Kruse Kronicle

Latin America’s middle class grows, but in some regions more than others

Pew Research: Latin America’s middle class grows, but in some regions more than others

Three interesting graphs:

Deforestation: Brazil is a success story for conservation

Christian Science Monitor: Deforestation: Brazil is a success story for conservation

"In the 1990s, tropical deforestation claimed 40 million acres each year, according to a report released in June by the Union of Concerned Scientists (UCS). Today, about 32 million acres of forests fall each year, a drop of about 19 percent. ...

...  The report cites a number of efforts that have led to deforestation’s decline. The researchers looked primarily at political policies, incentive programs, and economic reforms, limiting the scope of their study to countries and regions that displayed clear, tangible successes.

“Ultimately, the report shows that every euro, dollar, peso, rupee, dong, and African franc invested in these programs and policies is money well spent,” said Doug Boucher, the lead author of the study, in a news release. “The rewards far outweigh the costs.”

Brazil has effectively employed a suite of conservation methods. ...

Economics Links

1. Your personality type determines your paycheck

2. New York Times editorial: Yes, Economics Is a Science

... But the headline-grabbing differences between the findings of these Nobel laureates are less significant than the profound agreement in their scientific approach to economic questions, which is characterized by formulating and testing precise hypotheses. I’m troubled by the sense among skeptics that disagreements about the answers to certain questions suggest that economics is a confused discipline, a fake science whose findings cannot be a useful basis for making policy decisions.

That view is unfair and uninformed. It makes demands on economics that are not made of other empirical disciplines, like medicine, and it ignores an emerging body of work, building on the scientific approach of last week’s winners, that is transforming economics into a field firmly grounded in fact.

It is true that the answers to many “big picture” macroeconomic questions — like the causes of recessions or the determinants of growth — remain elusive. But in this respect, the challenges faced by economists are no different from those encountered in medicine and public health. Health researchers have worked for more than a century to understand the “big picture” questions of how diet and lifestyle affect health and aging, yet they still do not have a full scientific understanding of these connections. Some studies tell us to consume more coffee, wine and chocolate; others recommend the opposite. But few people would argue that medicine should not be approached as a science or that doctors should not make decisions based on the best available evidence.

As is the case with epidemiologists, the fundamental challenge faced by economists — and a root cause of many disagreements in the field — is our limited ability to run experiments. ...

For a related post: People Are Wondering If Economics Is Really A 'Science'

3. The Guardian: Economics students need to be taught more than neoclassical theory

... Despite this dominance, the few who did predict the financial crisis were economists from non-mainstream backgrounds. This clearly shows that alternatives have much to contribute to the discipline of economics. Neoclassical economics is the mainstream and it is vital for economics students to understand it, and there are reasons it has proved so alluring to so many great minds. While in recent decades it has often been used to advocate free markets, it can be used to argue for a socialist economy, and indeed was in the 1930s. So it doesn't necessarily restrict us to a single political viewpoint. However, it does not comprise the whole of economics – and nor should it. This is not about ideology, it is about improving economics education. ...

4. Does Studying Economics Breed Greed?

... Consider these data points: 

Less charitable giving: In the US, economics professors gave less money to charity than professors in other fields—including history, philosophy, education, psychology, sociology, anthropology, literature, physics, chemistry, and biology. More than twice as many economics professors gave zero dollars to charity than professors from the other fields.

More deception for personal gain: Economics students in Germany were more likely than students from other majors to recommend an overpriced plumber when they were paid to do it.

Greater acceptance of greed: Economics majors and students who had taken at least three economics courses were more likely than their peers to rate greed as “generally good,” “correct,” and “moral.”

Less concern for fairness: Students were given $10 and had to make a proposal about how to divide the money with a peer. If the peer accepted, they had a deal, but if the peer declined, both sides got nothing. On average, economics students proposed to keep 13% more money for themselves than students from other majors. ...

The author offers some remedies.

6. Six signs you’re reading good criticism of economics

1. The criticism is by an economist ...

2. They know the difference between academic economists, economic consultants, business, bureaucrats and politicians ...

3. They distinguish “good for business” and “good economics” ...

4. They criticise a particular, clearly defined area or use of economics ...

5. They criticise a specific economist ...

6. They recognise that economics and values cannot be untangled, no matter who is doing the analysis ...

5. We Don’t Need a ‘Third Way’, We Need More Non-Profits

The problem with advocating for third way economic system between capitalism and socialism is, as Matt Perman notes, there is no realistic third way. Fortunately, a third way isn’t needed since capitalism can do everything that so-called “third alternative” (e.g., distributism) want their system to do. For instance, one aspect of how capitalism can create a more “people-centered economy” is to increase the amount of capital that is dedicated to non-profits. ...

6. Deficits have fallen to 4% of GDP: Source

7. So why, exactly, is labor’s share of income on the decline?

... But e21′s Scot Winship trots out a differently theory (as seen below in a reverse-order Twitter exchange). He theorizes that the labor share of income used to be artificially high, reflecting overpayment to workers during the strong union era so wives could stay at home and raise the kids. Then as women entered the workforce, there was a “Great Correction” where male compensation stagnated, female compensation rose, and the labor share fell. Looking forward to Winship’s extended essay and research on the topic.

8. 1 In 8 Suffers From Chronic Hunger Globally, U.N. Report Says

Worldwide, roughly 1 in 8 people suffered from chronic hunger from 2011 to 2013, according to a new report from three U.N. food agencies.

They concluded that 842 million people didn't get enough food to lead healthy lives in that period, a slight drop from the 868 million in the previous report. ...

 9. BBC: Economy woes pile up for Latin America's leftists

Since the start of the global economic crisis, left-leaning Latin American politicians and pundits have been foretelling the end of economic "neo-liberalism" in their part of the world.

But now, five years after the collapse of US bank Lehman Brothers, we may instead be witnessing the twilight of economic "neo-leftism" in Latin America. ...

10. Why China’s middle class supports the Communist Party

... The common belief of the last 20 years outside China is that economic growth, a growing middle class, and the rise of entrepreneurs inevitably lead to democracy. Everyone knows democratic countries do not go to war with each other, and that a democratic China means thereby less of a "China threat."

The China threat may indeed disappear, but this is unlikely to be because of a rising middle class. The problems with these various equations are that different meanings of the middle class have been elided, even though they may have nothing in common. However it is conceptualized, the middle class in China is actually small despite the current rhetoric. And last but by no means least, China’s socio-political experience is not that of Europe or North America. The middle class in China remains an essential part of the state from which it has emerged and is not very likely to be the Chinese equivalent of the European or North American bourgeoisie with whom it is often equated. ...

11. How to Cut the Poverty Rate in Half (It's Easy)

... Using the dataset from the latest Census poverty report, I determined that if we cut a $2,920 check to every single American—adults, children, and retirees—we could cut official poverty in half. Economists consider this sort of across-the-board payment a “universal basic income.” You can think of it as Social Security for all, not just the elderly. 

The upside of giving everybody about $3,000 is that it’s a very easy policy to run and a surefire way to cut poverty in half. But it's a large program: it would require about $907 billion in 2012, or 5.6 percent of the nation’s GDP. (In a real implementation, we might exclude the more than 45 million Americans receiving OASI Social Security benefits from a basic income, bringing the cost down substantially.) ...

A challenge with this model is that as someone's income rises to the top of the poverty line, they will lose the $3,000 payment as they move past that line. They need a jump of $3,000 over the line to break-even. Some method is needed for the transition out of poverty if people are not to be trapped there.

12. NPR: Debate: For A Better Future, Live In A Red State?

13. Adam Smith on Self-Interests, Not Greed

... Smith’s views were clear: we are in “almost constant occasion for the help of[(our]brethren, and it is in vain for [us] to expect it from their benevolence only. [We] will be more likely to prevail if [we] can interest their self–love in [our] favour, and shew them that it is for their own advantage to do for [us] what [we] require of them”. 

Of course the same is true for solely self-interested greedy “butchers, brewers, and bakers”!  They will prevail only if they “lower their” price demands to what their customers “can go along with”.  For both self-interested buyers and for self-interested sellers they must mediate their self-interests to arrive at successful transactions.

The process by which they mediate their self-interests is by persuasion, as outlined by Adam Smith in his “Theory of Moral Sentiments” and how that is best achieved in negotiations or bargaining exchanges is explained in the sentence immediately before the “butcher, beer, baker” example: “Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of.” (Wealth Of Nations, above).

I hope this is made clear by tutors at Harvard University and that you also make it clear in your classes too.

Greed is not good!  That is the opposite of what Adam Smith taught.

 14. PBS: The Three Reasons Countries Get Rich: Location, Location and Location (I'm not endorsing this view. It is much too deterministic. But it makes for interesting discussion.)

 15. Emerging Economies Nearing Half of Global Warming Emissions

... Developing nations' emissions are rising fast and the report predicted that their share of cumulative emissions would reach 51 percent by 2020. ...

Economics Links

1. Did living standards improve during the Industrial Revolution?

... So, while the Industrial Revolution ultimately led to big increases in wealth, progress was unsteady. For much of the period, the average person was not reaping the benefits of economic change.

So much for wages. Other measures of standard of living should be considered. ...

This a great piece highlighting the methods economic historians use to evaluate standards of living.

2. Annual Food Inflation

3.  Robert Reich on free markets

... In reality, the "free market" is a bunch of rules about (1) what can be owned and traded (the genome? slaves? nuclear materials? babies? votes?); (2) on what terms (equal access to the internet? the right to organize unions? corporate monopolies? the length of patent protections? ); (3) under what conditions (poisonous drugs? unsafe foods? deceptive Ponzi schemes? uninsured derivatives? dangerous workplaces?) (4) what's private and what's public (police? roads? clean air and clean water? healthcare? good schools? parks and playgrounds?); (5) how to pay for what (taxes, user fees, individual pricing?). And so on.

These rules don't exist in nature; they are human creations. Governments don't "intrude" on free markets; governments organize and maintain them. Markets aren't "free" of rules; the rules define them....

All true, but the rules were not arbitrarily written yesterday. Centuries of trial and error are reflected in the rules. That doesn't make them all just or above modification, but neither are they a game thrown together at a whim. To claim there are no free markets because government frames elements of exchange is like saying there is no such thing as free speech because government frames elements of public dialog.

4. American Farmers Say They Feed The World, But Do They?

... So I called , an economist at Cornell University who studies international agriculture and poverty.

They're both right," he says, chuckling. "Sometimes the opposite of a truth isn't a falsehood, but another truth, right?"

It's true, he says, that bigger harvests in the U.S. tend to make food more affordable around the world, and "lower food prices are a good thing for poor people." ...

... But Mellon is right, too, Barrett says. The big crops that American farmers send abroad don't provide the vitamins and minerals that billions of people need most. So if the U.S. exports lots of corn, driving down the cost of cornmeal, "it induces poor families to buy lots of cornmeal, and to buy less in the way of leafy green vegetables, or milk," that have the key nutrients. In this case, you're feeding the world, but not solving the nutrition problems. ...

 5. Why the U.S. Needs to Fall Out of Love With Homeownership

... Less developed countries have consistently higher levels of homeownership, while more advanced nations combine higher levels of economic development with substantially lower levels of homeownership.  (The correlation between the two is -.40 overall and it rises to -.58 when she removed outliers Singapore, Norway, Luxembourg and Switzerland). American political rhetoric tends to equate rising homeownership rates with strong economic development. Instead, the opposite is true. The rate of homeownership declines as nations get wealthier.

One reason for this may be because people in less developed nations have fewer options of where to put their money. In agrarian economies, land ownership is the basic source and measure of wealth. In more advanced capitalist economies, people have many more investment options. Many of the places with the highest rates of homeownership are in former Communist nations of Eastern Europe. ...

... And numerous studies have found that excessive homeownership significantly distorts the economy, diverting investment away from much more needed areas like technology and knowledge.

Homeownership continues to make sense for many Americans. But for those whose income is limited or who are still building their careers, a house can be an anchor than limits their ability to move to where jobs are.  ...

6. Household Incomes Remain Flat Despite Improving Economy

7. Brazil's New Middle Class: A Better Life, Not An Easy One

Tens of millions of Brazilians have risen out of poverty over the past decade in one of the world's great economic success stories. The reasons are many: strong overall economic growth, fueled by exports. A rise in the minimum wage. A more educated workforce. And big government spending programs, including direct payments to extremely poor families.

But becoming middle class in Brazil means a better life, not an easy one. The new, lowest rung of the middle class is what in the U.S. would be called the working poor, with monthly incomes of between $500 and $2,000.

Yet this group is driving consumer spending in Brazil as they cobble together enough money to buy a television, a cell phone or pay for their children to go to a private school. ...

Saturday Links

1. Mark Buchanan asks Is Economics a Science or a Religion?

2. Poverty has moved to the suburbs

I don't think this should be seen as necessarily a bad thing. A few decades ago, the idea was to "warehouse" the poor in large urban complexes. There has been an intentional effort at dispersal through various means including creating mixed-income neighborhoods.

3. Crime has plummeted in the rich world, even amid the recession.

4. 5 Charts That Perfectly Capture The Incredible Rise Of China

5. How (and why) Africa should solve its own problems

Africa cannot rely on outside people to come and feed our poor or treat our sick, says African businessman and philanthropist Mo Ibrahim. The key is good governance, in both the public and private sectors.

6. World Bank: Africa held back by land ownership confusion

Africa's economic growth is being held back by confusion over who owns vast swathes of agricultural land, according to a World Bank report.

7. Deforestation in Africa's Congo Basin rainforest slows

Tree loss in one of the world's largest rainforests has slowed, a study suggests.

Satellite images of Africa's Congo Basin reveal that deforestation has fallen by about a third since 2000.

Researchers believe this is partly because of a focus on mining and oil rather than commercial agriculture, where swathes of forest are cleared. ...

 8. Brazil's Evangelicals A Growing Force In Prayer, Politics

... Recent polls show that evangelical Christianity is the fastest-growing sect in Brazil. According to the Pew Research Center, 22 percent of the Brazilian population identifies as evangelical Christian — up from 5 percent in 1970. Unfortunately for the Catholic Church, most of them switched from Roman Catholicism.

These days, only about 62 percent of people in Brazil say they are Catholic. In absolute numbers, however, this still makes Brazil the country with the most Catholics in the world. ...

9. For Developing World, a Streamlined Facebook

MENLO PARK, Calif. — Facebook has been quietly working for more than two years on a project that is vital to expanding its base of 1.1 billion users: getting the social network onto the billions of cheap, simple "feature phones" that have largely disappeared in America and Europe but are still the norm in developing countries like India and Brazil.

Facebook soon plans to announce the first results of the initiative, which it calls Facebook for Every Phone: More than 100 million people, or roughly one out of eight of its mobile users worldwide, now regularly access the social network from more than 3,000 different models of feature phones, some costing as little as $20.

Many of those users, who rank among the world's poorest people, pay little or nothing to download their Facebook news feeds and photos, with the data usage subsidized by phone carriers and manufacturers. ...

10. The Huge Threat to Capitalism That Republicans Are Ignoring (I don't agree with a couple of points but I think his thesis is spot on.)

11. Big Racial Divide over Zimmerman Verdict

12. The Wal-Mart Slayer: How Publix's People-First Culture Is Winning The Grocer War

Family-run Publix is both the largest employee-owned company and the most profitable grocer in America. Those two facts are linked, and they might be the formula for fending off Bentonville's retail behemoth. ...

... When a middle-aged woman asks about a box of crackers, no aisle number is blurted out. Instead, an employee races off to find the item, just as he is trained to do. At checkout, shoppers move to the front quickly, thanks to a two-customer-per-line goal enforced by proprietary, predictive staffing software. Baggers, a foggy memory at most large supermarket chains, carry purchases to the parking lot. Even Publix's president, Todd Jones, who started out as a bagger 33 years ago, stoops down to pick up specks of trash on the store floor.

"We believe that there are three ways to differentiate: service, quality and price," Jones says. "You've got to be good at two of them, and the best at one. We make service our number one, then quality and then price."...

... Publix, the seventh-largest private company in the U.S. ($27.5 billion in sales) and one of the least understood thanks to decades of media reticence, is also the largest employee-owned company in America. For 83 years Publix has thrived by delivering top-rated service to its shoppers by turning thousands of its cashiers, baggers, butchers and bakers into the company's largest collective shareholders. All staffers who have put in 1,000 work hours and a year of employment receive an additional 8.5% of their total pay in the form of Publix stock. (Though private, the board sets the stock price every quarter based on an independent valuation; it's pegged at $26.90 now, up nearly 20% already this year.) How rich can employees get? According to Publix, a store manager who has worked at the company for 20 years and earns between $100,000 and $130,000 likely has $300,000 in stock and has received another $30,000 in dividends. ...

 13. Grocery shopping online: Can it replace trips to the store?

The website mySupermarket.com compares the prices of groceries online and works to reduce shipping costs. But a limited selection means grocery store runs aren't a things of the past just yet.

14. 25 Everyday Things Made Obsolete This Century. What would you add to the list?

katmere via Flickr

The new middle class revolution: Facts and figures

BBC: The new middle class revolution: Facts and figures

Saturday Links

 1. The High Calling published an article I wrote. I linked it earlier, but here it is again in an act of shameless self-promotion. It goes to some core issues I'm trying to put into a book. Six Ideas on How to Lead Congregations to Integrate Work and Discipleship

2. Should Pastors Know How Much Church Members Give?

A recent study found that churches where pastors know how much is donated and by whom were more likely to be doing well financially. However, only half of the 3,000 responding congregations (and only 39 percent of evangelical ones) told the Lake Institute on Faith and Giving that their pastors knew this information.

What experts said (starting with "yes" and moving to "no" ): ...

3. Model for megacities? Mexico City cleans up its air.

... With urbanization advancing, economies expanding, and climate change a concern, Mexico City has emerged as an unlikely environmental example for cities in developing countries suffering similar air quality issues.

Mexico City recorded only eight days with air quality considered "good" in 1992. That compares with 248 "good" air days in 2012, reflecting the success of initiatives to relocate industry, kick clunkers off the capital's streets, encourage cleaner technologies, and expand public transit and cycling options. ...

4. Unmanned Drones May Have Their Greatest Impact on Agriculture

Talk about beating swords into plowshares. The mention of drones may conjure up images of Star Wars-like spacecraft or hell-fire war machines. But the controversial technology may prove to have its greatest impact in a peaceful endeavor: farming. ...

... The market for agricultural drones lies in the technology's ability to provide farmers with a bird's-eye view of their land. Historically, farmers have walked their land to survey it—looking for areas that need more fertilizer or water. More recently many have begun using small passenger planes to look at their lots from the air. But since airplane rental and fuel costs can quickly run into five figures, there's strong demand for cheaper alternatives. ...

... "Eighty percent of the utilization, once we are allowed to have Unmanned Aircraft Systems in the national airspace, in the first 10 years is going to be in precision agriculture," said Michael Toscano, CEO of AUVSI. "You will have a situation where you can spray crops by a UAS that flies 2 or 3 feet above the plants. You can control the downwash because you can put the pesticides on the plants and not in the ground where it gets to the groundwater."

"It sounds trivial but those numbers really add up a lot," said Rory Paul of Volt Aerial Robotics. "If we could save farms 1 percent on inputs like herbicide and pesticide and increase their yields by 1 percent, you are looking at multibillion dollar savings."...

5. Fascinating piece about the The Historical Horror of Childbirth

... Such stories were not at all shocking, as a woman's chances of dying during childbirth were between one and two percent -for each birth. If a woman gave birth to eight or ten children, her chances of eventually dying in childbirth were pretty high. The infant mortality rate was even higher. The chances of a child dying before his fifth birthday were estimated to be around 20 percent, depending on the community (accurate records are scarce). In addition to the fear of death or the fear of the child dying, there was no pain relief during labor, except for whisky in some places. ...

6. "INDIA will soon have a fifth of the world's working-age population." India's moment

7. 'Late-life crisis' hits the over-60s

"Of the 33% who went through a crisis, bereavement was the most common trigger, followed by personal illness or injury."

8. Hispanic High School Graduates Pass Whites in Rate of College Enrollment

 

9. Atlantic Cities asks the question that has interested me for years: Why Do So Many People Think Gun Violence Is Getting Worse?

"Twenty years into this safer era, we still don't know quite how we got here. Perhaps in absence of a logical narrative, many Americans simply find it hard to believe this is true."

10. People Don't Wear A Shocking Amount Of Their Clothes.

"The average person only wears about 20% of the clothing in his or her closets. Most clothing goes unworn because it's the result of an impulse buy or doesn't fit correctly, Ray A. Smith at the Wall Street Journal reports."

11. This week was the 20th anniversary of the birth of the World Wide Web. The Day Distance Disappeared

12. Great piece! The Tech Trends to Fear the Most: It's Not All Good

13. The market 'bubble' you've never heard of: "Some economists are worried that farmland prices are nearing bubble territory. How bad can it be if no one's heard of it?"

14. Michael Barone says College Bubble Bursts After Decades of Extravagance

15. Whatever happened to these Fortune 500 companies? "Here are seven companies from the first Fortune 500 that have since been merged, split up, or put out to pasture."

16. Dwight Lee has a thought-provoking piece about The Two Moralities of Ebenezer Scrooge.

17. The global economy: Welcome to the post-BRIC world

18. Development finance in Africa

19. Toxic Waste Sites Take Toll on Millions in Poor Nations

New studies attempt to quantify just how harmful the rampant exposure to lead and other chemicals is in the developing world.

20. James Pethokoukis with a provocative article about income inequality: Why A Decline In Income Inequality Would Be Bad News

Why has income inequality been rising in advanced economies — it's not just the US, people — over the past few decades? The economic consensus mostly explains the phenomenon as a race between accelerating technological change and expanding education. And the rise of inequality shows, as JPMorgan economist Mike Feroli puts it in a new report, that the "pace of technological advance has outstripped the ability of the educational system to supply the human capital skills needed to utilize this technology, leading to out-sized earnings gains for those who have such skills (the so-called college wage premium)."...

A secular Latin America?

Christian Century: A secular Latin America?

In recent months, observers have remarked on the growing number of Americans who claim no religious affiliation (the “nones”), whose numbers are highest among the young. We can argue about just what these numbers mean, but possibly they do mark the beginning of a secularizing trend, a drift toward European conditions. Surprisingly perhaps, given our customary assumptions about Latin America, conditions in several Latin American nations mirror those in the U.S. Increasingly these countries are developing a European coloring. ...

... Whatever the causes, the European experience indicates that countries where the fertility rate falls well below replacement (2.1 children per woman) might be facing rapid secularization.

With that figure in mind, let’s look at the countries of Latin America, and especially the most economically developed ones. A few decades ago, all had classic Third World population profiles and very large families. In the 1960s, for instance, Brazil’s fertility rate hovered around 6 children per woman, alarming those who warned of a global population explosion. By 2012, though, Brazil’s figure was 1.82, far below replacement level. Chile and Uruguay both record similar rates of 1.87. Argentina is still above replacement, but the rate is falling fast. That’s a social revolution in progress—as well as a gender revolution.

In religious terms, these countries present a complex picture, with strong evidence of a continuing passion for religion. Brazil is home to some spectacularly successful Pentecostal megachurches, which Catholic clergy seek to imitate in order to hold on to believers. New evangelical churches are also booming in the other Latin nations, to the point that Protestants claim to be living through a new Reformation.

At the same time, though, signs of secularization appear that would have been unthinkable not long ago. Nine percent of Brazilians now say they follow no religion, and the proportion of nones is much higher among those under 20. Uruguay emerges as the region’s most secular country, with 40 percent having no religious affiliation. ...

Saturday Links

1. Christian History magazine has an entire issue devoted to Christians in the New Industrial Economy: The World Changed, the Church Responded. It is a priceless collection of essays on how various religious traditions responded to (or failed to) the challenges of the Industrial Revolution.

Issue 104 examines the impact of automation on Europe and America and the varying responses of the church to the problems that developed. Topics examined are mission work, the rise of the Social Gospel, the impact of papal pronouncements, the Methodist phenomenon, Christian capitalists, attempts at communal living and much more.

2. Orange County Register says Don't count out mainline Protestants yet.

As flocks shrink, denominations that once defined America fight to stay relevant with new ways of reaching out.

3. The Washington Post reports that Megachurches thriving in tough economic times.

"Despite the tough economy, many of the nation’s largest churches are thriving, with increased offerings and plans to hire more staff, a new survey shows.

Just 3 percent of churches with 2,000 or more attendance surveyed by Leadership Network, a Dallas-based church think tank, said they were affected “very negatively” by the economy in recent years. Close to half — 47 percent — said they were affected “somewhat negatively,” but one-third said they were not affected at all. ..."

4. Harvard Business Review: Steve Blank on Why Big Companies Can't Innovate

... It's not surprising that younger entrepreneurial firms are considered more innovative. After all, they are born from a new idea, and survive by finding creative ways to make that idea commercially viable. Larger, well-rooted companies however have just as much motivation to be innovative — and, as Scott Anthony has argued, they have even more resources to invest in new ventures. So why doesn't innovation thrive in mature organizations? ...

... First, he says, the focus of an established firm is to execute an existing business model — to make sure it operates efficiently and satisfies customers. In contrast, the main job of a start-up is to search for a workable business model, to find the right match between customer needs and what the company can profitably offer. In other words in a start-up, innovation is not just about implementing a creative idea, but rather the search for a way to turn some aspect of that idea into something that customers are willing to pay for. ...

... discovering a new business model is inherently risky, and is far more likely to fail than to succeed ...

... Finally, Blank notes that the people who are best suited to search for new business models and conduct iterative experiments usually are not the same managers who succeed at running existing business units. ...

5. A fascinating, if sobering, look at the conflict over islands off the coast of East Asia. Trouble at sea

6. The rise of post-industrial China? (Economist)

7. New Geography thinks U.S. LATE TO THE PARTY ON LATIN AMERICA, AFRICA.

"President Barack Obama's proposed tilt of U.S. priorities toward the Pacific – and away from the historical link to Europe – represents one of the most encouraging aspects of his foreign policy. Although welcome, we should recognize that this shift comes about three decades too late and that it may miss the rising geopolitical centrality of sub-Saharan Africa and Latin America. The emergence of these longtime historically impoverished backwaters has been largely missed as American policy-makers and businesses are now obsessed with the challenges and opportunities posed by the emergence of China and, to a lesser extent, India. Sub-Saharan Africa, for example, over the past decade has produced six of the world's 10 fastest-growing economies. Through 2011-15, according to the International Monetary Fund, seven of the fastest-growing countries will be African, and Africa as a whole will surpass the slowing growth rates in Asia, particularly China.

This growth has caused the region's poverty rates, still unacceptably high, to fall from 56.5 percent in 1990 to 47 percent today. Further growth will likely push poverty levels down further."

8. New Geography also asks, Is the Family Finished? Some interesting thoughts about the impact of declining birthrates in the U.S.

9. A Portrait of U.S. Immigrants

Pew Research Center has compiled key findings from a new analysis of the nation’s foreign-born population, based on U.S. Census Bureau’s 2011 American Community Survey.

10. Marketing Daily says More Latinos See Themselves As Bicultural

With more than half the population of many U.S. cities who are multicultural and Hispanics comprising more and more of the U.S. population, when does it become meaningless and redundant to execute marketing strategy that is directed to a general market and a Latino market perceived to be homogenous?

11. Committee on Economic Development has an interesting piece looking at both the ideological and economic aspects underlying the debate about the minimum wage. Raising the Minimum Wage: “Which Side Are You On?”

"It is an easy call if you are either (a) a strict libertarian or (b) an enthusiastic advocate of the less fortunate with limited concern about the scarcity of resources.  (If you belong to both of those groups, there is little advice that I can offer.)  However, in between those poles of opinion, things become rather murky, rather quickly."

12. Being a Republican or a Democrat may all be in your head: Republican Brains Differ From Democrats' In New FMRI Study

... Comparing the Democrat and Republican participants turned up differences in two brain regions: the right amygdala and the left posterior insula. Republicans showed more activity than Democrats in the right amygdala when making a risky decision. This brain region is important for processing fear, risk and reward.

Meanwhile, Democrats showed more activity in the left posterior insula, a portion of the brain responsible for processing emotions, particularly visceral emotional cues from the body. The particular region of the insula that showed the heightened activity has also been linked with "theory of mind," or the ability to understand what others might be thinking. ...

... The functional differences did mesh well with political beliefs, however. The researchers were able to predict a person's political party by looking at their brain function 82.9 percent of the time. In comparison, knowing the structure of these regions predicts party correctly 71 percent of the time, and knowing someone's parents' political affiliation can tell you theirs 69.5 percent of the time, the researchers wrote. ...

13. Health Care Without the Doctors Coming to a Walmart Near You

STERLING, Va. - Perched by a computer monitor wedged between shelves of cough drops and the pharmacy in a bustling Walmart, Mohamed Khader taps out answers to questions such as how often he eats vegetables, whether anyone in his family has diabetes and his age.

He tests his eyesight, weighs himself and checks his blood pressure as a middle-aged couple watches at the blue-and-white SoloHealth station advertising "free health screenings." ...

... As Americans gain coverage under the federal health law, putting increased demand on primary care doctors and spurring interest in cheaper, more convenient care, unmanned kiosks like these may be part of what their manufacturer bills as a "self-service healthcare revolution." ...

14. Is this a case of marketing going too far? Young Japanese Women Rent Out Their Bare Legs as Advertising Space

15. Nanotechnology Rebuilds the Periodic Table

Recent developments in the field of nanotechnology might give new meaning to the phrase “nothing gold can stay.” Atoms and bonds developed not by Mother Nature, but by scientists, are gaining momentum as the building blocks for cutting-edge materials.

Using nanoparticles as “atoms” and DNA as “bonds,” Chad Mirkin, the director of Northwestern University’s International Institute for Nanotechnology, is constructing his very own periodic table. So far Mirkin has built more than 200 distinct crystal structures with 17 different particle arrangements. ...

16. ExtremeTech says NASA’s cold fusion tech could put a nuclear reactor in every home, car, and plane.

17. Atlantic Cities has some great maps showing the impact of railroads on travel time in the early 19th Century, thus shrinking the nation. A Mapped History of Train Travel in the United States

18. A soccer goalie's worst nightmare.

19. You might want to think twice before a game of horse with this cheerleader.

Saturday Links

Here are the links for this week. Lots of interesting finds this week, and not nearly enough time to blog.

1. Google Fiber offers super-fast broadband to Kansas City. If all goes well, we will get connected in late spring of 2013.

2. Two Thirds of Ocean Life Remains Undiscovered. If they haven't found them, how do they know?

3. "British people - and many others across the world - have been brought up on the idea of three square meals a day as a normal eating pattern, but it wasn't always that way." Breakfast, lunch and dinner: Have we always eaten them?

4. What is the optimal rate of taxation according to the Laffer Curve? Goats hold the answer. Goat Economics: Why the Laffer Curve Is No Joke

5. The print media industry is rapidly morphing right before our eyes. Google Ad Revenue Now More Than U.S. Print Publications Combined [CHART]

6. Cyberspace continues to evolve. Text Messaging Declines in U.S. for First Time, Report Says

7. "It's a common grumble that politicians' lifestyles are far removed from those of their electorate. Not so in Uruguay. Meet the president - who lives on a ramshackle farm and gives away most of his pay." Jose Mujica: The world's 'poorest' president

8. You may have heard that there was a presidential election last week. Here is a map showing how the counties voted, with red being the most intensely Republican and blue being the most Democrat. (Source: The Real Reason Cities Lean Democratic)

9. Speaking of the election, a lot has been written about how the GOP will need to change if they want to win national elections. As a right-leaning guy, I thought this article in Slate, The New Grand Old Party, and Bobby Jindal's article, How Republicans can win future elections, were among the best.

10. China continues working on technological innovations to address its water problems. Industry Special: Desalination tech helps slake nation's thirst for fresh water.

11. The world is going to the dogs. The Dog Economy Is Global—but What Is the World's True Canine Capital?

12. As manufacturing becomes more automated, requiring fewer workers, we see The Emerging Professional, Scientific, and Technical Sector.

13. Nanotechnology just keeps getting more impressive. "The latest invention from Stanford University's Department of Electrical Engineering sounds like something a superhero would have. A self-repairing plastic-metal material has been developed by a team of professors, researchers and graduate students." New Self-Repairing Material Invented at Stanford

14. For the true narcissist, you now can replicate your image in 3D. 3D-printing photo booth gives you a figurine instead of a bad photo

15. Speaking of 3D-Printing, how big a deal is it? "Chris Anderson has exited one of the top jobs in publishing - Editor-in-Chief of Wired magazine - to pursue the life of an entrepreneur, making a big bet that 3D printers represent a massive new phase of the industrial revolution." Chris Anderson: Why I left Wired - 3D Printing Will Be Bigger Than The Web

16. The debate about a historical Adam continues. Peter Enns with another interesting post, Who Needs a Historical Prometheus…uh, I mean Adam?

17. George Bullard asks, When is a Church a Church, and When is it a Flash Mob?

"A flash mob (or flashmob) is a group of people who assemble suddenly in a place, perform an unusual and seemingly pointless act for a brief time, then disperse, often for the purposes of entertainment, satire, and artistic expression. Flash mobs are organized via telecommunications, social media, or viral emails." [Wikipedia accessed 11.12.12] How do you define a church?"

18. This was me thirty years ago (in my dreams!)

19. Ever wonder how Cy Young award-winning pitcher R. A. Dickey manages to throw knuckleballs? Apparently, so do physicists. How a Baseball Star's Tricky Pitch Strikes Out Hitters—and Baffles Physicists

20. I loved these stat brain teasers. 5 Statistics Problems That Will Change The Way You See The World

Latin America's income inequality falling, says World Bank

Guardian: Latin America's income inequality falling, says World Bank

Region now has as many middle class people as those who are poor thanks to rapid growth in incomes, study reveals.

Income inequality is falling in Latin America even as it rises elsewhere in the world, according to a World Bank study that encourages government intervention to reduce the wealth gap.

Over the past 15 years, more than 50 million people have risen into the middle class, which is now – for the first time – about the same size as the population of poor in the region, says the report, which was unveiled on Tuesday. ...

... He said the main reason for the reduction in inequality is not a compression of income from the rich at the top, but because of a rapid growth in the incomes and spending power of those at the "bottom of the population pyramid".

About 30% of the region's population is now in the middle class, which the World Bank defines as those who have less than a 10% chance of falling back into poverty. This is similar to the proportion who are classified as poor. In between is the biggest group, the 38% who are considered "vulnerable" because they live just above the poverty line on an income of between $4 and $10 a day. ...

... The report, titled Economic Mobility and the Rise of the Latin American Middle Class, recommends improvements in public education and healthcare as a way of consolidating the upward mobility of the population. Currently, one of the biggest gaps is not in spending power, but in access to decent social services. In many countries, poorer families have no choice but to put their children in low-standard schools and their sick in poorly-funded hospitals, while the middle class spend substantial sums on private education and health care.

The World Bank's president, Jim Yong Kim, emphasised the role played by the private sector, which he said creates 90 percent of jobs in developing countries.

But he said the great strength of the story in Latin America was that countries that have self-consciously focussed on reducing inequality have also experienced rapid economic growth. ...

Rise of Evangelicals Changes Brazilian Fashion

ABC: Rise of Evangelicals Changes Brazilian Fashion

Strolling down the main shopping drag in this working-class Rio de Janeiro suburb, it's not the second-skin dresses in shocking pink spandex that catch the eye or even the strapless tops with strategically placed peekaboo paneling.

The newest look can instead be found in stores like Silca Evangelical Fashion, where the hot items are the demure, long-sleeved frocks with how-low-can-you-go hemlines and the polyester putty-colored potato sack dresses.

In the birthplace of the "fio dental" or dental floss string bikini, so-called evangelical fashion has emerged as a growing segment of the country's $52 billion-a-year textile industry, catering to the conservative sartorial needs of Brazil's burgeoning numbers of born-again Pentecostals.

Once so difficult to procure that evangelical women tended to make much of their own clothes themselves, the modest garb is now popping up all over Brazil.

On the tiny high street of Rio suburb Itaborai, not one but two evangelical clothing stores compete to dress the faithful. M&A Fashion got its start two decades ago as a conventional clothing shop, selling the short, tight styles favored in this tropical country, but shifted to evangelical offerings five years ago. Silca Evangelical Clothing, two doors down, opened in March. ...

With Venezuelan Food Shortages, Some Blame Price Controls

New York Times: With Venezuelan Food Shortages, Some Blame Price Controls

... At the heart of the debate is President Hugo Chávez’s socialist-inspired government, which imposes strict price controls that are intended to make a range of foods and other goods more affordable for the poor. They are often the very products that are the hardest to find. ...

... Venezuela was long one of the most prosperous countries in the region, with sophisticated manufacturing, vibrant agriculture and strong businesses, making it hard for many residents to accept such widespread scarcities. But amid the prosperity, the gap between rich and poor was extreme, a problem that Mr. Chávez and his ministers say they are trying to eliminate.

They blame unfettered capitalism for the country’s economic ills and argue that controls are needed to keep prices in check in a country where inflation rose to 27.6 percent last year, one of the highest rates in the world. They say companies cause shortages on purpose, holding products off the market to push up prices. This month, the government required price cuts on fruit juice, toothpaste, disposable diapers and more than a dozen other products.

“We are not asking them to lose money, just that they make money in a rational way, that they don’t rob the people,” Mr. Chávez said recently.

But many economists call it a classic case of a government causing a problem rather than solving it. Prices are set so low, they say, that companies and producers cannot make a profit. So farmers grow less food, manufacturers cut back production and retailers stock less inventory. Moreover, some of the shortages are in industries, like dairy and coffee, where the government has seized private companies and is now running them, saying it is in the national interest. ...

... If there is one product that Venezuela should be able to produce in abundance it is coffee, a major crop here for centuries. Until 2009, Venezuela was a coffee exporter, but it began importing large amounts of it three years ago to make up for a decline in production.

Farmers and coffee roasters say the problem is simple: retail price controls keep profits close to or below what it costs farmers to grow and harvest the coffee. As a result, many do not invest in new plantings or fertilizer, or they cut back on the amount of land used to grow coffee. Making matters worse, the recent harvest was poor in many areas.

A group representing small- to medium-size roasters said last month that there was no domestic coffee left on the wholesale market — the earliest time of year that industry leaders could remember such supplies running out. The group announced a deal with the government to buy imported beans to keep coffee on store shelves.

Similar problems have played out with other agricultural products under price controls, like lags in production and rising imports for beef, milk and corn. ...

Is a Woman in Brazil Better Off than a Woman in the U.S.?

Time: Is a Woman in Brazil Better Off than a Woman in the U.S.?

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. ...

Latin America's middle class grows, but with a tenuous grasp on status

Christian Science Monitor: Latin America's middle class grows, but with a tenuous grasp on status

Although 56 million households have joined Latin America's middle class, many lack the benefits and job security to ensure stability.

With a regular salary as a beauty salon manager, Edgar Ladino supports his two children, leases a compact car, and is able to make rent payments on time.

“It’s not my dream job, but it’s OK,” he says with a shrug, sipping a latte at a Bogotá shopping mall.

Mr. Ladino may not love his job, but it has landed him a spot in the burgeoning Latin American middle class. Millions across the region are finally setting up new companies, buying cars and homes, and helping to further stabilize democracies. In the world’s most unequal region, their rise has dominated policy documents, academic papers, and press reports.

Fifty-six million households have joined the Latin American middle class in the past decade and a half, according to new analysis by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), which studied 10 countries in the region representing 80 percent of the population. The growth mirrors trends in the rest of the world, the group says, with 1.3 billion people today calling themselves middle class.

But behind good news lies a troubling reality. While new members of Latin America's middle class might be better off than their parents, the benefits often taken for granted by their Western counterparts remain far from their grasp. Many are barely holding on to their new status, with insecure jobs and poor access to quality education for their children. In most cases, they are more likely to fall into poverty again than rise into affluence. ...

Brazil’s Potential in the Rousseff Era

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 prescription 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.

International Public Opinion on the Free Market

From the Economist

The Haves and the Have-Nots

New York Times Economix: The Haves and the Have-Nots

This is a fascinating chart, but it is like one of those pictures with all the dots. You look at it long enough, and a dolphin appears.

Across the horizontal axis are ventiles (and no, they aren't related to Gentiles.) Each ventile is 1/20, or 5%, of the population, ranked from least to most income. The verticle axis is the percentile of the world income distribution (All income is in inflation-adjusted international dollars.)

So, the poorest ventile in the USA still receives more than 68% of the rest of the world. Brazil has a wide income disparity, with the bottom ventile at the bottom of the world distribution and the top ventile nearly on a par with the USA's top ventile. India's top ventile doesn't even make it the level of the lowest ventile in the USA.

Among other things, we can see how much greater the income inequality in emerging giants is, but their lines will likely mirror the USA line in the coming years.

 

Global Poverty Falls Below One Billion

The Brookings Institution: Poverty in Numbers: The Changing State of Global Poverty from 2005 to 2015

... How many poor people are there in the world and how many Are there likely to be in 2015?

To calculate the number of people in the world living in extreme poverty, we update the World Bank’s official $1.25 a day poverty estimates for 119 countries, which together account for 95 percent of the population of the developing world. To do this, we take the most recent household survey data for each country, and generate poverty estimates for the years 2005 to 2015 using historical and forecast estimates of per capita consumption growth, making the simplifying assumption that the income distribution in each country remains unchanged.

Global poverty figures are then calculated by adding together the number of poor from each country. (See the Appendix for a full account of our methodology.) Our results indicate that the world has seen a dramatic decrease in global poverty over the past six years, and that this trend is set to continue in the four years ahead. We estimate that between 2005 and 2010, the total number of poor people around the world fell by nearly half a billion people, from over 1.3 billion in 2005 to under 900 million in 2010. Looking ahead to 2015, extreme poverty could fall to under 600 million people—less than half the number regularly cited in describing the number of poor people in the world today. Poverty reduction of this magnitude is unparalleled in history: never before have so many people been lifted out of poverty over such a brief period of time.

When measured as a share of population, progress remains impressive, but is more in line with past trends. In the early 1980s, more than half of all people in developing countries lived in extreme poverty. By 2005, this was down to a quarter. According to our estimates, as of 2010 less than 16 percent remained in poverty, and fewer than 10 percent will likely be poor by 2015.

The first Millennium Development Goal defines a target (MDG1a) of halving the rate of global poverty by 2015 from its 1990 level. In an official report prepared for the U.N. MDG conference this past September, the World Bank stated that we are 80 percent of the way toward this target and are on track to meet it by 2015, though the Bank warned that “the economic crisis adds new risks to prospects for reaching the goal.”3

Our assessment is considerably more upbeat. We believe that the MDG1a target has already been met—approximately three years ago.4 Furthermore, by 2015, we will not only have halved the global poverty rate, as per MDG1a, but will have halved it again.

Over the past half century, the developing world, including many of the world’s poorest countries, have seen dramatic improvements in virtually all non-income measures of well-being: since 1960, global infant mortality has dropped by more than 50 percent, for example, and the share of the world’s children enrolled in primary school increased from less than half to nearly 90 percent between 1950 and today.5 Likewise there have been impressive gains in gender equality, access to justice and civil and political rights. Yet, through most of this period, the incomes of rich and poor countries diverged, and income poverty has proven a more persistent challenge than other measures of wellbeing.6 The rapid decline in global poverty now underway—and the early achievement of the MDG1a target—marks a break from these trends, and could come to be seen as a turning point in the history of global development. ...

Here are some interesting charts and graphs:

  

I particularly liked this graph:

Nigeria will soon have more poor people than India.

The lion kings?

Economist: The lion kings?

Africa is now one of the world’s fastest-growing regions.

MUCH has been written about the rise of the BRICs (Brazil, Russia, India and China) and the shift in economic power eastward as Asia outruns the rest of the world. But the surprising success story of the past decade lies elsewhere. An analysis by The Economist finds that over the ten years to 2010, no fewer than six of the world’s ten fastest-growing economies were in sub-Saharan Africa (see table).

The only BRIC country to make the top ten was China, in second place behind Angola. The other five African sprinters were Nigeria, Ethiopia, Chad, Mozambique and Rwanda, all with annual growth rates of around 8% or more. During the two decades to 2000 only one African economy (Uganda) made the top ten, against nine from Asia. On IMF forecasts Africa will grab seven of the top ten places over the next five years (our ranking excludes countries with a population of less than 10m as well as Iraq and Afghanistan, which could both rebound strongly in the years ahead). ...

Brazil Vote's Winners: Evangelicals

Wall Street Journal: Brazil Vote's Winners: Evangelicals

Candidates Courted Growing Bloc for Edge in Sunday Election Run-Off.

RIO DE JANEIRO—Brazilians will take to the polls Sunday to determine their next president, but already one big winner of this political season has emerged: evangelical Christians.

Former cabinet minister Dilma Rousseff is expected to win the run-off, with pollster Datafolha projecting a 56% to 44% spread against former São Paulo Gov. José Serra. The surprise is how much the final stretch of the campaign in this predominantly Catholic country was shaped by an increasingly powerful bloc of conservative Protestants.

Ever since Brazil returned to democracy in 1985, presidential elections have been dominated by economic concerns as the country lurched from crisis to crisis. Potentially explosive issues such as whether to legalize abortion and gay marriage were rarely on the front burner, though the nation of 190 million is often called the world's biggest Catholic country.

This time, a grass-roots campaign of sermons, Internet videos and DVDs distributed mainly by evangelical pastors thrust moral questions like abortion and gay marriage abruptly onto the political agenda and forced Ms. Rousseff and Mr. Serra to declare positions. Joined by some conservative Catholic bishops, the evangelicals mobilized at least partly in response to the government's approval last year of a broad social plan supported by Ms. Rousseff's party that included calling for greater gay rights and abortion rights.

In order to shore up support among religious conservatives, both Ms. Rousseff and her rival, Mr. Serra, added opposition to legal abortion to their campaign platforms. That meant a big move to the right for Ms. Rousseff, an ex-Marxist guerrilla who has supported legalizing abortion in the past. ...

 

The New World Order

Newsweek: The New World Order

Tribal ties—race, ethnicity, and religion—are becoming more important than borders. 

... Although tribal connections are as old as history, political upheaval and globalization are magnifying their impact. The world’s new contours began to emerge with the end of the Cold War. Maps designating separate blocs aligned to the United States or the Soviet Union were suddenly irrelevant. More recently, the notion of a united Third World has been supplanted by the rise of China and India. And newer concepts like the BRIC nations (Brazil, Russia, India, and China) are undermined by the fact that these countries have vastly different histories and cultures.

The borders of this new world will remain protean, subject to change over time. Some places do not fit easily into wide categories—take that peculiar place called France—so we’ve defined them as Stand-Alones. And there are the successors to the great city-states of the Renaissance—places like London and Singapore. What unites them all are ties defined by affinity, not geography. ...

Less smoke, less ire (Deforestation in Brazil)

The Economist: Less smoke, less ire

Brazil, long the world’s deforester-in-chief, is mending its ways.

THE Amazon’s dry season, from July to September, is when the grileiros cut and burn the rainforest. The smoke is so thick it can be seen from space. It also stops rainclouds forming, so the flames burn higher. But on a recent surveillance flight over the forest frontier in Brazil’s state of Pará, there was hardly a wisp of smoke in the sky. Even the people from Greenpeace, whose flight this was, were impressed.

They can take some credit, thanks to their Amazon beef campaign. But even before that Brazil’s deforestation rate had slumped. Between 1996 and 2005 some 19,500 sq km of the Brazilian Amazon were cleared each year. At that rate, a third would be gone by 2050 and the rest might wither. But the rate of clearance has been reduced drastically and in 2008-09 it was at its lowest level for two decades, at a mere 7,008 sq km. This is partly because of tumbling prices for agricultural commodities, the reason for previous downward blips in 2006 and 2008. But it is also because of government action. When soya and beef prices briefly began to climb at the end of 2007 there was a renewed spurt of hacking and burning. But it was swiftly quashed.

What has changed? ...

Does culture affect long-run growth?

Vox: Does culture affect long-run growth?

Does culture affect long-run growth? This column argues that countries with a more individualist culture have enjoyed higher long-run growth than countries with a more collectivist culture. Individualist culture attaches social status rewards to personal achievements and thus provides not only monetary incentives for innovation but also social status rewards. ...

Two interesting graphs:

 

Latin America - So near and yet so far

The Economist: Latin America - So near and yet so far

... As Latin America marks the bicentenary of the start of its struggle for political independence, many of its constituent countries have more recent cause for celebration too. The five years to 2008 were Latin America’s best since the 1960s, with economic growth averaging 5.5% a year and inflation generally in single digits. Even more impressively, a region which had become a byword for financial instability mostly sailed through the recent recession. After a brief downturn in late 2008 and early 2009, a strong recovery is now under way, with most forecasts suggesting economic growth of over 5% this year for the region as a whole.

Along with growth came a better life. Between 2002 and 2008 some 40m Latin Americans, out of a total population of 580m, were lifted out of poverty, and income distribution became a bit less unequal almost everywhere. Poverty increased in 2009 because of the recession, but will start declining again this year. Average unemployment went up slightly to 8.2%, but should come down again this year to 7.8%, according to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC).

Latin America weathered the recession partly thanks to good fortune but also to sound policies. After the cataclysmic debt crisis of 1982 the region’s policymakers abandoned the protectionism and fiscal profligacy that had brought hyperinflation and bankruptcy. In their place they adopted the market reforms of the Washington Consensus (opening up their economies to trade and foreign investment, privatisation and deregulation).

But they found the road to stability and faster growth a long and bumpy one. During a second bout of instability, from 1998 to 2002, the region introduced more pragmatic policies. ...

... Some Latin American countries may at last have found a path towards economic development. But getting there may be no quicker or easier than achieving independence. Latin America has often flattered to deceive (see article). Today there are at least three big worries. First, since 1960 it has seen the lowest growth in productivity of any region in the world, not least because around half of all economic activity takes place in the informal sector. Second, despite some recent improvement, its income distribution is still the most unequal anywhere. This has acted as a drag on growth and caused political conflict. Third, it suffers from widespread crime and violence, much of it perpetrated by organised drug gangs. The murder rate is hideously high in some countries.

A problem for any report such as this one is that Latin America is so diverse as to defy most generalisations. ...

Forest loss slows, as China plants and Brazil preserves

BBC: Forest loss slows, as China plants and Brazil preserves

The world's net rate of forest loss has slowed markedly in the last decade, with less logging in the Amazon and China planting trees on a grand scale.

Yet forests continue to be lost at "an alarming rate" in some countries, according to the UN Food and Agriculture Organization (FAO).

Its Global Forest Resources Assessment 2010 finds the loss of tree cover is most acute in Africa and South America.

But Australia also suffered huge losses because of the recent drought.

"It is good news," said the report's co-ordinator Mette Loyche Wilkie, a senior forestry office with FAO.

"This is the first time we've been able to say that the deforestation rate is going down across the world, and certainly when you look at the net rate that is certainly down.

"But the situation in some countries is still alarming," she told BBC News.

The last decade saw forests being lost or converted at a rate of 13 million hectares per year, compared to 16 million hectares in the 1990s.

However, new forests were being planted to the tune of more than seven million hectares per year; so the net rate of loss since the year 2000 has been 5.2 million hectares per year, compared to 8.3 million in the 1990s.

Globally, forests now cover about 31% of the Earth's land surface. ...

Chile, once Latin America's economic model, now overtaken by Brazil

Christian Science Monitor: Chile, once Latin America's economic model, now overtaken by Brazil

Conservative tycoon Sebastian Piñera won the second round of Chile's presidential election on Sunday in part due to voter faith that he can revive the economy. Meanwhile, Brazil's economy is booming.

For two decades, Chile was the “teacher’s pet” of Latin America, the student who always brought home straight A’s.

Economists gushed that the Andean country’s commitment to free-market policies and democratic reform made it a model for the developing world. And as Chileans enjoyed the trappings of a sustained average growth rate of more than 5 percent per year, poverty plummeted from 40 percent to 13.7 percent. But in the past year, Chile’s gold star has gone to its hulking neighbor to the east, Brazil.

The agricultural juggernaut just won its bid to host the 2014 World Cup and the 2016 Olympics; it discovered vast oil deposits that could turn it into a major oil exporter; it was one of the last countries to be pulled into the global economic crisis and one of the first to pull out.

To be sure, the so-called Chilean “miracle” that constructed the most solid economic foundation in Latin America still stands, and some of its slower growth today is merely a result of its own maturation. But Brazil is finally claiming new status in the region, and not just for its size. ...

The Wal-Mart Effect

Foreign Policy: The Wal-Mart Effect

When India's first Wal-Mart opened this summer in Amritsar, the response was mixed, with detractors fearing that big-box stores would eventually crowd out India's fabled "wallah" culture. What no one remarked on, however, was that Wal-Mart's debut in a country is a bellwether for future growth. Indeed, Wal-Mart has started operations in 15 countries since 1991, and 13 of them have had boom economies, with an average of 4.4 percent annual growth since Wal-Mart arrived. Over the last five years, the economies of Wal-Mart countries outside the United States have grown 40 percent faster than the world average. So what's going on? Does the ability to buy giant bags of Froot Loops at cut-rate prices inspire economic growth? More likely, Wal-Mart is simply a smart, cautious investor. "Wal-Mart chooses to go places with a sizable middle class," says Nelson Lichtenstein, a historian who just published a book on Wal-Mart's rise. And Wal-Mart's attention to middle-class growth could pay off for the company in the future.

The portion of the global middle class that lives in the developing world should rise from 56 percent in 2000 to 93 percent in 2030, according to the World Bank. Next up for the Wal-Mart effect, Lichtenstein says: Russia and Eastern Europe. Picture the new global bourgeoisie outfitted with cheap hibachi grills, extra-durable puppy toys, and energy-efficient minifridges, and you've got a glimpse of the coming Wal-Mart revolution.

Why South American economies are rebounding first

Christian Science Monitor: Why South American economies are rebounding first

Commodities-hungry China is pulling Brazil, Chile, and others out of recession. But Mexico and Central America, dependent on US sales, are lagging.

Mexico City; and SÃo Paulo, Brazil - Latin America, long tied to the economic well-being of the United States, finds itself in a rare position these days: recovering from the global financial crisis faster than most of the rest of the world.

After shrinking 2.5 percent this year, the regional GDP is expected to return to 2.9 percent growth next year, according to the International Monetary Fund's World Economic Outlook.

But the recovery has two faces.

Brazil and other commodities-­exporting nations in South America are blazing the way forward thanks to increased trade with China, as Mexico and Central America languish from a sustained drop in demand in the US.

"Every time that the US or Europe or any other of the big world locomotives were in trouble, Latin America fell," says Alfredo Coutino, Latin America director at Moody's Economy.com. "This is the first time in many, many decades in which Latin America is better prepared, in terms of economic strengths, to deal with the external recession." ...

China pursues Latin America ties

BBC: China pursues Latin America ties

Two top Chinese officials have started visits to Latin America as part of an intensified effort to strengthen ties with the region.

Chinese Vice-Premier Hui Liangyu is to visit Argentina, Ecuador, Barbados and the Bahamas.

Vice-President Xi Jinping is visiting Jamaica, Colombia, Venezuela and China's two biggest trading partners in the region, Brazil and Mexico.

China has stepped up its efforts to strengthen ties with Latin America.

It is rare for two of its top leaders to descend on the region almost at the same time. ...

Archeologists in Peru unearth ancient Wari city

Reuters: Archeologists in Peru unearth ancient Wari city

LIMA (Reuters) - Researchers digging at the Cerro Patapo archeological site in northern Peru have discovered the ruins of an entire city, which may provide the "missing link" between two ancient cultures, investigators said on Tuesday.

Scientists say the find, located 14 miles from the Pacific coast city of Chiclayo, likely dates to the Wari culture, which existed in what is now Peru between about 600 AD and 1100 AD.

If initial assumptions prove correct, the discovery would connect the ancient Wari civilization to the Moche culture, which flourished from about 100 AD to 600 AD. ...

Russia's new presence in Latin America

Christian Science Monitor: Russia's new presence in Latin America

President Medvedev visits Venezuela this week as a Russian nuclear warship leads joint maneuvers.

Caracas, Venezuela; and Moscow - Russian President Dmitry Medvedev's visit this week with Venezuela's leftist leader Hugo Chávez is the first ever for a Kremlin leader to this oil-rich nation. And the meeting – part of a Latin America tour that includes stops in Brazil and Cuba – is kindling concerns that a resurgent Russia is aiming to revive its cold-war era presence in America's backyard.

The meeting is expected to coincide with joint naval exercises off Venezuela's coast, led by the Russian nuclear-powered warship, Peter the Great, and comes as the two powers announce that Russia will help Venezuela build a nuclear reactor.

Both nations insist their focus is economic, but geopolitics are also at play. ...

Plane to monitor Brazilian tribes

BBC: Plane to monitor Brazilian tribes

The Brazilian authorities are to use a plane equipped with body-heat sensors to monitor uncontacted Indian tribes in the Amazon from a distance.

Brazil has a policy of leaving such isolated indigenous groups in peace unless it is absolutely necessary to make contact.

Officials say the plane will help them to protect remote communities without interrupting their way of life.

Some 39 isolated groups are believed to be living in the Amazon region.

In May this year the authorities released a photograph of members of an uncontacted tribe firing arrows at a passing plane - an image reproduced in newspapers and on websites.

It is thought there may be more than 100 such tribes still in existence worldwide - more than half living in Latin America. ...

Brazil becomes antipoverty showcase

Christian Science Monitor: Brazil becomes antipoverty showcase

The country's Bolsa Familia program – which pays poor mothers to keep their children in school and follow healthcare rules – is reducing poverty.

Cumaru, Brazil -  In the arid, impoverished expanse of northeast Brazil, Cumaru is the town no one's ever heard of. And once you get here, Maria Joelma da Silva's house is a 20-minute ride beyond where the paved road ends.

Ms. da Silva gets few guests.

Yet in August, officials from Angola, Ghana, the African Union, and the African Development Bank – here to study Brazil's social programs – stood in da Silva's yard gleaning lessons from the small but productive garden that is flourishing where cacti once dominated.

"Everyone talks about how we can't do anything right in the northeast, but if these people came here from so far away, we have to be doing something important in the countryside," says da Silva, who has used government subsidies and help from a nonprofit to build a cistern and start a small business selling honey and other crops. Today, she is part of a transformation under way among Brazil's underclass.

Although the global financial crisis is taking its toll on Brazil, the country's economy has boomed in the past five years, and the poor have risen with the swell. Lower inflation and easier access to credit – along with a higher minimum wage – have created a new class of consumers who have kept the economy growing. And with the world's largest conditional welfare program for the poor, and a slew of complementary local, state, and federal initiatives that continue to target the poor – a cornerstone of the presidency of President Luiz Inácio Lula da Silva – many Brazilians are feeling economic stability as they have never before. ...

Farming superpower Brazil spreads its know-how

Christian Science Monitor: Farming superpower Brazil spreads its know-how

Planaltino, Brazil -  As a young soil scientist, Edson Lobato looked out at the vast savanna of central Brazil and imagined fields of soy, corn, and cotton where most saw an inhospitable mass of red earth and tangled trees.

His friends and family urged him to take his agronomy degree elsewhere, somewhere it would make a difference. But he joined Brazil's agricultural and livestock research agency (Embrapa) and relocated to the country's heartland, called the cerrado, where there was, at the time, little besides wooded plains, termites, and deer.

Embrapa then set out to prove that those soils could produce like the most efficient cropland of Idaho. The agency poured millions into research. It sent teams of scientists like Mr. Lobato to the American Midwest to glean as much know-how as possible.

Today his vision has helped turn Brazil into the world's largest exporter of soybeans, beef, chicken, orange juice, ethanol, and sugar.

The significance for the globe is huge. Two years ago, Mr. Lobato and two others received the World Food Prize for "one of the great achievements of agricultural science in the 20th century." As Asian diets and quality of life improve, putting pressure on available land and contributing to a spike in food prices earlier this year, Brazil could be one of the answers to the global food crisis.

Yet today it is emerging as more than just a supplier. Its scientists are now bringing the technologies of tropical agriculture to other parts of Latin America, and to Africa and Asia. In 2006, Embrapa opened its first foreign office in the West African nation of Ghana to lead the effort. Lobato assessed soils in Mozambique this year. And in May, Embrapa dispatched its first team to Venezuela to help boost food production. ...

Latin America better girded for financial crisis

Christian Science Monitor: Latin America better girded for financial crisis

The region is affected by global downturn, but more prepared this time thanks to greater foreign reserves and less external debt.

Mexico City and Sao Paulo, Brazil - As leaders in Washington rushed to stem the growing financial crisis in the United States, Latin American leaders thought they'd be unscathed. Brazil's president, Luiz Inácio Lula da Silva, when asked what repercussions he expected at home, retorted, "What crisis?" Venezuelan President Hugo Chávez called it the "crash of capitalism."

A few weeks later, the tone has changed remarkably for a region heavily dependent on the international prices of minerals, crude oil, and food – all of which have taken a hit – not to mention remittances, tourism, and investment.

Stock markets across the region are falling. Argentina's has sunk 20 percent since Tuesday. Brazil's dropped 10 percent Wednesday; Mexico's, 7 percent; Chile, 6 percent.

Mexico and Brazil, the region's two largest economies, spent chunks of their federal reserves to stem unexpected currency declines. Mexico introduced an emergency stimulus package, while Brazil offered $2 billion in loans to exporters through local banks. The era of uninterrupted economic growth and fiscal surpluses, it seems, could be on the wane.

Yet even as nations await the full impact of a crisis that is reaching every corner of the world, Latin America is better placed today to weather the downturn than at any other time in the past half century, says Gray Newman, senior Latin America economist at Morgan Stanley in New York. Countries in the region have, overall, kept spending within budget and built up their currency reserves. Many have solved external imbalances and adopted flexible exchange-rate systems. ...

...Commodities prices are a key reason. The metals, grains, and livestock that South America sends around the world, particularly to China, helped push Latin America to five years of unstinting growth. Trade surpluses that averaged almost $100 billion a year between 2004 and 2008 are likely to fall to around $23 billion next year, according to a Morgan Stanley report.

The nations that have worked to get their economies in order – such as Brazil, Chile, and Peru – are among the best placed to keep growing next year.

Argentina, Venezuela, Bolivia, and Ecuador are expected to face tougher times – both because they are dependent on commodity exports, says Alfredo Coutino, a senior economist for Latin America at Moody's Economy.com, and because of greater needs for external financing. ...

Half the nation, a hundred million citizens strong

Economist: Half the nation, a hundred million citizens strong

What the middle class plans to do with its money—and its votes.

EVER since it was first spotted amid the factory smoke of western Europe’s industrialising nations, the middle class has borne the hopes for progress of politicians, economists and shopkeepers alike. It remains hard to define, and attempts to do so often seem arbitrary. But in Brazil, the middle class describes those with a job in the formal economy, access to credit and ownership of a car or motorbike. According to the Fundação Getulio Vargas (FGV), a research institute, this means households with a monthly income ranging from 1,064 reais ($600) to 4,561 reais. Since 2002, according to FGV, the proportion of the population that fits this description has increased from 44% to 52%. Brazil, previously notorious for its extremes, is now a middle-class country.

This social climbing is a feature mainly of the country’s cities, reversing two decades of stagnation that began at the start of the 1980s. Marcelo Neri of FGV suggests two factors behind the change. The first is education. The quality of teaching in Brazil’s schools may still be poor, but those aged 15-21 now spend on average just over three more years studying than their counterparts did in the early 1990s.

The second is a migration of jobs from the informal “black” economy to the formal economy. The rate of formal job creation is accelerating, with 40% more created in the year to this July than in the previous 12 months, which itself set a record. Together with cash transfers to poor families, this helps to explain why—in contrast with economic and social development in India or China—as Brazil’s middle class has grown, so the country’s income inequality has lessened (see chart). ...

Poverty in Brazil

Reuters: Poverty still plagues Brazil

Jul 9 - Poverty still haunts Brazil, even as a booming economy has lifted millions of Brazilian into a new middle class.

The income of Brazil's poorest 10 percent grew by about 9 percent per year between 2001 and 2006 - meaning millions of poor are moving out of danger of hunger.

Deborah Lutterbeck reports.

Note: One interesting thing about this report is that you could easily have titled it "Remarkable Improvement in Brazilian Poverty," yet Reuters chose the dire title "Poverty still plagues Brazil."

Brazil bucks global economic downturn

Christian Science Monitor: Brazil bucks global economic downturn

The high food and commodity prices hurting most countries are buoying Brazil, a top exporter of minerals, soy, beef, chicken, and grains.

São Paulo, Brazil -  When Carl's Jr. looked at expanding its international fast-food franchise operation earlier this year, several emerging markets were muted. But after a trip to São Paulo and Rio de Janeiro in June, company officials made sure Brazil was on the list.

Why? The country's young, meat-eating population is growing, which is important to the American chain, says Mike Stout, director of international franchise sales.

But Carl's Jr. also had other motives that speak to Brazil's newfound economic robustness.

"Disposable incomes are increasing and more and more people are moving into the middle class," Mr. Stout said in a telephone interview from St. Louis, shortly after a two-week visit here. "The economy is growing and inflation is stable. From a business perspective, we love the market."

Add to that lower interest rates and easier credit, and you have the reasons Brazil is emerging as an investment magnet. Direct foreign investment to Brazil doubled last year as companies as diverse as real-estate developer Tishman Speyer and agricultural machinery producer John Deere looked to the Southern Hemisphere as a place to do business.

It is a remarkable turnaround for a nation accustomed to boom and bust and strengthens Brazil's place as Latin America's economic powerhouse. ...

 

The ghost at the till: Latin America’s economies

The Economist: The ghost at the till: Latin America’s economies

UNLIKE the developed world, Latin America has been barely touched so far by the credit crunch. Many of its economies are still growing fast, helped by demand for their commodity exports. But the commodity boom has started to have a less desirable effect: soaring food and fuel prices are pushing inflation up across the region. This has become a test of credibility for Latin America’s new-found economic stability, and for its central banks. Some of the more important ones have responded more robustly than many of their Asian peers—even if claims that Brazil’s hawkish Central Bank is “the new Bundesbank” require a pinch of salt.

The regional average inflation rate rose to 7.5% in April, from 5.2% a year before, according to the IMF. This is an underestimate, since Argentina’s official inflation figure of 9.1% is probably less than half the true rate. It also conceals a divide. Around the turn of the decade, several of the larger countries adopted floating exchange rates, and inflation targets administered by more-or-less independent central banks. Another group of countries—including Argentina and Venezuela—have given greater priority to growth than to price stability. But even among the first group, inflation has been rising. In response, central banks in Chile, Colombia, Mexico and Peru began to raise interest rates last year. Even so, they have missed their inflation targets, in most cases for the first time....

 

Quagmire to goldmine?

The Economist: Quagmire to goldmine?

The rapid growth in developing countries prompts a rethink by drugs companies.

BRAZIL has long been a thorn in the side of the global drugs companies. The country's vibrant generics industry has often trampled over their patents. As recently as last year, its government threatened to invoke compulsory licensing (a legal mechanism that, in effect, legitimises such trampling) to browbeat a foreign drugs firm into offering huge discounts. And Brazil's state-funded researchers have devised some impressive drugs, including a new therapy for malaria (see article). Small wonder, then, that big drugs firms have remained leery of this market.

Indeed, they have been cautious about developing countries in general, which they have regarded as the source of many headaches and few profits. A decade ago Britain's GlaxoSmithKline (GSK) got a bloody nose in South Africa when it tried too vigorously to defend patents on an HIV drug. More recently Novartis, a Swiss firm, lost a bitter battle in India over patent protection for Gleevec, a profitable cancer drug. In Thailand the government has invoked compulsory licensing for some drugs. And next week the industry can expect another drubbing over patents harming “innovation for the poor” at the World Health Organisation's annual assembly.

But consider the story of Moksha8, a new drugs firm launched last month with money from Texas Pacific Group, a private-equity outfit. It aims to capitalise on Big Pharma's neglect of many emerging economies by striking licensing deals for branded drugs which it, in turn, intends to market to affluent customers in those countries. It already has some two dozen drugs under licence for Brazil from Roche and Pfizer. Fernando Reinach of Votorantim, a Brazilian firm that also invested in Moksha8, expects its annual sales to top $1 billion within a year or two.

All of which suggests that the situation is ripe for change. For much of its history, the industry has focused chiefly on the diseases that afflict people in rich countries, while largely neglecting research into diseases of the poor. But as growth slows in developed markets, and the twin threats of generic drugs and price controls advance even in pharma-friendly America, drugs companies are thinking again. ...

Poverty amid progress

The  Economist: Poverty amid progress

A revolution in South America's fastest-growing economy is not reaching everyone.

BLOCKS of flats or offices are under construction on nearly every street. New hotels and restaurants sprout on every corner, while shopping centres multiply in what were once shantytowns. Across the city, thoroughfares have been torn up to make way for new bus lanes and terminals. Such is the anarchic volume of traffic that just crossing the street has become a time-consuming and perilous exercise. Lima, Peru's capital of 8m people, is shedding its former air of provincial lassitude and turning into a bustling metropolis.

The city is the visible face of a boom that has made Peru South America's fastest-growing economy (see chart). That performance owes much to record prices for mineral exports. But newer export products, from designer cotton T-shirts to mangoes and artichokes, are also flourishing. As well as trade, private investment, growing at 20% a year, and domestic consumption are driving the economy forward at an accelerating pace (in the year to February, GDP grew by 9.2%).

Thanks to high world prices for food and fuel, inflation has spiked to 5.5%, having been low for years. Nevertheless, the growth looks to be built on solid foundations. The national savings rate has risen to 24% of GDP, high by regional standards, and the government last year posted a fiscal surplus of 3% of GDP. A free-trade agreement with the United States is about to come into effect. In recognition of such achievements, Peru's debt was awarded an investment-grade credit rating last month by Fitch, a ratings agency.

Yet there are paradoxes at the heart of the boom. Despite the growth, poverty has fallen only slowly. And many Peruvians are disgruntled. The president, Alan García, was once a radical populist who presided over hyperinflation and debt default in a first term in office in the 1980s. He returned to office in 2006 a reformed character. But his people give him little credit for the strong economy. He is one of the least popular presidents in Latin America, with an approval rating of just 26% in a poll taken in the main cities in April by Ipsos-Apoyo, a pollster.

There are several reasons for the relatively slow fall in poverty. Although the number of formal-sector jobs is expanding at 9% a year, many Peruvians still labour in the informal sector of unregistered businesses, where productivity is low. Wages for the unskilled have been slow to rise. ...

Peru Takes the Other Path

Wall Street Journal: Peru Takes the Other Path (Chart from Mark Perry)

It's about 90 minutes flying time from Lima to this jungle metropolis of 400,000. But daily life here is light years away from what it is in the Peruvian capital.

After almost two decades of gradual reforms by the central government, Lima is today home to first-world services, globally competitive businesses, shopping malls and an emerging middle class. But here in the hub of the Peruvian Amazon, living standards are all too similar to what they were 30 years ago.

The differences between the two cities illustrate one of the biggest challenges for the government of President Alan García, who was once a renowned socialist but now says he embraces democratic capitalism.

Peru has been experiencing fast growth – better than 6% annually – for almost seven years, and it has largely occurred on the coast and in the capital city. But the mountain and jungle regions of the country have not kept up. They remain vulnerable to the siren song of left-wing populism.

This is what makes Peru ground zero in the continental struggle between modernity and atavistic socialism. Hugo Chávez is circling like a vulture in the poorer parts of the county, hoping to pick off a prized Andean nation to add to his collection of revolutionary allies in South America. Meanwhile, reformers are trying to push ahead with deeper liberalization.

The good news is that the white hats have the momentum. If it is true that remote locations like this city are vulnerable to ideological incursions from the authoritarian left, it is also true that much of the rest of the country is beginning to think and act more like Chilean entrepreneurs than Cuban apparatchiks. Understanding why is critical to further progress. ...

 

Mennonites and Mammonites...in Paraguay

The Weekly Standard: Mennonites and Mammonites...in Paraguay

...This progressive Mennonite congregation has departed in more ways than these from the customs of their forebears. Mennonites have lived in Paraguay since the 1920s, mostly in the miserably hot Chaco, a region that was barely inhabited before they arrived, and indeed barely inhabited today. For the first 70 years, they kept to themselves and preserved the pacifist and isolationist ways that characterize the sect everywhere. But now they're at the center of one of the strangest phenomena in South American politics, a saga of corruption and faith that has left these world-renouncing Anabaptists in control, for a time, of the highest worldly offices in Paraguay--and wondering whether their newfound power is a blessing or curse....

...But the economic entanglements remain, and to retreat from politics might require them to curtail the astonishing economic boom that financed the Mennonite ascent to power in Asunción less than a decade ago. Their commercial habits are too ingrained, and the Paraguayan appetite for their milk and yogurt too powerful, for easy reversal now. The seal is broken. "They are family men," Abente says, perhaps channeling the early Mennonite fathers. "But the more they have to deal with a corrupt place, the more they corrupt themselves."

Twenty years ago, when I was a grad student at Eastern University, a group of us would periodically get together and play the table game "Risk: The game of world domination." There were Mennonites among us, and one of our favorite observations was how ruthless and successful the Mennos were in playing this game. We used to comment that it was good that they wouldn't get their hands on any real power. :)

Chile: well on the way to eradicating poverty

MacLeans.ca: Chile: well on the way to eradicating poverty

Capitalism and globalization used to be dirty words for Latin American leftists, who in the past were quick to blame the region's poverty on what they saw as these largely destabilizing and outside factors. But after a decade in which savvy leftist legislators in Chile pursued a bold economic program to embrace the free market, while at the same time creating public policy measures to address the needs of the most impoverished in the country, poverty is rapidly becoming an anachronism in Chile, one of the world's fastest-growing economies.

Poverty has fallen faster in Chile than anywhere else in Latin America, according to figures recently published by the Chilean government. Statistics collected by the Caracterización Socioeconómica Nacional (CASEN) survey carried out by the country's planning ministry showed that poverty fell from 18.7 per cent in 2003 to 13.7 per cent in 2006. In 1990, when dictator Augusto Pinochet left office, more than 38.6 per cent of people in this Andean country of 16 million lived below the poverty line.

For the country's president, Michelle Bachelet, the breakthrough is due entirely to the steady rule of several centre-left Concertación administrations. The party, an alliance of centre-left political parties founded in 1988, has won every presidential race since Pinochet's departure. "The social achievements are obvious," said Bachelet, a former political prisoner under Pinochet's rule, in a recent public statement following the release of the CASEN statistics. "Our priorities have never varied and we stick to them: a social safety net as never before, quality education, better health care, decent homes, pensions for the most vulnerable."

..........

...The Chilean government has invested in public infrastructure and telecommunications while maintaining a strong export-led approach to development, he says. Chile has 54 free-trade agreements with countries all over the world, including Canada. Since 1990, the country has increased exports from US$9 billion a year to US$60 billion in 2006, Heine says. As a result, Chile's economy has grown at a yearly average of 5.6 per cent, the highest anywhere outside Asia. Since 1990, per capita income has soared from US$2,500 to US$9,000 today....

Amazon Farmers Grow Grain and Save the Forest

Christian Science Monitor: Amazon Farmers Grow Grain and Save the Forest

McDonald's, Cargill, and The Nature Conservancy create a 'responsible' soy program.

Santarem, Brazil - You might call it the greening of Chicken McNuggets.

At first glance, there seems little common ground between fast-food giant McDonald's, US commodities multinational Cargill, and The Nature Conservancy, an environmental group.

But here in the Brazilian Amazon, all three are working together to help soy farmers produce grains without cutting down the forest.

In fact, under the Responsible Soy Project, farmers in two municipalities in the northern Amazon can only sell soy to Cargill if they promise to plant trees on denuded land. McDonald's, which buys chicken fed with Brazilian soy, set that condition after pressure from environmental groups and consumers. The Nature Conservancy, with $390,000 from Cargill, assists all sides and oversees compliance.

It is, conservationists say, a potential model for sustainable development not just in the Amazon but all over Brazil, home to the world's largest rain forest. ...

Up from the bottom of the pile

The Economist: Up from the bottom of the pile

Something rather exciting is happening in Latin America.

MUCH of the news coming out of Latin America in recent years has been of radical populists proclaiming “revolution” or, as Venezuela's Hugo Chávez would have it, “21st century socialism”. In their widely propagated caricature, a tiny white elite in Latin America oppresses an indigenous majority whose poverty has been exacerbated by the free-market reforms imposed by the IMF and the United States.

So it might be hard to believe that in many countries in the region, and especially in Brazil and Mexico, Latin America's two giants, things are in fact going better today than they have done since the mid-1970s. The region is in its fourth successive year of economic growth averaging a steady 5%. In most places inflation is in low single digits. And for the first time in memory, growth has gone hand-in-hand with a current-account surplus, holding out hope that it will not be scotched by a habitual Latin American balance-of-payments crunch.

What is more, financial stability and faster growth are starting to transform social conditions with astonishing speed. The number of people living in poverty is falling, not only because of growth but also thanks to the social policies of reforming democratic governments. The incomes of the poor are rising faster than those of the rich in Brazil (where income inequality is at its least extreme for a generation) and in Mexico.

In both these countries a new lower-middle class is emerging from poverty (see article). Low inflation, achieved through more disciplined public finances and trade liberalisation, has brought falling interest rates. Credit has at last returned. So these new consumers are buying cars and DVD players or taking out mortgages. No wonder Latin Americans are in an optimistic mood: earlier this year a poll by the Pew Global Attitudes Project found a greater increase in personal satisfaction in Brazil and Mexico over the past five years than in any of the other 45 countries it surveyed. ...

See related story: Latin America's middle class: Adiós to poverty, hola to consumption

Ecuador moves to cut interest rates for poor

Christian Science Monitor: Ecuador moves to cut interest rates for poor

Banks and microlenders say Ecuador's leftist president may hurt most those he wants to help with 'financial justice' law.

Quito, Ecuador - Ecuador's new leftist president, Rafael Correa, is wasting no time forging his own path toward the "21st-century socialism" championed by Venezuela's anti-US leader, Hugo Chávez.

In April, three months after taking office on promises to wrest control of the country from the hands of a corrupt elite, Mr. Correa kicked out the representative to the World Bank. He blames the financial institution for forced privatization programs that have failed to benefit the poor, he says.

Now he's pushing through a controversial "financial justice" bill to increase state control of the banking sector.

The bill, which is expected to pass into law this week or next, paves the way for a complete overhaul of an abusive financial system, say government officials. It's also the latest example of a populist movement strengthening throughout Latin America.

But this new law could hurt most those Correa hopes to help. As he strives to protect Ecuador's poor from predatory lenders and free the country from the "Father-knows-best" conditionality of international institutions, such as the World Bank, he risks putting microlending groups out of business, preventing thousands of Ecuadoreans from receiving cash loans to lift themselves out of poverty. ...

Religion in Latin America: Lighting on new faiths or none

The Economist: Religion in Latin America: Lighting on new faiths or none

In his first Latin American visit, Pope Benedict XVI will find a less divided church facing stronger rivals.

.......

Benedict's choice of Aparecida for the conference suggests a desire to guide Latin America's Catholics back to traditional spirituality after decades of strife between progressive and conservative wings of the church. “Our great mission is to reach people who belong to the church but have lost a sense of living in accordance with the faith,” says Raymundo Damasceno Assis, the archbishop of Aparecida.

Belief in God is as widespread in Brazil as in the United States, says Antônio Flávio Pierucci, a sociologist at the University of São Paulo, but religious practice is close to Europe's wan levels. The numbers saying they are of no religion is small but growing. Some in the Catholic church fear that it is losing its grip over public morality. Local governments in Buenos Aires and Mexico City have recently legalised gay unions; the latter legalised abortion last month. Brazil's health minister has called for a plebiscite on the issue.

The more familiar threat to Catholic hegemony in Latin America comes from Pentecostal Protestantism. Born in the United States, this began to spread south a century ago but it has taken off since the restoration of democracy in the 1980s. According to the World Christian Database, a statistical service based in Massachusetts, more than 80% of Latin Americans are still Catholic. But that figure has been falling swiftly.

In Brazil, the world's largest Catholic country, the church has lost adherents at a rate of 1% a year since 1991, mainly to Pentecostal churches. Fewer than three-quarters of Brazilians are now Catholics while 15% are Protestants (known locally as “evangelicals”). In Mexico, 7.3% were Protestants according to the 2000 census; the figure may be almost 20% today. In Guatemala, some 30% are Protestant.

Traditional varieties of Pentecostalism emphasise a strict moral code of personal behaviour, including teetotalism and marital fidelity. Newer groups have added a gospel of self-enrichment. They offer a customer-friendly faith, telling the poor and uprooted that Christ can improve their lives and that He can be approached through ecstasy rather than ritual....

Results suggest Latin leftist movement may have peaked

Results suggest Latin leftist movement may have peaked is an analysis of recent Latin American elections, including Mexico's, by AP writer Mark Stevenson. He concludes his article with these observations about Mexico:

Intolerance, confrontation, messianic attitudes and stridency — once staples of Latin America’s left — are proving less attractive than leaders who can provide stability. The “leftist tide” idea probably oversimplifies by lumping Indian rights movements, radicals and moderates together.

Andres Manuel Lopez Obrador arguably did better than any other leftist candidate ever has in Mexico. But he may have scared voters with vows to change an economic model that has brought stability and low inflation.

“Attacking some of the programs, including some of the economic strategy, was a mistake,” said Ana Maria Salazar, a political analyst. “At least part of the middle class and the lower middle class for the first time in many decades have access to loans to buy things.”

This is one more instance where rising prosperity generates a broad base of economic stakeholders who have something at risk if things go wrong and much to gain if property rights and free markets are respected. That generates more pressure for the rule of law and a more democratic society. If Stevenson is right in his analysis, we may finally be witnessing the rise of a new, freer, more economically sound Mexico. Let us pray it is so.