seeking, and second, they needed restraint and correction by still other institutions—e.g., well-devised financial regulations and state assistance to the poor—for preventing instability, inequity, and injustice. If we were to look for a new approach to the organization of economic activity that included a pragmatic choice of a variety of public services and well-considered regulations, we would be following rather than departing from the agenda of reform that Smith outlined as he both defended and criticized capitalism.

We must understand how institutions work and make them work better. But not just aiming at economic growth.

There is a critical need for paying special attention to the underdogs of society in planning a response to the current crisis, and in going beyond measures to produce general economic expansion.

A crisis not only presents an immediate challenge that has to be faced. It also provides an opportunity to address long-term problems when people are willing to reconsider established conventions. This is why the present crisis also makes it important to face the neglected long-term issues like conservation of the environment and national health care, as well as the need for public transport (…).

Wars in the Backyard

The National Security Archive has just declassified eleven documents on the extra judicial arrests conducted 25 years ago by the government of Guatemala. It appears that the US embassy clearly knew that the security forces were involved in the kidnappings. In a Department of State secret report, dated March 1986, we can read:

While criminal activity accounts for a small percentage of the cases, and from time to time individuals “disappear” to go elsewhere, the security forces and rightist paramilitary groups are responsible for most kidnapping. Insurgent groups do not normally use kidnapping as a political tactic, although they did resort to kidnapping for ransom in their formative years.
First used systematically by security forces against Communist Party and members of the moderate left beginning in 1966, the practice of kidnapping became institutionalized over time. Some 6500 persons have been kidnapping or disappeared since 1977, far short of the 38,000 claimed by critics of the previous Guatemalan governments. The average number of monthly kidnapping peaked in 1984 under regime of General Mejia. At first security forces utilized kidnappings to intimidate the left and convince potential guerrilla supporters to remain neutral. Kidnapping of rural social workers, medical personnel, and campesinos became common between 1979-83. Often innocent victims were accused of being insurgents by military commissioners, other village leaders or an individual’s personal enemies or business competitors. (…) In the cities, out of frustration from the judiciary’s unwillingness to convict and sentence insurgents, and convinced that kidnapping of suspected insurgents and their relatives would lead to a quick destruction of the guerrilla urban networks, the security forces began to systematically kidnap anyone suspected of insurgent connections. This tactic was successful. Most of the insurgent infrastructure in Guatemala City was eliminated by 1984.

The Guatemalan Civil War ended formally in 1996. But violence did not. According to national newspaper Siglo XXI, in the last fourteen months, an average of 17.6 persons have been killed every day. How many during the 36 years of civil war? 15.2.

Detained and Dismissed

Human Rights Watch has just published a detailed report on Women’s Struggles to Obtain Health Care in United States Immigration Detention. Immigration detention facilities are black holes all around the world. For one thing it is difficult to understand or explain why a state should imprison somebody who has committed no crime at all. At least for those who tend to consider existing as a right and not as a crime. HRW writes that in the United States

the number of individuals held in administrative detention while their immigration cases are determined has skyrocketed in recent years. The detained population on any given day is now over 29,000 nationwide, up almost 50 percent from 2005.

And according to the report the overshadowing sanitary problems for women in this condition are

delays and denials of testing and treatment, obstacles to obtaining medical care, distortions in the doctor-patient relationship, detrimental and unnecessary use of restraints and strip searches, discontinuity of care, lack of effective remedies.