An excellent video that will make you an expert on what has happened with Syria.
Business Insider: How GDP shares have shifted across the world since 1000 AD
Conversable Economist: The Rise of Remittances
"Here's a pattern showing the rise in remittances over time compared to some other international financial flows. Back in 1990, international remittances were lower than official development assistance (ODA). Flows of foreign direct investment (FDI) to developing countries were also smaller than ODA, as were flows of private debt and portfolio equity to developing countries. (The FDI flows to developing countries show here exclude China.) Remittances have been larger than development assistance for some years now, and the gap is growing. Perhaps more surprising, remittances also outstripped debt and portfolio equity flows to developing countries in recent years. The flows of remittances also look quite stable compared to other private-sector capital flows."
"The developed world holds up the ideals of capitalism, democracy and political rights for all. Those in emerging markets often don't have that luxury. In this powerful talk, economist Dambisa Moyo makes the case that the west can't afford to rest on its laurels and imagine others will blindly follow. Instead, a different model, embodied by China, is increasingly appealing. A call for open-minded political and economic cooperation in the name of transforming the world."
Bill and Melinda Gates Foundation:
We hear these myths raised at international conferences and at social gatherings. We get asked about them by politicians, reporters, students, and CEOs. All three reflect a dim view of the future, one that says the world isn’t improving but staying poor and sick, and getting overcrowded.
We’re going to make the opposite case, that the world is getting better, and that in two decades it will be better still. ...
... By 2035, there will be almost no poor countries left in the world. Almost all countries will be what we now call lower-middle income or richer. Countries will learn from their most productive neighbors and benefit from innovations like new vaccines, better seeds, and the digital revolution. Their labor forces, buoyed by expanded education, will attract new investments.
I still hear many people today talk about the "Third World." It refers to those nations that were poor and not aligned with either the Western capitalism (First World) or the communist world (Second World.) The Third World has vanished and it is time to bury the term. The world’s nations and populations exist on a continuum and there are now multiple poles, not two, shaping the world. Furthermore, the story is not one of descent into global dystopia but one of rising prosperity. It is hard to meaningfully address contemporary problems with antiquated frameworks.
It’s time to develop a new framework for assessing the post-Cold War, post-9/11 world. ...
... The three worlds used to be capitalist, communist, and the rest. Now they are the West, the failed states, and the emerging challengers. But that's still too simple a view. A small and declining number of developing countries are charity cases. And none are competitors with us in a zero-sum game. Rather than dividing most of the planet into two threatening classes, we need to see states of the developing world as vital partners—both in strengthening the global economy and in preserving the global environment. ...
... Given that much of the world only makes headlines when it is in the midst of a humanitarian crisis and U.S. assistance is on the way, it isn’t surprising that the average American thinks things are going to hell in a handbasket: a recent survey of Americans found that two thirds believe extreme poverty worldwide has doubled over the past 20 years. The truth is that it has more than halved. This might also explain why Americans think that 28 percent of the federal budget goes to foreign aid—more than 28 times the actual share.
According to the World Bank, the developing world as a whole has seen average incomes rise from $1,000 in 1980 to $2,300 in 2011. Life expectancy at birth has increased from 60 to 69 years over that same time, and college enrollment has climbed from 6 to 23 percent of the college-age population. Progress is happening everywhere, including Africa: Six of the world’s 10 fastest-growing economies over the past decade are in Africa. There were no inter-state conflicts in the world in 2013 and, despite tragic violence in countries including Syria and Afghanistan, the number of ongoing civil wars has dropped considerably over the last three decades. Emerging markets themselves are also playing an ever-expanding role in ensuring global security. The developing world is the major source for blue-helmeted UN peacekeepers, who are ending wars and preserving stability in 16 different operations worldwide. The 20 biggest contributors of police and military personnel to the UN’s 96,887 peacekeepers are developing countries. ...
Very interesting piece. For more data, see yesterday's post, The (Mostly) Improving State of the World.
... In this infographic we trace the iPhone supply and manufacturing chain. We’re providing snippets of information on both of the existing flagship model plus early breaking rumors for the next-gen iPhones. Did you know, for example, that 90% of all the rare-earth minerals used on an iPhone 5’s circuitry, screen, speakers, and glass cover are mined in China and Inner Mongolia? And did you know that Foxconn might soon be overtaken by Pegatron as Apple’s biggest manufacturing partner in China?
What does the rest of the world contribute to the making of the iPhone? Let’s find out!
The past century has been a competition between two metanarratives: communism vs. democracy and markets. Is it possible that there are other viable ways of organizing human societies? Eric Li offers a fascinating window into Chinese culture and suggests that there may indeed be viable alternatives. The Chinese model may not be viable in other cultures but that is his point. The future may be a variety of societal structures, not evolution toward one common mode of governance.
... But the Arab Spring was a demand for freedom, not necessarily democracy – and the distinction between the two is crucial. Take, for example, the case of Mohammed Bouazizi, who started this chain of events by burning himself alive on a Tunisian street market two years ago. As his family attest, he had no interest in politics. The freedom he wanted was the right to buy and sell, and to build his business without having to pay bribes to the police or fear having his goods confiscated at random. If he was a martyr to anything, it was to capitalism.
All this has been established by Hernando de Soto, a Peruvian economist who travelled to Egypt to investigate the causes of the Arab Spring. His team of researchers found that Bouazizi had inspired 60 similar cases of self-immolation, including five in Egypt, almost all of which had been overlooked by the press. The narrative of a 1989-style revolution in hope of regime change seemed so compelling to foreigners that there was little appetite for further explanation. But de Soto’s team tracked down those who survived their suicide attempts, and the bereaved families. Time and again, they found the same story: this was a protest for the basic freedom to own and acquire ras el mel, or capital.
New York Times: When America Stops Importing Energy
... The numbers tell the story: U.S. oil production has reversed its 30-plus year decline; U.S. imports from OPEC producers have fallen more than 20 percent in the past three years; U.S. natural gas reserves and production are up significantly and prices have dropped 75 percent in the past five years. The International Energy Agency forecasts that the United States could become the world’s largest oil producer by 2020 and may be energy self-sufficient by 2035. That’s a game changer.
While this is not a free lunch, it should not be feared. The production process is complicated and expensive, and if the industry is not careful there can be risks to the environment. But the potential is staggering. Significant domestic job growth and economic expansion has begun.
But let’s look beyond the impact on the United States and consider a few of the more profound implications for the rest of the world, because this revolution is also a game changer for international politics and the global economy. ...
... Like all revolutions, America’s new energy bonanza raises some fascinating questions. How might a lighter U.S. presence and heavier Chinese involvement change the world’s most volatile neighborhood? What can the next generation of Saudi leaders expect for their country’s future in a world where OPEC has lost much of its market power? Will Qatar’s support for Muslim Brotherhood governments in other Arab states and China’s interest in using the United Arab Emirates as an offshore trading center for its currency leave the Saudis dangerously isolated? Can Iran’s revolution survive the need to build a more modern economy?
A world in which the United States is less involved in answering these questions is a new world indeed.
Five years ago I wrote a piece called, Technophysio Evolution and Demographic Transition, explaining the dynamics and trends of global population growth and decline. Slate has and excellent article explaining the Demographic Transition Model.
Research suggests we may actually face a declining world population in the coming years.
The world’s seemingly relentless march toward overpopulation achieved a notable milestone in 2012: Somewhere on the planet, according to U.S. Census Bureau estimates, the 7 billionth living person came into existence.
Lucky No. 7,000,000,000 probably celebrated his or her birthday sometime in March and added to a population that’s already stressing the planet’s limited supplies of food, energy, and clean water. Should this trend continue, as the Los Angeles Times noted in a five-part series marking the occasion, by midcentury, “living conditions are likely to be bleak for much of humanity.”
A somewhat more arcane milestone, meanwhile, generated no media coverage at all: It took humankind 13 years to add its 7 billionth. That’s longer than the 12 years it took to add the 6 billionth—the first time in human history that interval had grown. (The 2 billionth, 3 billionth, 4 billionth, and 5 billionth took 123, 33, 14, and 13 years, respectively.) In other words, the rate of global population growth has slowed. And it’s expected to keep slowing. Indeed, according to experts’ best estimates, the total population of Earth will stop growing within the lifespan of people alive today.
And then it will fall. ...
... Why is this happening? Scientists who study population dynamics point to a phenomenon called “demographic transition.”
“For hundreds of thousands of years,” explains Warren Sanderson, a professor of economics at Stony Brook University, “in order for humanity to survive things like epidemics and wars and famine, birthrates had to be very high.” Eventually, thanks to technology, death rates started to fall in Europe and in North America, and the population size soared. In time, though, birthrates fell as well, and the population leveled out. The same pattern has repeated in countries around the world. Demographic transition, Sanderson says, “is a shift between two very different long-run states: from high death rates and high birthrates to low death rates and low birthrates.” Not only is the pattern well-documented, it’s well under way: Already, more than half the world’s population is reproducing at below the replacement rate. ...
... One of the most contentious issues is the question of whether birthrates in developed countries will remain low. The United Nation’s most recent forecast, released in 2010, assumes that low-fertility countries will eventually revert to a birthrate of around 2.0. In that scenario, the world population tops out at about 10 billion and stays there. But there’s no reason to believe that that birthrates will behave in that way—no one has every observed an inherent human tendency to have a nice, arithmetically stable 2.1 children per couple. On the contrary, people either tend to have an enormous number of kids (as they did throughout most of human history and still do in the most impoverished, war-torn parts of Africa) or far too few. We know how to dampen excessive population growth—just educate girls. The other problem has proved much more intractable: No one’s figured out how to boost fertility in countries where it has imploded. Singapore has been encouraging parenthood for nearly 30 years, with cash incentives of up to $18,000 per child. Its birthrate? A gasping-for-air 1.2. When Sweden started offering parents generous support, the birthrate soared but then fell back again, and after years of fluctuating, it now stands at 1.9—very high for Europe but still below replacement level.
The reason for the implacability of demographic transition can be expressed in one word: education. One of the first things that countries do when they start to develop is educate their young people, including girls. That dramatically improves the size and quality of the workforce. But it also introduces an opportunity cost for having babies. “Women with more schooling tend to have fewer children,” says William Butz, a senior research scholar at IIASA. ...
A group of Chinese intellectuals has called on the government to implement urgent political reforms and respect human rights or risk "violent revolution".
In an open letter 71 top academics warned that growing economic imbalances were fuelling social unrest and an uprising could erupt if reforms were not implemented immediately, Hu Xingdou, one of the signatories, told AFP Monday.
"If urgent systematic reforms needed by Chinese society continue to suffer setbacks and stagnate, then official corruption and social dissatisfaction will boil up to a crisis point," said the letter, posted on the Internet last week.
"China will once again miss the opportunity for peaceful reform, and slip into the turbulence and chaos of violent revolution." ...
... While the latest call for reform steered away from Charter 08's advocacy of western-style democracy, it called on the Communist Party fully to implement the freedoms of speech, press and association that are protected by the constitution but routinely ignored by the authorities and police. ...
New York Times: Study Finds One in 6 Follows No Religion
A global study of religious adherence released on Tuesday by the Pew Research Center found that about one of every six people worldwide has no religious affiliation. This makes the “unaffiliated,” as the study calls them, the third-largest group worldwide, with 16 percent of the global population — about equal to Catholics. ...
Source: World Religious Groups
New Geography: Alleviating World Poverty: A Progress Report
There has been a substantial reduction in both the extreme poverty rate and the number of people living in extreme poverty since the early 1980s, according to information from the World Bank poverty database. The World Bank maintains data on developing world nations, which include both low income and middle income nations. The analysis below summarizes developing world (low and middle income nations) poverty trends from 1981 to the latest available year, 2008 (Table and Figure 1).
The article also includes this graph:
Go to the article for a number of interesting nuances in how poverty has changed.
The horrific massacre in Newton, Connecticut, is to sparking debate about guns and violence, as well it should. As the discussion gets underway, I think it is helpful to get a sense of where we stand in the flow of history as it relates to violence in the United States. Here are a few things to consider.
Below is data from the most recent FBI Uniform Crime Report (UCR). The annual report compiles reported crimes. It strength is the use of hard data. Its biggest weakness is the absence of unreported crime. The willingness of people to report crime varies by type of crime and their willingness to report may change over time. Also, law enforcement’s diligence with different types of crime may change over time. Tougher enforcement can lead to fewer incidents of actual crime, even as incidents of reported crime rise. Nevertheless, the UCR is an important measure.
Crimes are grouped in two categories:
Violent crime is at a forty year low.
A second measure is the National Crime Victimization Survey (NCVS). Twice a year, surveys ask members of households if they have been victims of particular crimes, reported or not. The strength of the survey is that it captures unreported crime. A weakness may be that some crimes, like domestic violence, are underreported.
The NCVS is also broken into two categories:
(A different methodology was used in 2006 that makes it incomparable with other years. Also, 2011 data has been published and shows an uptick in crime. However, the 2002 and 2010 data in the recent report, used as comparison points, do not match earlier publications and I have yet to determine why. I chose not to include it here until I have a better understanding.)
An interesting question: Was there truly less crime fifty years ago or were people simply less likely to report crimes? I doubt there is a definitive answer. Murder is sometimes used as a proxy for overall violence in society. Here is the United States murder rate per 100,000 population:
Additionally, there is this estimation of the murder rate over the last 300 years. (Source: The Public Intellectual)
It can conclusively be said that that violence in American society is not spiraling out of control. We are living in one of the least violent eras in American history. But this is not the whole story.
Duke sociologist Kiern Healy published this graph a few months ago. (Source: America Is a Violent Country)
The 4.7 homicide rate for the United States is a near record low but it is still two or three times the rate of other Organization for Economic Co-operation and Development nations. Guns are a big part of this difference. The good news is the precipitous decline in aggravated deaths. The bad news is how much more violence there is in the United States compared to other nations, even at all-time lows.
The final issue is the number of mass shootings. The Associated Press had this article No rise in mass killings, but their impact is huge. The article notes:
… And yet those who study mass shootings say they are not becoming more common.
"There is no pattern, there is no increase," says criminologist James Allen Fox of Boston's Northeastern University, who has been studying the subject since the 1980s, spurred by a rash of mass shootings in post offices.
The random mass shootings that get the most media attention are the rarest, Fox says. Most people who die of bullet wounds knew the identity of their killer. …
… Grant Duwe, a criminologist with the Minnesota Department of Corrections who has written a history of mass murders in America, said that while mass shootings rose between the 1960s and the 1990s, they actually dropped in the 2000s. And mass killings actually reached their peak in 1929, according to his data. He estimates that there were 32 in the 1980s, 42 in the 1990s and 26 in the first decade of the century.
Chances of being killed in a mass shooting, he says, are probably no greater than being struck by lightning.
Still, he understands the public perception - and extensive media coverage - when mass shootings occur in places like malls and schools. "There is this feeling that could have been me. It makes it so much more frightening." …
Here is a graph showing mass public murders (defined as four or more murders in a 24 hour period) by decade over the past 100 years. (Source: Opinion: The Rise and Decline of Mass Shootings – Grant Duwe)
This data was reported in March of 2010. According to a recent Los Angeles Times article, Deadliest U.S. mass shootings, there have been nine mass shootings in the United States in the first three years of this decade. That projects out to thirty for this decade. But there have been five mass shootings in the last five months. There clearly has been an uptick in mass shootings over the past year.
On a final note, the Sandy Hook massacre involved young children at school. Over the past twenty years, the number of children 5-18 years old murdered at school has ranged from a low of 14 (school years ending in 2000 and in 2001) and a high of 34 (schools years ending 1993 and in 1998.) (Source: Indicators of School Safety: 2011) According to an article in the Guardian, Mass shootings at schools and universities in the US – timeline, over the last fifty years there have been six school mass shootings (including Sandy Hook) that have taken the lives of children 5-18. Three of the mass shootings were at primary schools (Stockton, CA, in 1989; Nickel Mines, PA, 2006; and now Sandy Hook.)
So here are a few observations and comments:
Update: You may also want to see 6 Timelines That Explain America's Persistent Gun Culture
AP has a story summarizing Global Trends 2030, a report put out by the U.S. Intelligence community.
... The study said that in a best-case scenario, Americans, together with nearly two-thirds of the world's population, will be middle class, mostly living in cities, connected by advanced technology, protected by advanced health care and linked by countries that work together, perhaps with the United States and China cooperating to lead the way.
Violent acts of terrorism will also be less frequent as the U.S. drawdown in troops from Iraq and Afghanistan robs extremist ideologies of a rallying cry to spur attacks. But that will likely be replaced by acts like cyber-terrorism, wreaking havoc on an economy with a keystroke, the study's authors say.
In countries where there are declining birth rates and an aging population like the U.S., economic growth may slow.
"Aging countries will face an uphill battle in maintaining living standards," Kojm said. "So too will China, because its median age will be higher than the U.S. by 2030."
The rising populations of disenfranchised youth in places like Nigeria and Pakistan may lead to conflict over water and food, with "nearly half of the world's population ... experiencing severe water stress," the report said. Africa and the Middle East will be most at risk, but China and India are also vulnerable.
That instability could lead to conflict and contribute to global economic collapse, especially if combined with rapid climate change that could make it harder for governments to feed global populations, the authors warn.
That's the grimmest among the "Potential Worlds" the report sketches for 2030. Under the heading "Stalled Engines," in the "most plausible worst-case scenario, the risks of interstate conflict increase," the report said. "The U.S. draws inward and globalization stalls." ...
Here is the overview from the report:
Over the next two decades, the relative power of major international actors will shift markedly. Around 2030, after nearly a century as the preeminent global economic power, the United States will be surpassed by China as the world’s largest economy. With its trade in goods expected to nearly double that of the U.S. and Europe, China’s international economic clout will reach new heights. By 2030, India will become the world’s most populous country and third-largest economy, while Brazil’s economy will rank fourth in size. India and Brazil will join China at the high table of 21st century international politics alongside the United States, even as the relative weight of Russia and Japan diminishes. The European economy will remain in the top tier, but it is not clear whether Europe will be able to act with common purpose to leverage this source of strength.
With its enhanced economic base, Beijing could rival Washington in overall military spending, even as a slowing Chinese economy and internal political conflict complicate China’s ability to lead internationally. The United States will remain primus inter pares in light of its continued advantages across the full spectrum of national power and the legacy benefits of its leadership. It will, however, be operating in a post-Western world in which the bulk of global economic power is held by countries whose per capita incomes are far below those of the traditional great powers. This reality will leave China, India, Brazil, and other players focused on internal development and domestic challenges, torn between their desire to be global powers and their interest in free-riding on Western management of the international system.
How will the rise of the rest impact the international system? The National Intelligence Council’s draft Global Trends 2030: Alternative Worlds maps out three broad scenarios:
Reverse Engines. Under this scenario, the international system would consist of several powerful countries — but no single state or bloc of states would have the political or economic leverage to drive the international community toward collective action. Such a world, characterized by a global vacuum of power, assumes that the United States will no longer be willing or capable of sustaining the predominant leadership role it has assumed since 1945. With no other country able to step in to replace the U.S. as a global leader, the resulting divergence of interests would lead to fragmentation and the inability of great powers to work cooperatively to solve global issues. Mercantilism and protectionism could lead economic globalization to go into reverse, constraining technological breakthroughs required to manage scarce global resources. Conflict and disorder would follow.
Great Power Convergence. An alternative scenario is what the NIC calls a “fusion” world, in which major powers work together to adopt and enforce a set of globally accepted rules and norms. As U.S. predominance over the international system recedes, other emerging powers would step in to assume greater responsibility for the management of international affairs commensurate with their swelling economic might. Emerging powers emerge as full stakeholders in a global order that is transformed by power shifts but remains liberal and pluralistic. Great power concert (perhaps enabled by democratization in China) to meet global challenges increases the stability of the international system even as power is diffused within it. U.S. resilience enables it to create enduring partnerships with rising powers to sustain the basis of liberal order. Technological advances create new possibilities for joint management of key global challenges, rewarding positive-sum behavior by the great powers.
Multipolar Divergence—U.S. Primacy. A third scenario, one the NIC calls “fragmentation,” involves a multipolar system characterized by a divergence of views among great powers that challenges global governance. The United States would continue to maintain disproportionate global influence and leverage that influence to address global challenges by working through coalitions of like-minded states. A multispeed global economy accelerates the diffusion of power but an alternative coalition to the West does not form, with developing giants consumed by their domestic challenges – even as the global middle class explodes in ways that transform politics within the rising powers. With inclusive global institutions effectively stalemated, the United States instead turns to its old and new allies in Europe and Asia, who would continue to see Washington as their partner of choice in advancing the norms and rules of a liberal order. The risk of conflict increases with the continued rise of new powers like China and the rapid pace of technological change.
One key conclusion of the NIC study is that the future role of the United States in the international system is a decisive variable in determining what kind of “alternative world” will exist in 2030. The choices U.S. leaders make – about how to marshal (and preserve) domestic resources, how vigorously to assert U.S. military and economic leadership overseas, and how much to invest in alliances old and new – will be central to determining which of the above pathways the international system will follow over the coming 20 years. To a certain extent, the answer to the question of how the “rise of the rest” impacts the U.S.-led international system is that it is not up to them… so much as it is up to us.
Last year, I had the privilege of visiting the leaders of the Synod of Syria and Lebanon and the Synod of the Nile (Egypt) a year ago, partner denominations to the Presbyterian Church USA. I heard firsthand about the struggles of Christians in these countries. It was made apparent to me that a central component to any lasting peace in the region is for moderate Muslims, Christians, and religious minorities to form a healthy civil society. Dedicated Christians from our partner denominations in these regions have worked diligently toward that end.
We are hearing a great deal about the violence in Syria, and with good reason. The immediacy of the suffering is tragic. But I sense that Egypt may be the bigger story in the long run. There are more than eighty million Egyptians, dwarfing the size of other nations in the region. There is also a history of stronger, more tolerant, societal institutions. If Egypt is transformed into an Islamist state, then I think the implications well be tragic and far reaching for much of the rest of the region.
As I recall, about 90% of Egyptians are Muslim. About 9% are Coptic Orthodox Christians. About 1% are Protestant. Moderate Muslims and Christians alike were part of the protests that ousted Mubarak. Moderate Muslims and Christians are leading the protests against Morsi’s power grab and against the troubling new constitution that is being proposed.
While in Egypt, I had the privilege of dining in the home of a young family who also acted as our tour guides for a day. The wife and mother of this family has been posting articles and pictures relating to the protests on Facebook, like this picture of brave women taking the front row of a march towards the presidential palace carrying their own shrouds (coffin cloth) in their arms.
Three hours ago my friend posted that the referendum on the constitution has now been delayed until the 12th. The pressure has been to get this constitution passed as quickly as possible and there is some hope this delay may lead good things.
Let us all remember to keep Egypt in our prayers. Let us pray that moderate Muslims and Christians will be able to influence events toward the creation of a healthy civil society, delivering Egypt from the bondage of extremist elements, even was we continue to pray for an end to the horrific suffering in Syria.
It's a stunning thought: The United States, long dependent on foreign oil, may actually achieve energy independence over the next two decades. And by 2030 it could become a net exporter of oil. ...
... That intriguing possibility has generated most of the headlines, but the IEA report draws attention to another trend that's just as important: A possible reversal of globalization trends that until now have mostly caused a net outflow of jobs from the United States to lower-cost nations, such as China and India. ...
... Some economists have been predicting a second phase of globalization, in which foreign labor costs rise and it becomes more cost-effective to produce things in developed nations such as the United States. And now, the booming U.S. energy sector may give that trend a boost.
The IEA report points out that abundant energy in the United States will have at least two secondary effects: It will make the U.S. an energy supplier to the rest of the world. And it will lower costs for U.S. manufacturers, since energy is a key input for factories who run assembly lines.
Energy is already a growing industry that supports perhaps 10 million U.S. jobs, and while the growth of some fields, such as green energy, may sometimes be overstated, it's clear that energy jobs tend to be high-paying ones that can help replace some of the blue-collar jobs that have been lost. ...
... ower energy costs will also be a growing competitive advantage for U.S. manufacturers. Some foreign manufacturers—especially those based in Europe—already find it cheaper to build certain things in America, especially products that are sold here. If the gap in energy costs grows, it will only lure more firms across the pond.
Some economists believe a "reshoring" trend is already underway....
(Reuters) - China's outgoing leader and his likely successor are pushing the ruling Communist Party to adopt a more democratic process this month for choosing a new leadership, sources said, in an attempt to boost its flagging legitimacy in the eyes of the public.
The extent of the reform would be unprecedented in communist China where elections for the highest tiers of the party, held every five years, have been mainly exercises in rubber-stamping candidates already agreed upon by party power-brokers.
The Communist Party, which has held unbroken power since 1949, is struggling to maintain its popular legitimacy in the face of rising inequality, corruption and environmental degradation, even as the economy continues to bound ahead.
President Hu Jintao and his heir, Xi Jinping, have proposed that the party's 18th Congress, which opens on Thursday, should hold elections for the elite Politburo where for the first time there would be more candidates than available seats, said three sources with ties to the party leadership. ...
One theory of economic development is that as long as the masses are poor, there is little incentive to develop sound economic and governmental institutions. As prosperity begins to emerge, those who have benefited have more to lose through arbitrary and ineffective institutions. The presence of a rising middle class creates a hope among the poor that they too can prosper. Citizens begin to press for better institutions and greater accountability. Better institutions and accountability leads to more prosperity. And on the cycle goes.
Is that happening here? Let's hope so.
China Daily: Higher costs forcing firms to relocate
Jobs going to other countries in China's 'great industry transfer'
Rising wages and shrinking export demand are forcing manufacturers to relocate to neighboring Southeast Asian nations and many that remain are seriously considering moving, a foreign trade official from the Ministry of Commerce said.
The official, who declined to be named, said that "nearly one-third of Chinese manufacturers of textiles, garments, shoes and hats" are now working "under growing pressure" and have moved all, or part, of their production outside China in what he called the great industry transfer.
Favored destinations are usually members of the Association of Southeast Asian Nations, especially Vietnam, Indonesia and Malaysia.
And in all likelihood, "the trend will continue" with more traditional labor-intensive manufacturers transferring production, he told China Daily. ...
... China's labor costs have surged recently by 15 to 20 percent annually, squeezing margins and driving some companies to bankruptcy.
According to the Ministry of Human Resources and Social Security, from January to June the minimum wage was raised, on average, by 20 percent in 16 provinces.
The minimum wage in Shenzhen now stands at 1,500 yuan ($238) per month, setting the highest standard for the whole Chinese mainland.
Many developing countries in Southeast Asia have lower labor costs.
The monthly wage for manufacturing jobs in Vietnam was, on average, 600 yuan in 2011, equivalent to the level of 10 years ago in Dongguan, an industrial town in South China's Pearl River Delta....
...But lower costs in other countries could soon change, some said.
"The advantage (of labor and production costs) in Southeast Asian countries will only last for a few years," said Chen Jian, a general manager of a garment company headquartered in Foshan, on the Pearl River Delta.
"The trend is just like what happened some 10 years ago when many manufacturing industries in Hong Kong and Taiwan moved to the Pearl River Delta to chase cheap labor. But now you can see how much our labor costs have gone up."
Technorati Tags: Association of Southeast Asian Nations, china, export, import, in-sourcing, indonesia, jobs, labor-intensive, malaysia, manufacturing, minimum wage, outsourcing, rising wages, vietnam, wages
Christian Science Monitor: Reverse brain drain: Economic shifts lure migrants home
The tide of brain drain – from developing countries to industrialized nations – has turned. Human capital is returning home to Asia, Latin America, Eastern Europe, and Africa, while some European professionals squeezed by the recession, turn toward developing countries for advancement.
"Brain drain" – the flow of intellect and skilled labor from poor to rich countries – has been so constant in modern times that the Nigerian cabdriver who was educated as a doctor back home is just as much a fixture of New York City's landscape as a fledgling Broadway actress or Wall Street banker.
Academics and college-educated engineers from Brazil to China to Poland have long set off for the world's more developed nations for better opportunities, sometimes in their own fields, often behind steering wheels or in fast-food or restaurant kitchens.
But now that tide is turning; immigrants no longer always see developed countries as a better place to be. ...
... Emerging economies not only are faring better than most of the developed world in the current recession, they also continue to grow, drawing back their expatriates and, in some cases, even luring new high-skilled citizens of the US and Europe.
It is the "democratization of talent," says Demetrios Papademetriou, president of the nonprofit Migration Policy Institute in Washington, D.C. "Everyone went to four or five English-speaking countries before, [and all other nations] got the third-rung talent. Today, knowledge is no longer monopolized anywhere." ...
... Benefits are not just measured in the individuals' skills or number of jobs generated but also in a host of ancillary benefits.
"When you've lived in an OECD country and you see how things work there, I would think you become less tolerant of a corruption, of things that don't work, inefficiency, people sitting on their thumbs," says Georges Lemaitre, an expert on workforce migration at the Organization for Economic Cooperation and Development. "You want to see your own country with much more available services and with the efficiency that you are used to."
Such benefits, he adds, could become a global pattern in coming years, both from new migration and reverse migration.
In the meantime, those countries losing their allure could also lose their competitive edge. ...
The author of Poor Economics on why aid that assumes the poor will do the right thing is misguided – and why political corruption does not necessarily mean economic stagnation.
... Until Poor Economics appeared last year, the debate about aid had been broadly polarised into two positions. On the left was Jeffrey Sachs, arguing that the single biggest factor keeping poor people poor is poverty. If foreign aid can lift them out of the poverty trap long enough to free them from the disease, ignorance and debt that thwart their potential, then pretty soon they will be able to solve their own problems for themselves. On the right, William Easterly argued that the real problem isn't a poverty trap but aid itself, which creates a dependency culture that keeps the poor poor, and distorts their only real roadmap to prosperity – the free market.
As Banerjee saw it, both positions owed more to polemic and conjecture than empirical evidence. Aid budgets run into billions, yet very little work had been done to analyse their outcomes. He and Duflo, both economists at the Massachusetts Institute of Technology, thought a better approach would be to appropriate the methodology of the pharmaceutical industry, and subject different types of aid to randomised controlled trials. In 2003 they established a Poverty Action Lab, and by 2010 its researchers had conducted more than 240 experiments in 40 countries, in a Herculean attempt to find out what actually works.
New York Times: Hits, and Misses, in a War on Bribery
Until recently, federal prosecutors had won settlements in nearly every battle involving charges of foreign bribery by multinational corporations and their executives. But in late February — indeed, the very week that Mr. Stanley was sentenced — the Justice Department had an embarrassing setback: it abruptly withdrew the biggest case ever brought against individuals under the Foreign Corrupt Practices Act.
It was an extraordinary turn of events. The F.B.I. had recorded 800 hours of video and audio as part of a sting operation involving supposed arms contracts in Africa. Twenty-two executives had been arrested.
Then the whole case fell apart. In a withering appraisal, the federal judge in the case, Richard J. Leon, called the government’s effort “a long and sad chapter in the annals of white-collar criminal enforcement.” Its approach to the law, Judge Leon said, had been “very, very aggressive.”
THE development opened the door for critics who assert that federal authorities have overstepped in trying to fight corruption overseas. They say that the crackdown, which began in earnest three years ago, has made it harder for companies to win legitimate business and that it has needlessly instilled fear among executives. Many companies would rather make any charges brought under the act go away with a quick settlement than try to fight them in court.
“We are seeing companies getting scooped up in aggressive enforcement actions and investigations,” said Lisa A. Rickard, president of the United States Chamber of Commerce’s Institute for Legal Reform, which is pushing to modify the law. “A culture of overzealousness has grabbed the Justice Department.”
“The last time I checked,” Ms. Rickard added, “we were not living in a police state.”
Such heated criticism aside, federal authorities say they are unbowed.
Lanny A. Breuer, the assistant United States attorney general who has stepped up enforcement actions under the act, said he saw no reason to change course. In fact, he is expanding his staff — and his range of potential targets. ...
... AS they pursue their overall campaign, federal authorities have their work cut out for them. As business has gone global, so has graft, particularly as companies in rich nations push into poorer regions. The World Bank estimates that $1 trillion in bribes is paid annually to government officials. In Africa alone, $148 billion is siphoned off annually, according to Transparency International, a global nonprofit group that tracks corruption. ...
... Leading the efforts to modernize the corruption act — or weaken it, in the eyes of the government — is the Chamber of Commerce. The group, in Washington, has been in discussions with the Justice Department and the Securities and Exchange Commission about new guidelines on enforcement. That guidance, expected later this spring, would give corporations a better notion of what they need to do to stay on the right side of the law.
Corporate America clearly wants its views heard.
“You are dealing with criminal liability, and that strikes fear and terror through the heart of the corporate suite,” said Ms. Rickard at the chamber.
In a letter signed by more than 30 trade associations, the chamber asks that the guidance allow companies with strong compliance programs to use that as a defense against liability. It also asks that the definition of a “foreign official” be more limited and that companies not be held accountable for the past wrongdoing of foreign companies they may purchase, among other provisions. ...
... Mr. Breuer and other government lawyers have spoken out against the provisions. They have been joined by 33 human rights groups, including Amnesty International, Oxfam America and Transparency International. ...
New York Times: Dire Poverty Falls Despite Global Slump, Report Finds
WASHINGTON — A World Bank report shows a broad reduction in extreme poverty — and indicates that the global recession, contrary to economists’ expectations, did not increase poverty in the developing world.
The report shows that for the first time the proportion of people living in extreme poverty — on less than $1.25 a day — fell in every developing region from 2005 to 2008. And the biggest recession since the Great Depression seems not to have thrown that trend off course, preliminary data from 2010 indicate.
The progress is so drastic that the world has met the United Nations’ Millennium Development Goals to cut extreme poverty in half five years before its 2015 deadline. ...
... The report contained a raft of statistics showing broad declines in poverty throughout the 2000s. For the first time since the World Bank started keeping statistics in 1981, poverty fell in every region of the world on a three-year timeframe. In sub-Saharan Africa, the proportion of the population living in extreme poverty fell below 50 percent for the first time. And between 1981 and 2008, poverty fell to just less than a quarter of the developing world’s population from more than half .
Much of the story was about China, which moved nearly 700 million people out of poverty between 1981 and 2008, with the proportion of its population living in extreme poverty falling to 13 percent from 84 percent during that period. The country’s annual pace of economic growth never dipped below 9 percent, even in 2009, when the world’s economy contracted.
But perhaps the most surprising success story is sub-Saharan Africa, where the proportion of people living in extreme poverty actually increased through the 1990s, before declining in the 2000s.
“People used to worry, ‘Is Africa going to be poor forever?’ ” said Mr. Kenny of the Center for Global Development. “Well, it doesn’t really look like it, does it?”
Extreme poverty in the Middle East and North Africa fell to just 2.7 percent in 2008 from 4.2 percent in 2002. And extreme poverty in sub-Saharan Africa fell to 47.5 percent in 2008 from 55.7 percent in 2002. ...
Women overseas are reaching new heights professionally. Here's what we can learn from our emerging market counterpart.
The mention of women in emerging economies often evokes a picture of oppressed and poverty-stricken victims, relegated to the sidelines of male-dominated cultures. That’s the usual narrative, exemplified by the best-selling Half the Sky by Nicholas Kristof and Sheryl Wu Dunn. Yes, these problems are real and of critical importance. But educated women in Brazil, Russia, India and China — the BRIC economies which represent the four largest emerging markets — and the United Arab Emirates, are telling a different tale: one of agency and power.
Just as in the U.S. — where female college graduates now outnumber men — BRIC women are flooding into universities and graduate schools. They represent 65% of college graduates in the UAE, 60% in Brazil and 57% in Russia. These figures represent more than just a tiny elite: Between 15 and 25% of young women in the BRICs/UAE are now college-educated — a substantial number. And they’re not just earning degrees: They are bursting with the desire to use them.
Highly educated women the world over are ambitious, but ambition and aspiration among BRIC/UAE women is off the charts. New data from the Center for Work-Life Policy show that 85% of female college graduates in India and 92% in the UAE consider themselves very ambitious, compared to a paltry 36% in the U.S. In India, 86% of college-educated women are shooting for the top job, closely followed by their counterparts in Brazil (80%) and China (76%).
And turbo-charged ambition is paying off. In Brazil, 14% of the CEOs of large companies are female; in India, the figure is 11%. Meanwhile, the number of women who head up Fortune 500 corporations in the United States and FTSE 100 firms in the United Kingdom is stuck at less than 5%. What’s behind these startling numbers? Our study — which is based on rich, new data — describes opportunities and obstacles, which are surprisingly different from those in the West. ...
Here is just one example of the positive impact a large "evil" multi-national corporation has on economic development among the poor. There are many other stories similar to these that are rarely seen in the press.
... Seventy percent of the world's cocoa grows in West Africa, and most of that in one country, Ivory Coast. Since 1999, Ivory Coast has been through a bloody succession of military coups, rigged elections, and civil wars. "We were concerned about running into a ceiling on production there," says Harold Poelma, managing director of Cargill Cocoa. So Cargill began looking for other options. The solution that it came up with perfectly illustrates the company's global reach and long view.
Cocoa trees look like something Dr. Seuss would draw, with clusters of hard-shelled pods, as big and colorful as Halloween gourds, sprouting directly from the trunk and limbs. They don't grow just anyplace. They need shade, warmth, and humidity, as well as deep, rich soil -- conditions generally found within a band 20 degrees north and south of the equator. That band passes through Vietnam.
Cargill was one of the first U.S. multinationals to return to Vietnam when President Bill Clinton normalized relations with the government in Hanoi in 1995. Today it is the country's largest domestic producer of livestock feed and a central player in Vietnam's fast-moving shift from a state-controlled agricultural economy to one where small farmers are encouraged to work private plots for private gain. The effect of that shift has been transformative. Not long ago, Vietnam was importing a million tons of rice a year. Last year it became the world's second leading rice exporter. "Same people, same land," Vietnam's director of crop production, Dr. Nguyen Tri Ngoc, told me in his Hanoi office, speaking through a translator. "Before, farmers were not really farmers. They were workers in the fields, and they worked under the supervision of the government." And the difference now? "Free markets!" he says in English.
In 2004, Cargill launched a public-private partnership with one of its biggest customers, chocolate giant Mars, and the governments of Vietnam and the Netherlands. The aim: to create something that had never before existed in Vietnam, a cocoa-export economy.
First, Cargill had to convince a front line of growers to switch to cocoa from well-established crops like coffee, black pepper, and cashews. Two years before the first harvest (it takes at least that long for cocoa seedlings to produce fruit), before there was anything to buy, Cargill opened two fully staffed cocoa buying stations on major roads, in Ben Tre and Dak Lak provinces. It made an early commitment to transparency, posting on the Cargill website and offering by text message both the daily international price on the London market and what Cargill is paying locally; growers can lock their price for three weeks, the time it takes to ferment and dry the beans after harvest. Cargill also built a network of more than 100 demonstration farms, where curious growers can learn from their neighbors. And in February 2011 the company took delivery of the first Vietnamese cocoa beans to carry UTZ certification -- an independent sustainability program through which growers can earn an extra $100 per ton.
This year Vietnamese farmers will produce about 2,500 metric tons of cocoa, 70% of which will go to Cargill. That's a tiny sliver of the 3.4 million-ton global market, but the growth trend is impressive: 40,000 acres under cultivation in 2010, compared with 1,200 in 2003, and already 32,000 active growers in 12 provinces. Poelma sees the potential for 100,000 tons by 2020. Instead of shipping all of that to Cargill's North Sea Canal processing plant in Wormer, the Netherlands -- a voyage that takes 24 days -- Cargill hopes to have a Cargill factory in Vietnam by then, processing cocoa liquor, cocoa butter, and cocoa powder for export to growing markets in China and India.
None of that happens without the eager participation of thousands of small growers. One I met last summer was Trinh Van Thanh, a smooth-cheeked 43-year-old with a wife, three daughters, and roughly four acres of land in Baria-Vungtau province, a two-hour drive southeast from Ho Chi Minh City. Five years ago Thanh was growing pepper and coffee and raising pigs, and he was struggling. His pepper trees were afflicted by blight. The yield from his mature coffee trees was declining year by year. He says he was $5,000 in debt.
Thanh planted his first cocoa saplings, as Vietnamese farmers often do, in the shade of his coffee trees. He enrolled in an agricultural extension program in Ho Chi Minh City, where he learned how to build a specialized slow-drip irrigation system based on technology invented on an Israeli kibbutz. When the first crop came in, Thanh made the ambitious choice to ferment and dry the cocoa beans himself. Ultimately, he built more fermentation boxes and drying tables than he needed for his own crop, which meant he could perform those value-adding services for other growers. Soon he wasn't just farming, he was running a collection station. Next he planted a cocoa-tree nursery. Then he launched an irrigation consulting business. (The man gets the concept of a virtuous cycle.) Thanh still sells all his beans to Cargill but maybe not for long. What he really wants to learn how to do next, he told me, is make and sell chocolate.
Thanh's success so far almost defies belief. He says his mini cocoa conglomerate will gross more than $850,000 this year. And if his daughter, who's about to graduate from high school, wants to go to college in America -- and he hopes that she will -- he can easily afford it.
Later in Hanoi, I tell Ngoc all about my visit to Baria-Vungtau province. When does a farmer like Thanh, I ask him, become too much of a capitalist for the Socialist Republic of Vietnam? Ngoc beams. "No limit!" he says. Again in English. ...
National Geographic has a fascinating interactive map at their website that gives some valuable socio-economic perspective. The World of Seven Billion
Foreign Policy: Think Again: War
World peace could be closer than you think.
The early 21st century seems awash in wars: the conflicts in Afghanistan and Iraq, street battles in Somalia, Islamist insurgencies in Pakistan, massacres in the Congo, genocidal campaigns in Sudan. All in all, regular fighting is taking place in 18 wars around the globe today. Public opinion reflects this sense of an ever more dangerous world: One survey a few years ago found that 60 percent of Americans considered a third world war likely. Expectations for the new century were bleak even before the attacks of Sept. 11, 2001, and their bloody aftermath: Political scientist James G. Blight and former U.S. Defense Secretary Robert McNamara suggested earlier that year that we could look forward to an average of 3 million war deaths per year worldwide in the 21st century.
So far they haven't even been close. In fact, the last decade has seen fewer war deaths than any decade in the past 100 years, based on data compiled by researchers Bethany Lacina and Nils Petter Gleditsch of the Peace Research Institute Oslo. Worldwide, deaths caused directly by war-related violence in the new century have averaged about 55,000 per year, just over half of what they were in the 1990s (100,000 a year), a third of what they were during the Cold War (180,000 a year from 1950 to 1989), and a hundredth of what they were in World War II. If you factor in the growing global population, which has nearly quadrupled in the last century, the decrease is even sharper. Far from being an age of killer anarchy, the 20 years since the Cold War ended have been an era of rapid progress toward peace.
Armed conflict has declined in large part because armed conflict has fundamentally changed. Wars between big national armies all but disappeared along with the Cold War, taking with them the most horrific kinds of mass destruction. Today's asymmetrical guerrilla wars may be intractable and nasty, but they will never produce anything like the siege of Leningrad. The last conflict between two great powers, the Korean War, effectively ended nearly 60 years ago. The last sustained territorial war between two regular armies, Ethiopia and Eritrea, ended a decade ago. Even civil wars, though a persistent evil, are less common than in the past; there were about a quarter fewer in 2007 than in 1990.
If the world feels like a more violent place than it actually is, that's because there's more information about wars -- not more wars themselves. Once-remote battles and war crimes now regularly make it onto our TV and computer screens, and in more or less real time. Cell-phone cameras have turned citizens into reporters in many war zones. Societal norms about what to make of this information have also changed. As Harvard University psychologist Steven Pinker has noted, "The decline of violent behavior has been paralleled by a decline in attitudes that tolerate or glorify violence," so that we see today's atrocities -- though mild by historical standards -- as "signs of how low our behavior can sink, not of how high our standards have risen." ...
Bradley Wright's Weblog: My new book, Upside, is now available
My second book has been released. It’s entitled Upside: Surprising Good News about the State of Our World, and it’s available on Amazon, Christian bookstores, and various other places… if there are any left ;-)
The guiding question for this book is whether the world is getting better or worse. Now, I realize that you’re probably thinking right now that that’s too narrow of a topic, but bear with me, it’s a question worth asking. ...
... My book develops two paradoxes. One, many, many things in the world are getting better, but most people are convinced that things are getting worse. Two, most people think that their lives are getting better, but their community and nation is getting worse. In my book I explore the reasons for these paradoxes.
After that—since I’m a data-driven guy—I present information about what’s happening in the world. I cover areas that most people take as important, such as income and poverty, health, education, happiness, crime, freedom, faith, marriage, families, and the environment.
In each of these areas, I present the best available data about how things are changing. The data come from sources such as the US Census Bureau, the World Bank, Centers for Disease Control and Prevention, the Environmental Protection Agency, and various sociological surveys.
I finish with examining various explanations for why so many things are getting better, and what we should do in response. ...
I can't wait to read this book! As long time Kronicle readers know, I've visited this topic over and over again at my blog. I did a World Social Indicators - 2008 series that details some of these issues. The incredible amount of pessimism in the face of the greatest expansion of global prosperity and physical well-being in the history of the world is just astounding.
The dwindling allure of building factories offshore.
“WHEN clients are considering opening another manufacturing plant in China, I’ve started to urge them to consider alternative locations,” says Hal Sirkin of the Boston Consulting Group (BCG). “Have they thought about Vietnam, say? Or maybe [they could] even try Made in USA?” When clients are American firms looking to build factories to serve American customers, Mr Sirkin is increasingly likely to suggest they stay at home, not for patriotic reasons but because the economics of globalisation are changing fast.
Labour arbitrage—taking advantage of lower wages abroad, especially in poor countries—has never been the only force pushing multinationals to locate offshore, but it has certainly played a big part. Now, however, as emerging economies boom, wages there are rising. Pay for factory workers in China, for example, soared by 69% between 2005 and 2010. So the gains from labour arbitrage are starting to shrink, in some cases to the point of irrelevance, according to a new study by BCG.
“Sometime around 2015, manufacturers will be indifferent between locating in America or China for production for consumption in America,” says Mr Sirkin. That calculation assumes that wage growth will continue at around 17% a year in China but remain relatively slow in America, and that productivity growth will continue on current trends in both countries. It also assumes a modest appreciation of the yuan against the dollar. ...
... Many multinationals will continue to build most of their new factories in emerging markets, not to export stuff back home but because that is where demand is growing fastest. And companies from other rich countries will probably continue to enjoy the opportunity for labour arbitrage for longer than American ones, says Mr Sirkin. Their labour costs are higher than America’s and will remain so unless the euro falls sharply against the yuan. ...
German exports surged in March to their highest level since records began, as the growing global economy lifted demand for its products and services.
The country's exports for the month totalled 98.3bn euros ($142bn; £87bn), 7.3% higher than February.
Its imports also reached an all-time high, up 3.1% to 79.4bn euros. Both imports and exports are the most since data started to be collected in 1950.
Germany is the world's second-largest exporter.
Only China exports more than the European nation, and the latest monthly figure for German exports was much higher than market expectations. ...
The Globalist: Brazil’s Potential in the Rousseff Era
In 2003, President Lula inherited a poor, resigned nation on the verge of an economic implosion. Eight years later, Brazil’s new president, Dilma Rousseff, leads an emerging, optimistic nation. Dan Steinbock explores how Brazil can realize its full growth potential in the post-crisis landscape.
One interesting note is the continued decoupling of the rest of the world from the American economy.
When Lula won the presidency in 2002, Brazil’s main trading partners were the United States (25.5%), the Netherlands (5.3%), Germany (4.2%) and China (4.2%).
Over the eight years, the U.S. share collapsed, while the Chinese share more than tripled. By 2009, Brazil’s main trading partners were China (13.2%), the United States (9.6%), Argentina (7.8%) and the Netherlands (5.0%).
Steinbock's presription for Brazil's economic health?
In order to realize its full BRIC potential, Brazil has to undertake seven critical steps. First, reduce the importance of the informal sector. Second, correct macroeconomic deficiencies (including the high interest rate and a relatively high government-debt-to-GDP ratio).
Third, reduce the notorious red tape. Fourth, streamline the labor code. Fifth, contain political corruption. Sixth, improve the quality of public services (e.g., education, justice and security). And seventh, develop new infrastructure.
In order to engage in the Asian trajectory of growth, however, even more reforms are needed, including far greater trade openness, significantly higher investment and savings and substantially lower public and foreign debt.
New York Times Economix: As China Grows, So Does Its Appetite for American-Made Products
SHANGHAI — America’s huge trade deficit with China has raised concerns about American competitiveness and jobs moving overseas. But a new study offers a glimmer of hope to Americans: Last year, American exports to China soared 32 percent to a record $91.9 billion.
A study by a trade group called the U.S.- China Business Council says China is now the world’s fastest-growing destination for American exports. ...
... I recently put these questions to Abdolreza Abbassian, a food economist at the UN's Food and Agriculture Organization. Here's what he told me.
Abbassian attributed the price rise to several factors — some familiar to me (and probably to you), some less familiar.
1. The rise of biofuels, like ethanol made from corn. This market, driven largely by government subsidies, has created demand that is what economists call "price inelastic" — demand stays strong even as prices rise.
2. More demand from the developing world, particularly for meat. Livestock eat grain, so increasing demand for meat means increasing demand for grain. This source of demand has also been price inelastic, Abbassian said.
3. Disappearing stockpiles.
Because of WTO rules, the U.S. and Europe have been moving away from subsidies that led to vast reserves of wheat and corn.
Subsidies still exist in the U.S. and Europe, but they've taken a different form. Governments used to buy and stockpile surplus food from farmers. Now it's more common for governments to give farmers subsidy payments without actually buying any of the food they produce, Abbassian told me.
This sounds super wonky, but it has a huge impact on the price of food.
Big stockpiles mean that the supply of food remains relatively constant, even when there are disasters like the vast fires that destroyed last summer's Russian wheat crop.
But in the absence of stockpiles, unexpected shocks like those fires in Russia last summer have a huge impact on supply. That, in turn, contributes to huge price spikes.
"What you get is a world market that is increasingly tight, without much of a buffer," Abbassian told me. "Without a buffer, you have volatility. It's as simple as that."
The volatility created by declining stocks is in turn compounded by speculation — traders betting on the rise or fall of prices.
Abbassian argued that bringing more transparency to commodities futures markets might mitigate this issue.
"If we know who is buying it and what are they buying it for, that may get those who are just there to gamble to be more cautious about their positions," he said.
Who is going to go hungry?
At any given moment, there are about a billion people in the world who don't have enough food to eat. When food prices go up, more people do go hungry — but the increase isn't as dramatic as you might think.
That's partly because many of the world's poorest people simply have no money and no access to food. Many live in countries where wars and other crises make it hard to get food to people. They would be hungry even if the price of food had not spiked.
What's more, in many poor countries, the local harvest is a more important factor than the price of global commodities. And many countries in Africa have had strong harvests of staples such as white corn and cassava.
One often overlooked region likely to be hit hard by the price increases is Central Asia, Abbassian said. This recent FAO report has lots of region-by-region detail. ...
New York Times: China Replaced Japan in 2010 as No. 2 Economy
TOKYO — Japan’s economy contracted in the fourth quarter when compared with the previous three months, though analysts are optimistic about the country’s prospects for the rest of the year.
Japan’s gross domestic product fell 0.3 percent in the October-December quarter as the end of generous government incentives on environmentally friendly cars resulted in a temporary decline in spending. At an annualized rate, Japan’s economy shrank 1.1 percent from the previous quarter.
The contraction, the first in five quarters, brought Japan’s economy for 2010 to $5.47 trillion, the Japanese Cabinet Office said. That compared with a $5.88 trillion economy for fast-growing China. The latest numbers were further evidence of China’s rapid ascent as an economic superpower, as China surpassed Japan last summer after the half-year gross domestic product numbers were released. Just five years ago, China’s gross domestic product was around $2.3 trillion, about half Japan’s.
Japan’s economy has stagnated over the last two decades, reflecting its continued decline in economic and political clout.
The country had the world’s second-largest economy after the United States for much of the last four decades. In the 1980s, its rapid growth even led to talk of the Japanese economy’s overtaking that of the United States. ...
New York Times: Emerging Markets as Partners, Not Rivals Greg Mankiw
IN his State of the Union address last month, President Obama set the stage for a coming policy debate and his re-election bid with a catch phrase. Six times, he called on Americans to “win the future.” And he used the variant “winning the future” three other times. But is this really a good way to frame the economic challenges we face? ...
... More troublesome to me as an economist, though, is that calling on Americans to “win the future” misleads us about the nature of the policy choices ahead. Achieving economic prosperity is not like winning a game, and guiding an economy is not like managing a sports team. ...
... The gains from trade would be much the same if your neighbor were manufacturing a good — knitting you a scarf, for example — rather than performing a service. And it would be much the same if, instead of living next door, he was several thousand miles away, say, in Shanghai.
Listening to the president, you might think that competition from China and other rapidly growing nations was one of the larger threats facing the United States. But the essence of economic exchange belies that description. Other nations are best viewed not as our competitors but as our trading partners. Partners are to be welcomed, not feared. As a general matter, their prosperity does not come at our expense. ...
...The president is right that we should encourage a greater number of highly educated foreigners to migrate here. Because skilled workers pay more in taxes than they receive in government benefits, increasing their supply would reduce the fiscal burden on the rest of us. But if these foreign students decide to return home, as many do, we shouldn’t worry that they are competing against us.
Instead, we should view higher education in the United States as one of our most successful export industries. The United States has 5 percent of the world’s population but most of the best universities. Is it any wonder that students from many nations flock here to learn? And as they do so, they create opportunities for Americans — from the professors who teach the classes to the grounds crews who maintain the campuses.
When the foreign students head home, they take the human capital acquired here to become productive members of their own communities. They spread up-to-date knowledge, so it can foster prosperity everywhere. Some of this knowledge is technological. Some of it concerns business, legal and medical practices. And some is even more fundamental, such as the values of democracy and individual liberty. Nothing could be better for the United States than these thousands of American-trained ambassadors who have seen at first hand the benefits of a free and open society.
As we confront the many hard policy choices ahead, let’s prepare for the future. Let’s invest for the future. Let’s be willing to make hard sacrifices for a more prosperous future. But let’s not presume that the future is a game requiring winners and losers.