25 September 2010

Impunity to Accountability

Was it just a coincidence that after hearing so much about accountability, or rather the lack of it, when it comes to the CWG in Delhi, I get a mail announcing a conference on a very similar theme for Africa - FROM IMPUNITY TO ACCOUNTABILITY: AFRICA’S DEVELOPMENT IN THE 21ST CENTURY - organised by  Dr. Arien Mack in collaboration with Dr. Befekadu Degefe, an eminent Ethiopian economist. The impulse for the conference?
"While the region’s problems and constraints are varied, we believe the relationship between the people and their government to be one of the most critical. In many of these countries, governments remain unresponsive to the needs of their people, and are accountable to their own interests rather than their people. In the special issue of Social Research on which this proposed conference is based, we will bring the relationship between the governors and the governed into the spotlight once again. By bringing some of our authors together for frank discussion with each other and the public, we hope to generate a productive debate among social scientists and other experts that might serve to prod policy makers and the international community to take more appropriate actions than those they may be currently engaged in."
In the case of India, could we be going the other way - from accountability to impunity? If you read the interview with former Central Vigilance Commissioner, Pratyush Shah, in the Mint, this appears to be the case- a worrying trend indeed.
"Two things bother me greatly. One is the social attitude towards corruption. In India, the most unfortunate part is that the society is no longer seriously concerned about corruption and there is social acceptance. When we were growing up I remember if somebody was corrupt, they were generally looked down upon. There was at least some social stigma attached to it. That is gone. So there is greater social acceptance. This is a kind of paradox. On one side, civil society has become more active in exposing corruption; people are filing PILs (public interest litigations) and various other ways of highlighting corruption, trying to do something about it. On the other hand, in society, there is a general acceptance of corruption. If somebody has a lot of money, he is respectable. Nobody questions by what means he has got the money. Second, the final punishment is becoming increasingly difficult. I am not saying that everything is right with CBI, but there are times they are blamed for things for which they are not responsible.
Look at an average case in the special judge’s court, which is the first court where a chargesheet of CBI is filed—(it) is taking 10 years. We got a survey done for a small pocket of CBI in one of their zones; only 4% people out of all those who were finally convicted actually went to jail. On some ground or the other they went in appeal. One appeal after another, on one ground after another. Same is happening with the departmental proceedings… they take years and hardly any punishment is given. Let me make it more mathematical for you. There would be 20% people in India even today who would be honest, regardless of the temptations, because this is how they are. They have a conscience, they would not be corrupt. There would be around 30% who would be utterly corrupt. But the rest are the people who are on the borderline."
We have to wait to see what action is taken post-Games, whether the CVC report expected by the end of this year will be acted upon or not. Meanwhile developments and debate in Africa should be followed, they remain relevant to India as well.

20 September 2010

Expanding rural health care

My article in the Financial Express today takes up the point that we need a multi-pronged strategy to address the shortage of doctors, especially in rural areas. The new BRHC course is a positive move, because it brings with it government and Medical Council accreditation. The Chhattisgarh course ran into deep trouble just because this backing was not available, but those who graduated and placed in the primary health centres have proved to be a boon for rural health care in the state where the socio-economy and geography have been limiting factors in expanding health services. Tamil Nadu has cracked the model with sufficient medical colleges, good infrastructure in rural areas etc. but other states have not got that far yet.
The BRHC course cannot be a one-point solution to healthcare. The point is that there is no need for a new course, if, and this is the big if, there is sufficient supply of doctors coupled with good infrastructure and incentives in the rural areas. Meanwhile, the course needs to be integrated with the general medical degrees to allow BRHC graduates to move into the mainstream over time. Hopefully the proposed National Commission for human resources in health will do a complete overview of the system and create a complete solution to meet the challenge of providing healthcare services to our large and diverse population.

16 September 2010

To each his own!

More news from the US against outsourcing in particular, clearly the times are bad. Bangalore meanwhile does not appear unduly ruffled by these growing protectionist trends, 'He (Obama) has his own concerns for his own country, but nothing will stop India from emerging as a superpower not only in IT but in other areas also. I have no concerns on this," said P Radhakrisnan, from Infotech, quoted on NDTV.

The problem of course has much wider ramifications, as this article in the Knowledge@Wharton series points out, its not just China, but also Germany that needs to be included in the list of countries causing the global imbalance, and of course the US stands at the other end. There are no easy solutions.

Meanwhile, Wharton legal studies and business ethics professor Philip Nichols advises U.S. manufacturers to ignore the politics and "populist aversion" around today's trade imbalances, "Political borders don't reflect the commercial reality," he notes. Economies today are so intertwined that "a trade war is really a war on ourselves." This intertwining has also been noted by Richard Baldwin in the debate on the future of EU Trade Policy on Voxeu. The fact that production has been unbundled and there has been internationalisation of the supply chain must be kept in mind, he says,  while fashioning trade policies.

For two others who have left comments on the debate so far - Tim Worstall and Jeff York-  the answer is simple - keep politicians out and let businessmen handle business.
Unfortunately,  the simplest strategy is often the most difficult to implement in practice.

15 September 2010

The world's biggest free school?

Just discovered Khan Academy, what is in all probability the world's biggest free school..this is an open source project and has the potential to bring learning to children across the world as more videos are added on.

What is really interesting is his motivation for leaving a hedge-fund job to do this work full time as he talks of getting the highest possible social return per dollar invested:
Are you interested in turning this into a business? Maybe with some VC funding?
I've been approached several times, but it just didn't feel right. When I'm 80, I want to feel that I helped give access to a world-class education to billions of students around the world. Sounds a lot better than starting a business that educates some subset of the developed world that can pay $19.95/month and eventually selling it to some text book company or something. I already have a beautiful wife, a hilarious son, two hondas and a decent house. What else does a man need? With that said, if you are a social venture capitalist and are looking to deploy capital with the highest possible social return per dollar invested, we should talk. I think you'll find that there is no more measurable, scalable and high impact way to educate the world.

Hear from Salman Khan in person here

26 August 2010

China, India and industrial policy

Latest paper on Voxeu by Felipe, Kumar and Abdon from the ADB analyses export data to show that China and India are two outliers, with more sophisticated and diversified export baskets, given their income levels- the paper argues ' that the capabilities that both China and India accumulated before reforms started are vital to understanding their growth later on. While we agree that planning led to mistakes, inefficiencies, and to the mis allocation of resources in both countries, we argue that, given their income per capita, China’s and India’s export baskets are more sophisticated – as measured by the income content of the export basket – and diversified – as measured by the number of products exported with revealed comparative advantage – than might otherwise be expected. Both are far ahead of countries at similar levels of development. This could have been achieved only through planning, industrial policy, and sector targeting.'
Going ahead, this calls for more support from the governments to exploit the advantages in place.

25 August 2010

Natural resource or political resource curse?

With Vedanta not getting an environmental clearance for its project in Orissa, one issue that the environment ministry has sidestepped on is the involvement of state and central government officials in granting favours. “The Saxena committee made a number of observations on state officials. I don’t agree with that and believe that they were acting to the best of their ability. There will not be any witch-hunt,”  said Jairam Ramesh the Environment Minister. According to Mr. NC Saxena, whose Report forms the basis of the decision by the government to scrap the project, “I have not given clean certificate to the Union environment officials who too ignored various violations at the site at various times. The report has clearly stated that the State government officials were hand-in-glove with the company in 2005 by ignoring Forest Rights Act,” he told PTI.   Whose responsibility is it now to see that the corruption pointed out by the Saxena Report is dealt with and cleaned up?

This is of course not an issue that is just Indian in nature, it affects countries across the globe, documented in Africa,  in South America.. the term 'natural resource curse' has come up precisely because of this. While more than 40% of the resource rich countries are autocracies, and democracy is preferred to autocracy when it comes to benefiting from resource windfalls, data from Brazil examined by Brollo et alfinds that a 10% windfall in government revenues leads to a 12 percentage point increase in corruption and a 3 percentage point reduction in the probability that politicians have a degree. The chance that an incumbent is reelected raises by over 4 percentage points.They call this the political resource curse. So democracies do provide the necessary checks and balances, compared to autocracies, but there are pitfalls here too.
What about the corporates? As Sudeep Chakravarti says, If the corporation had cared, protests would not have happened. ...,(Perhaps the flaw in the concept of human resource has always been that, it is practised with those under a corporate umbrella, rarely with those adversely affected on account of a company’s activities.) In an earlier column, he writes, Businesses ought typically to be more far sighted, less prone to believing in hype, and more aware of liability.

Here, the problem is compounded because the crucial issue, as Sunita Narain points out,  is that the poorest people in India live on its richest lands. For governments and corporates to rethink the way they manage resources, there has to be a review of growth and development plans, because without understanding and integrating this basic point into our plans for the future, social conflict is inevitable. 

20 August 2010

Random thoughts on mosquitoes

With dengue in the family, here are some totally random thoughts generated by mosquitoes on the mind.

  • Come monsoon and dengue is hitting the headlines once again, along with malaria in Delhi, Mumbai, and abroad too..near Manila.
  • There is no vaccine and no cure for dengue, and one can be cynical and wonder whether the H1N1 vaccine came out so quickly precisely because it affected the richer countries too. 
  • Dengue is in fact a part of the list of Neglected Tropical Diseases with the WHO, diseases that affect low income countries the most. Within these countries, the burden of course falls disproportionately on the poorer sections of society, who have to grapple with loss of daily income, low productivity, extra healthcare expenses, family support issues etc.
  • But it is true that research in tropical diseases barely gets the kind of attention it deserves. An article by Sandeep Kishore, Gloria Tavera and Peter Hotez talks of the innovation gap in the 'diseases of poverty' asking for universities to step into the breach and work in this area: 'Devising and developing therapies for the diseases of poverty is not profitable, but the dividends of developing life-saving therapies are priceless. If our universities won't deliver, who will?'
  • Of course a large part of the problem stems from lack of sanitation and this requires community education and more emphasis on general hygiene, especially in congested urban areas. 
  • And last but not the least, what part do mosquitoes play in the ecosystem? This article in Nature debates these points, concluding  And so, while humans inadvertently drive beneficial species, from tuna to corals, to the edge of extinction, their best efforts can't seriously threaten an insect with few redeeming features. "They don't occupy an unassailable niche in the environment," says entomologist Joe Conlon, of the American Mosquito Control Association in Jacksonville, Florida. "If we eradicated them tomorrow, the ecosystems where they are active will hiccup and then get on with life. Something better or worse would take over."  There are however quite a few many comments at the end of that article left by readers pleading for the right of mosquitoes to live and asking for the eradication of homo sapiens instead, which reminded me of James Thurber's Interview with a Lemming
PS. For those who are wondering why a post on mosquitoes should appear in a blog on rethinking development economics, it's because health is by far the most neglected aspect in development and by economists, even though it is so obviously linked to productivity. 

26 July 2010

Dead end ahead?

Ramchandra Guha's article in the Telegraph about the IRMA assessment of the PESA:
..the Panchayat (Extension to Scheduled Areas) Act. Passed in 1996, PESA conferred on tribal communities the ownership of non-timber forest produce, the power to prevent alienation of land to non-tribals, the power of prior recommendation in granting mining leases, and the right to be consulted in land acquisition by the government. Assessing the impact of the legislation a decade later, the report found that “in most states, the enabling rules for the gram sabha’s control over prospecting of minor minerals, planning and management of water bodies, control and management of minor forest produce, [and] dissent to land acquisition are not yet in place, suggesting reluctance by the state governments to honour the mandate of PESA”.
In the past decade, it is in tribal districts that the Maoists have made the greatest gains, in good part because of the State’s own short-sighted and exploitative policies. The IRMA researchers are no sympathizers of the methods of the Naxalites. They see them (in my view, rightly) as a threat not just to Indian democracy, but to democratic values in general. They quote an activist who notes that while the Maoists might have, in the beginning, fought for greater economic and social rights for tribals, over the years they have “become corrupt, power hungry and intolerant of any difference[s]”. The insurgents are also deeply hypocritical; thus “while denouncing the ‘loot of adivasi resources’, the Party takes money from the mining industry to fund its operations”.
Ironically, although it had commissioned this assessment of PESA, the ministry of panchayti raj has thus far refused to allow it to be printed. If the ministry is sincere about its mandate, it should have this study read by all its officials. The officials of the home ministry and the prime minister’s office would profit from reading it too. Perhaps four people in particular should closely read and digest its contents: the prime minister, the home minister, the Congress president, and the youngest of the Congress general secretaries.

As Guha writes:

The IRMA study quotes an activist saying, “The government might not be interested in talking to the Maoists without certain pre-conditions. But what stops it from talking to its own people and understanding their pain?” Mahatma Gandhi once walked through the riot-torn districts of Bengal and Bihar — it may be too much to ask the leaders of today to walk through Dantewada, or Koraput, or Narayanpur, or Gadchiroli, or any of the other areas of tribal suffering and discontent.
The report can be read at Tehelka's website here and concludes:
But PESA—if honestly honoured—might help us 
as a democracy, to begin rewriting this tragic story. Incidentally, this may be the last opportunity 
that the State may have to retrieve PESA. The alternative is too horrific even to contemplate for 
the Tribal Areas.

22 July 2010

Step on the gas.. with care!

Excellent post by Suvrat Kher, geologist, on the implications of using shale gas as an energy source in India:
Over the last few months, several articles and papers have emphasized the potential role shale gas will play in India's hunt for energy. Shale gas is natural gas trapped in fine grained sediment.
I don't know how much shale gas resources India has because there has not been a systematic evaluation of shale gas. India's current energy policy prohibits exploitation of shale gas and coal-bed methane. The sooner that policy changes the better for energy starved India.
Still, there is one aspect of exploiting these resources that has not been touched upon by any of the articles I have come across and that is the environmental costs of extracting shale gas.

He goes on to point out the social and environment costs, the regional implications as well that need to be carefully dealt with.  

21 July 2010

What's wrong with economics?

A great speech by a Central Banker, Dr DeLisle Worrell, Governor of the Central Bank of Barbados that talks of the problems with economics today, about complexity economics, about looking at data and understanding its details rather than going in for models that hide such detail at the aggregate..and lots more.

Our theories can’t deal with reality, so we ignore the real world and spend our time “testing” our theories. If economics is to have any advice to offer which is useful for the management of real economies, we must speak to the reality in all its rich complexity, using all the data we have, all the methodologies we can devise, and all the sources of insight we can borrow. We must dig as deeply as we can, and become sleuths in pursuit of deeper understanding of our economies, even if our search leads us into paths that are dark and uncertain.

So when central bankers talk of going back to the drawing board and making theory more realistic, what does that mean for policy?

15 July 2010

Agents of change

A recent news item about the Finance Minister to tell CEOs to tone down their lavish lifestyle, had a quote from Tarun Das of CII :
"People in India think the corporate sector is not doing enough for the society,” he said. It was time, for instance, that the top 10 Indian corporates set aside Rs 1,000 crore each for providing safe water, good quality education and medical facilities for the poor, he said.
“More than money, the corporate sector has the management skills to execute programmes without leakages. They must join the government in its efforts,” Das said.

Perception-wise this is correct, the general feeling is that the corporate sector can do much more. Yet public perception of the government not doing enough either is also very strong.
However, mandating limits is not the right way to go about it, it is in fact a rather bureaucratic solution and it is doubtful whether public perception will change much even if such amounts are spent.
What would prove more useful would be to see how much does the corporate sector actually do, and here a study by the CII would be valuable as a benchmark.

More interesting though was his second point, that the corporate sector should join the government in its efforts and help execute programmes without leakages - now that will be a big step ahead. There are of course instances where this is already happening, e.g the UID project - Nandan Nilekani has opened the doors to volunteers :What we are finding in many companies there are a lot of youngsters who want to do something meaningful for a couple of years in the social world. So we have volunteer sabbatical programme. We generally want this to be a public participative project because it is not limited to a few people. It is about getting everybody energized. So anyway they can help we’ll be happy.

Another example of the corporate sector aiding the government in raising efficiency is TeamLease Services, which has tied up with the Karnataka government to revamp the defunct employment exchanges in the state:
According to TeamLease, India currently runs about 14,000 government employment exchanges with about four crore registered candidates. Only two lakh jobs were created last year.  Under the new public-private model, TeamLease would set up the building and infrastructure to run the service, and government would contribute to the training costs. This means registered candidates will get trained for free.
Small steps maybe but in the right direction.

And then there is the news that Aruna Roy and Jean Dreze are back with the National Advisory Council. What is heartening is that 'Both see the state as part of the problem, not the solution. Dreze frankly says he continues to find the government and its functionaries “elitist” and “repressive”; Roy, that ordinary people and their concerns are far away from the priorities of those in power in Delhi' Yet, there they are, working with the government, doing their bit to get a better system worked out.

Of course, all these efforts will work only if the government is open to such assistance and is willing to work out change in its own functioning. As PK Dubashi points out in a piece on dealing with the Naxal challenge,'Dedicated leaders and selfless people like Baba Amte and his sons, Vikas and Prakash, spent years in tribal areas, providing them medical service. So do the couple, Abhay Bang and Rani Bang. They are respected by the tribal society but the government does not feel it necessary to consult them and take their guidance. Instead selfish leaders from the tribal communities rule the roost and instead of helping their own community they promote their own interests and those of their families.'
His solution: 'We will have to refashion our administration of the tribal areas. A large number of young people with dedication and idealism, conversant with tribal language, culture and way of life, would have to be put in service in administrative positions in the tribal areas. The sooner such a new approach is adopted, the better.'

 There is no dearth of such people, but the question again arises, will the current administration allow such a change..or rather to phrase the question more constructively - what will it take for the current administration to allow such a change? If we look at the examples of currently successful efforts like the UID, the change has to come from within, whether it is the corporate sector, social activists or volunteers ready to work, they cannot work with the government unless the government works with them. It is when the hand of help is accepted that public perception will change, for both the government and the corporate sector.

01 July 2010

This time for Africa!

Read about a very interesting project in Africa, under the Millennium Project initiative, a new health application based on mobile phone Child count+ which allows community health centres to monitor every single child in their area and follow up on the progress. With networks now all in place, such ICT initiatives are set to explode all over the continent. For more particulars check this.
 Matt Berg, Director of ICT for the Millennium Villages project, indicated that, as of this year, all MVs are wired for Internet and mobile phone service, thanks in large part to partners Zain and Ericsson. These systems are connected to the larger fiber networks now in place through much of Africa. “The infrastructure is in place,” Berg said, and “Africa is ready to code.”
The ChildCount+ Goals

Register every child – Create a “living” registry of all children under five in a community. This list provides the basis for CHWs to monitor the health status of their children.
Screen for malnutrition every 90 days for children from 6 months to 5 years. When a child with acute malnutrition is detected, the program provides support for Plumpy’nut based malnutrition treatment.
Monitor for malaria and diarrhea – track and treat the two major preventable causes of death in children under five. ChildCount+ provides support for home based malaria RDT testing and ACT dosing, and oral rehydration salt (ORS) usage.
Full child immunization support - Group all children in monthly age groups to know when a particular immunization is due. Record all immunizations and follow up with all children who are behind with their immunization schedule. Help manage vaccination campaigns.
Register all newborns and record when child deaths occur to enable local CHWs and communities to understand why.

The system can even be used to transfer wages to CHWs and monitor their productivity. 
It shouldn't be too hard to get similar programmes underway in India.Though the Minister of State for Health Dinesh Trivedi just went on television complaining about the red tapism in his own ministry -

"Roadblocks are that these people (bureaucrats) are not innovative. They don't understand technology. Young people fresh out of college would be able to run the Health Ministry better that these bureaucrats," he said. 
So will we catch up with Africa someday on public health programmes?

15 April 2010

Finance and fisheries

The Economics of Ecosystems and Biodiversity (TEEB) workshop organised by the Indian Institute of Technology (IIT), Mumbai, the Conservation Action Trust (CAT), the Bombay Natural History Society (BNHS) and the Green India States Trust (GIST) was inaugurated by an unlikely candidate for this task, RBI Deputy Governor, Usha Thorat. I wonder why someone from the RBI, a 'layperson who needed to learn the jargon', as she put it,  was chosen for this seminar - all I could find was that the TEEB Study Leader, Pavan Sukhdev, has extensive connections with the finance world and the RBI.
Whatever the reason, it was good to see this speech on biodiversity on the RBI website. Her speech makes for an interesting read and took me onto Haldane's paper, linked below.
Excerpt from her speech:
In a speech at the Financial Student Association, Amsterdam, on 28 April 2009, Andrew G Haldane, Executive Director, Financial Stability, Bank of England, drew an interesting parallel between the recent global crisis and ecosystems. He cited the collapse of fisheries that came to a head during the 1970s. and 1980s, leading to the imposition of fishing quotas for various species. In setting quotas, no account was taken of interaction between species and the surrounding eco-system. Relating this to the global crisis, he observed that the existing regulatory rules for financial institutions echoed the fisheries management of the 1970s. Risk quotas are calibrated and applied node by node, species by species approach, which takes no account of individual nodes’ system-wide importance – for example, arising from their connectivity to other nodes in the network or their scale of operations. Apart from interconnectedness, Mr Haldane also uses the natural relationship between diversity and stability to show how lack of diversity was a reason for collapse of the financial system. Studies of coastal eco-systems, he said, reveal some dramatic patterns. For around 800 years, between the years 1000-1800 AD, fish stocks and species numbers were seemingly stable and robust. Since then, almost 40% of fish species across the world’s major coastal eco-systems have “collapsed” - defined here as a fall in population of greater than 90%. That is systemic by any metric. There appear to be many environmental reasons for this collapse, some natural, others man-made. The financial system, Mr. Haldane observed, has mirrored the fortunes of the fisheries, for many of the same reasons. Since the start of crisis many banks have seen their market capitalization fall by a significant amount- the fisheries equivalent of collapse. But what took marine eco-systems two hundred years to achieve has been delivered by financial engineers in two!! In explaining the collapse in fish and finance, lack of diversity seems to be a common denominator

The speech by Haldane cited by her is fascinating:
It considers the financial system as a complex adaptive system. It applies some of the lessons from other network disciplines – such as ecology, epidemiology, biology and engineering – to the financial sphere. Peering through the network lens, it provides a rather different account of the structural vulnerabilities that built-up in the financial system over the past decade and suggests ways of improving its robustness in the period ahead.

The financial system evolved in a way that by 2007 showed more complexity and less diversity. As Haldane says:
But in just about every non-financial discipline - from ecologists to engineers, from geneticists to geologists - this evolution would have set alarm bells ringing. Based on their experience, complexity plus homogeneity did not spell stability; it spelt fragility. In understanding why, it is useful to explore some of the wider lessons from
those disciplines, taking in turn the effects of complexity and diversity on stability.

The tentative policy prescriptions he puts forth:
The experience of other network disciplines suggests a rather different approach to managing the financial network than has been the case in the past, if future systemic dislocations are to be averted. Three areas in particular are discussed: 
• Data and Communications: to allow a better understanding of network dynamics following a shock and thereby inform public communications. For example, learning from epidemiological experience in dealing with SARs, or from macroeconomic experience after the Great Depression, putting in place a system to map the global financial network and communicate to the public about its dynamics;
• Regulation: to ensure appropriate control of the damaging network consequences of the failure of large, interconnected institutions. For example learning from experience in epidemiology by seeking actively to vaccinate the “super-spreaders” to avert financial contagion; and 
• Restructuring: to ensure the financial network is structured so as to reduce the chances of future systemic collapse. For example, learning from experience with engineering networks through more widespread implementation of central counterparties and intra-system netting arrangements, which reduce the financial network’s dimensionality and complexity.

06 April 2010

Ostrom again, and the management of commons

Excerpts from Ostrom's recent interview :

I don’t see the human as hopeless. There’s a general tendency to presume people just act for short-term profit. But anyone who knows about small-town businesses and how people in a community relate to one another realizes that many of those decisions are not just for profit and that humans do try to organize and solve problems.
We tend to want simple formulas. We have two main prescriptions: privatize the resource or make it state property with uniform rules. But sometimes the people who are living on the resource are in the best position to figure out how to manage it as a commons.

Fran: Is there a role for government in those situations?    Elinor: We need institutions that enable people to carry out their management roles. For example, if there’s conflict, you need an open, fair court system at a higher level than the people’s resource management unit. You also need institutions that provide accurate knowledge. The United States Geological Survey is one that I point to repeatedly. They don’t come in and try to make proposals as to what you should do. They just do a really good job of providing accurate scientific knowledge, particularly for groundwater basins such as where I did my Ph.D. research years ago. I’m not against government. I’m just against the idea that it’s got to be some bureaucracy that figures everything out for people.
Fran: How important is it that there is a match between a governing jurisdiction and the area of the resource to be managed?     Elinor: To manage common property you need to create boundaries for an area at a size similar to the problem the people are trying to cope with. But it doesn’t need to be a formal jurisdiction. Sometimes public officials don’t even know that the local people have come to some agreements. It may not be in the courts, or even written down. That is why sometimes public authorities wipe out what local people have spent years creating.
The following is almost Gandhian in concept:  The need to get people away from the notion that you have to have a fancy car and a huge house. Some of the homes that have been built in the last 10 years just appall me. Why do humans need huge homes? I was born poor and I didn’t know you bought clothes at anything but the Goodwill until I went to college. Some of our mentality about what it means to have a good life is, I think, not going to help us in the next 50 years. We have to think through how to choose a meaningful life where we’re helping one another in ways that really help the Earth.
What we need is a broader sense of what we call “social ecological systems.” We need to look at the biological side and the social side with one framework rather than 30 different languages. 
This interview reminded me of this case study done of Bhutan, where the forest resources, traditionally managed by the communities, was faced by outside commercial interests - the govt response, the impact and the evolution of the current system where communities share in the management are all detailed in this study.
The Royal Government of Bhutan has taken a very strong stance on conserving their rich natural resources base, and were very successful in doing so. However, some of the conservation measures had negative side-effects on the quality of some CPRs. The most prominent example is the nationalisation of all non-private land into ‘Government reserved forest’. This took away the control and responsibility away from the local communities. As monitoring was limited (especially for non-timber resources), open access was created, which led to ‘tragedy of the commons’.
On the other hand, during the last 5 years, several government initiatives had sprung up to facilitate CPR management and commercialisation in close cooperation with local communities. A few success stories are emerging. Moreover, new legislation to encourage community participation in common resources management is coming up.

31 March 2010

The fight over land

ArcelorMittal, the world's biggest steel company, is having it tough finding land for its projects in India. This news item talks to the latest developments where the company has been negotiating with farmers successfully so far, the landowners have put up a list of 20 demands that the company has apparently agreed to. The news item is one of the few that explain why some landowners give up land and why others dont - the quality of land is an important issue here.
Jobs are what everyone is eyeing in Petarwar. “Our family will give land for the project. You can see this land, it does little to support our livelihood. If ArcelorMittal gives us jobs, we will all give land,” said Bindeswar Mahato, whose family has 30 acres.
And it’s not just for themselves. ArcelorMittal has agreed to support land losers for up to three generations, as part of a rehabilitation package being discussed with the land owners. Apart from employment, land losers will also get a pension till the plant becomes operational. Schools, colleges, hospitals, peripheral development are all being discussed.
An ArcelorMittal spokesperson says the company has held multiple discussions with landowners and residents of Petarwar. “This ongoing dialogue of exploring ways to address local needs and aspirations will help us devise a sustainable package for both sides,” he said.
Moreover, the people have been made to understand that they would not be losing land to the project. Lakhanlal Mahato said, “The land will belong to the company as long as the smoke comes out of the furnace in the plant. The day it stops, the land will be returned to us.” In other words, if the plant stops functioning the land would be returned to the people."
ArcelorMittal has learnt doing business in India the hard way. The company signed a memorandum of understanding (MoU) with the Jharkhand government in 2005, but land agitation prevented it from making any headway. The situation in Orissa is no better.
Why are residents here so willing to give up what their counterparts just 100 km away were not.
First, unlike Petwarwar, Khunti-Gumla is fertile with the double-crop and multi-crop land in places. Also, in Petarwar's case, proximity to the Bokaro steel city, 40 km away, would have also made the environment more conducive to industrialisation.
Even though 90 per cent of the people are willing land losers in Petarwar provided the company accepts their 20-point charter of demands, ArcelorMittal is taking a cautious approach. The company’s original land requirement was 11,000 acres. Now, the requirement in the first phase of six million tonnes is about 2,000 acres. “The plant will be built in phases,” the company spokesperson said.
That’s not to say that there is no resistance to the project. The project site covers essentially five villages : Kojram, Lukaiya, Jarwatar, Bendotar and Hanslata. Residents of Kojram, the smallest of the villages, are resisting the project.
They have strong support from tribal activist, Dayamani Barla, who spearheaded the agitation in Gumla. “The public meeting went off well for the company because it was attended by middlemen. The adivasis called me, for support,” said Barla.
Barla is not against development. “Around 8 million tribals have been displaced so far in Jharkhand, of which only 3-4 per cent has been rehabilitated.”
But it seems that ArcelorMittal has more people on its side, for now. If the company manages to bag 70 per cent of the land through direct purchase, then the Jharkhand government could step in to acquire the rest, says N N Sinha, industry secretary.
Still, in east India, land acquisition is an emotive issue and the tables can turn any moment.
Consider this: Bokaro Steel Plant’s (BSP’s) expansion to seven million tonnes is held up because people displaced from the 32,000 acres of land way back in the 1960s are demanding jobs. The number of displaced families has grown from 3,000 back then to 30,000 now. The steel plant has already accommodated 15,000, but the list is open-ended and the backing, more so. There are about 30 political groups representing them.
The industrial scenario is also a reflection of the states’ politics. Carved into a separate state in 2000, the state has had seven governments since then, making continuity in policy an impossible task. 

The piece says, land acquisition is an emotive issue, True, it's the life and blood of those who own it, but at the bottom of the conflict is the question of control over resources - water, forest, land - that drives the emotions...the struggle from the other side can be found in this blog, which isnt updated very often but still gives a good idea of the concerns of the tribal owners. 

In India, land is being acquired for industry, but in Africa, it is being taken away for food..by foreign investors, raising another set of issues. The FAO's report on International Land Deals is a comprehensive study and points out the key lacunae in these deals:

Virtually all the contracts analysed by this study tend to be strikingly short and simple compared to the economic reality of the transaction. Key issues like strengthening the mechanisms to monitor or enforce compliance with investor commitments, through monitoring and sanctioning, maximising government revenues and clarifying their distribution, promoting business models that maximise local benefit, as well as balancing food security concerns in both home and host countries are dealt with by vague provisions if at all. 

There are many recommendations to fix the concerns, e.g

innovative business models that promote local participation in economic activities may make even more
commercial sense. These include outgrower schemes, joint equity with local communities and local content requirements.

On many counts, the recommendations seem a set of ideals of attain, they should form a charter of sorts for all stakeholders. In the end, given the focus on returns in the short-term, as the FAO suggests, it is important that world bodies deliberate the implications of these deals for food security, human rights etc. The questions raised for African agriculture actually need to be addressed the world over, for instance, in India it is the clash between large industry and small land owners (last post on water, this one on land)..the closer we are to attaining some parts of the ideal, the better...

What should African agriculture look like in 30 years’ time? What place should large investment and smallholders play within that, and why? These basic questions should frame decision-making. Public deliberation is essential to ensure that this question is properly addressed and factored into choices between different options.

24 March 2010

Conflict and development

South Asia is the second most violent place in the world, after Iraq. Not just Afghanistan and Pakistan that are in the world news, but parts of India, Lanka and Nepal have been reeling under the impact of conflict for decades.
Ghani and Iyer present research on South Asia:
Given the inverse association between conflict and per capita income, we would expect that conflict rates should be much higher in lagging regions within countries – i.e. those regions that have lower per capita income compared to national average? Indeed, this is exactly what we find – conflict is concentrated in lagging regions within countries.
Lagging regions have experienced more than three times the number of terrorist incidents per capita, compared with leading regions, and almost twice as many deaths per head of population in such incidents.

Reducing conflict is a prerequisite to political stability, which, in turn, is the prerequisite for implementing pro-growth policies. Even in a best-case scenario, the presence of low-level conflict constrains the policies governments can implement to promote growth.
Policymakers in South Asia have tried various policies to reduce conflict. The most common approach to deal with insurgencies, terrorism, or internal violence is to use the police forces to establish law and order in the affected areas. The police forces in South Asian countries, however, tend to be understaffed and underequipped. In cases where police forces are insufficient, the armed forces are called in to deal with the insurgency. In most cases, this has not been a successful strategy. Even when these measures are successful in defeating the insurgents, as in Sri Lanka, the human cost associated with military operations is very high.
A different approach to dealing with insurgencies is to conduct negotiations and sign peace agreements with the insurgents. To be effective, this approach needs two conditions:
  1. the government must negotiate in a coordinated way and fulfil at least some of the insurgents’ demands; and
  2. the insurgent group must be genuinely interested in joining the political mainstream
 This approach has been tried in some areas of South Asia. For instance, the Indian government has signed peace deals with several separatist groups in the northeastern states, granting them a higher degree of local autonomy in some cases. Similarly, negotiations with some Tamil groups such as the EPRLF have resulted in their integration into mainstream politics.
At the same time as the security-based solution, there are economic solutions. These involve the government expanding welfare programmes to reduce poverty in the conflict-affected areas as a means to undercutting the support for the insurgency. This approach is consistent with economic backwardness as a cause of conflict and has been tried in some conflicts in South Asia, but it has failed because of poor choices of economic policies and poor implementation in conflict regions.

Connected to the above resolution of conflict is Amartya Sen's article in the Guardian

..take Steve Biko's remarks on "powerlessness" in the apartheid-based South Africa in the 1970s. "Powerlessness breeds," Biko said, "a race of beggars who smile at the enemy and swear at him in the sanctity of his toilet; who shout 'Baas' willingly during the day and call the white man a dog in their buses as they go home." If capability failure of any kind is a matter of concern, those related to people's inability to act freely or speak openly because of the power of others have special urgency. This is an important concern in the advancement of freedom and capability, since societies involve conflicts as well as togetherness and mutual support. The pursuit of justice in enhancing freedoms and capabilities in peoples' lives has to be alive to both.

There are no easy solutions, though the past has proven that change is possible. Read this piece in the paper today about an Indian army officer who went back to Manipur after 16 years, and met the militant who had shot him, and the girl he had rescued during the shoot out. The problems in Manipur are far from resolution but stories like this hold out some hope.

18 March 2010

Cola companies and groundwater

The Pepsi plant in Kerala has come under censure from the state government for 'overextraction' of ground water, the 'Panel Chairman and state Water Resources Minister N K Premachandran said the key suggestion was to impose restrictions on water extraction by Pepsi at 234,000 litres per day from the current average of 700,000 litres a day.' Palakkad district where the plant is located has been declared a drought-hit area this year.

While the spokesperson for Pepsi said that they were using innovative recycling and recharging techniques and had been able to save about 200 million litres of water in the last four years and has also brought down the water usage by 60 per cent, the point is that usage of groundwater by industrial units, especially for 'nonessential' uses is coming under scrutiny across the world,cola companies are the first to get struck.
In 2004 the Central Ground Water Board in Kaladera, Rajasthan, had held Coca Cola  responsible for depleting ground water level in the region.

As the report 'Watching Water' by JP Morgan put it,  'As water becomes more precious, companies’ real and perceived behavior with respect to water consumption and discharge is also likely to have greater consequences in the marketplace, with an increased risk of consumer backlash against companies judged to be profligate or irresponsible.

Rikki Stancich's article pointed out in 2008,
The need for water mapping and for companies to take the initiative on water management has arisen largely from failure on governments’ part to effectively price water.
But this is likely to change, says Jacob Tompkins, director of WaterWise. “At present, the price of water isn’t representative of its cost – the environmental damage associated with its extraction or its contamination. But the price of water will continue to go up, globally. There will be more regulation and we are likely to see the emergence of voluntary trading of water rights and pollution rights within the next decade,” he says.
In the UK, the Federation House Commitment, coordinated by the Food and Drink Federation, an industry organisation, and Envirowise, a government agency, aims to reduce the water consumption of participating companies by 20% by 2020 (compared to a 2007 baseline). Such schemes are creating a framework for future regulation, says Tompkins.
Water regulation moved up a gear in Australia earlier this year when the Council of Australian Government set the first ever sustainable cap on ground and surface water usage for the Murray-Darling Basin, a land area spanning over one million square kilometres and five jurisdictions. “It’s likely that the rest of the world will not be far behind Australia’s lead,” notes Mattison.

Cola companies will be picked up first as an example and will in all probability take up a lot of media attention; however, watch out for sweeping changes in the way the world uses water in the years ahead.

13 March 2010

Capital controls back in favour!

Well well, the IMF has reversed its policy on capital controls last month..read Dani Rodrik on Project Syndicate on this

In the world of economics and finance, revolutions occur rarely and are often detected only in hindsight. But what happened on February 19 can safely be called the end of an era in global finance.
On that day, the International Monetary Fund published a policy note that reversed its long-held position on capital controls. Taxes and other restrictions on capital inflows, the IMF’s economists wrote, can be helpful, and they constitute a “legitimate part” of policymakers’ toolkit.
Rediscovering the common sense that had strangely eluded the Fund for two decades, the report noted: “logic suggests that appropriately designed controls on capital inflows could usefully complement” other policies. As late as November of last year, IMF Managing Director Dominique Strauss-Kahn had thrown cold water on Brazil’s efforts to stem inflows of speculative “hot money,” and said that he would not recommend such controls “as a standard prescription.”

Copyright: Project Syndicate, 2010.
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This is a major shift in thinking. Rodrik points out that the combination of economists ideas and political power with the banks made finance lethal in the past. This is set to change, even though political power remains, the intellectual climate has changed significantly. 

09 March 2010

Earthquakes and governance

Suvrat's post bringing out the link between governance and earthquake impact talks of how building codes and safety regulations are routinely violated in India, making governance, especially at the municipal level a key variable in understanding disaster management.
Kaufman and Tessada's review of natural disasters and national diligence delves into this issue in depth:

Chile’s good governance played a significant role in limiting the death toll resulting from this earthquake. In particular, two dimensions of governance stand out—government effectiveness (the efficacy of the public sector), and control of corruption. Over the years, Chile’s effective institutions succeeded in designing and adopting better building codes, which have been periodically upgraded, to take into account previous earthquake experience, innovations in preventative technologies and the country’s growing wealth (made possible in part by good governance).
Equally noteworthy is that these building codes are enforced. The media has brought to international public knowledge a new high-rise that has collapsed in ConcepciĆ³n and an apartment building near Santiago that has been rendered inhabitable since it is leaning more than the Tower of Pisa. Notably though, these examples indicate that non-compliance with building codes (and possibly corruption) is likely individualized, rather than systemic. Naturally, there are many damaged structures, particularly (but not exclusively) those built long ago. Even though there are many people close to the epicenter who are now homeless, the overall stock of houses was not decimated and the number of fatalities due to buildings collapsing was limited. In fact, a very large portion of deaths resulted from the tsunami instead.

Undoubtedly, as with past earthquakes, lessons will be drawn from damage assessments and building codes will be improved; but overall the existing system did work. In contrast with the devastating effects that corruption in the construction sector had on the cities affected by the earthquakes in Turkey (where many new residential buildings collapsed) and China (where many schools full of pupils collapsed), the low levels of corruption in Chile, coupled with effective institutions, help explain why building codes were largely enforced.
ore broadly, empirical evidence, such as that presented by Kahn’s study on natural disasters (gated, ungated), suggests that among other factors, governance and corruption control are determinants of the death tolls A review of recent earthquakes, as shown in Table 1, and of the quality of governance (in terms of governance effectiveness and control of corruption) is also suggestive, as depicted in Chart 1.

See the article for more details.

03 March 2010

Award time again!

Real World Economics Review blog is calling for nominations for the Revere Award
The economics establishment has attempted to evade responsibility for the Global Financial Collapse by calling it an unpredictable, “Black Swan” event.  But in fact some non-neoclassical economists foresaw the crisis and warned the public of its approach. The Revere Award aims to give these economists the professional and public recognition that they deserve, to encourage others to utilize their methods, and to increase the likelihood that, for the benefit of humankind, empirically responsible economists will be listened to in the future

Greenspan, Friedman and Summers won the Dynamite Prize
Alan Greenspan has been judged the economist most responsible for causing the Global Financial Crisis. He and 2nd and 3rd place finishers Milton Friedman and Larry Summers, have won the first–and hopefully last—Dynamite Prize in Economics.
They have been judged to be the three economists most responsible for the Global Financial Crisis. More figuratively, they are the three economists most responsible for blowing up the global economy.
Most than 7,500 people voted—most of whom were economists themselves from the 11,000 subscribers to the real-world economics review. With a maximum of three votes per voter, a total of 18,531 votes were cast.  The poll was conducted by PollDaddy. Cookies were used to prevent repeat voting.
Dynamite Prize Citations  
Alan Greenspan (5,061 votes): As Chairman of the Federal Reserve System from 1987 to 2006, Alan Greenspan both led the over expansion of money and credit that created the bubble that burst and aggressively promoted the view that financial markets are naturally efficient and in no need of regulation.
Milton Friedman (3,349 votes): Friedman propagated the delusion, through his misunderstanding of the scientific method, that an economy can be accurately modeled using counterfactual propositions about its nature. This, together with his simplistic model of money, encouraged the development of fantasy-based theories of economics and finance that facilitated the Global Financial Collapse.
Larry Summers (3,023 votes):  As US Secretary of the Treasury (formerly an economist at Harvard and the World Bank), Summers worked successfully for the repeal of the Glass-Steagall Act, which since the Great Crash of 1929 had kept deposit banking separate from casino banking.  He also helped Greenspan and Wall Street torpedo efforts to regulate derivatives.

02 March 2010

Fuel prices again

The Budget presentation saw the opposition walk out of the Parliament for the first time in India's history. This was over the government's raising fuel prices by increasing duties.
There are a number of problems with the fuel pricing policy in the country, see this article on the 'dieselisation' of the economy thanks to differential pricing.
For the long term view, though there appears to be little alternative to rational pricing. Suyodh's piece in the Express explains
We cannot run away from reality: we are talking here about pricing non-renewable natural resources. Feynman had once said: “for a successful technology, reality must take precedence over public relations, for Nature cannot be fooled.” The technology that has been built upon fossil fuel-based energy has to be transformed. The only way the market will do that is if it is confronted with higher prices.:

26 February 2010

Trade and politics: the case of Madagascar

Aidwatch blog post by William Easterly and Laura Freschi on the US imposing trade sanctions to force President  Andry Rajoelina to hold elections brings out the issues relating to sanctions, politics, impact on the vulnerable and on the macro-economy.

The US pulled the plug on AGOA at the end of December and import duties of up to 34 percent were reintroduced. Now we are starting to see the effects in the formal and informal economy:
Factories closing and factory jobs lost: “As lead times [expire] on orders placed before the agreement [came to an end], factories are laying off workers and we are seeing an explosion in the numbers of unemployed,” said the director pf the Association of Free Trade Business in Antanarivo.
Increased competition among street traders now that former factory workers are pushed out to sell goods in overly crowded street markets (and lower wages now for both): “‘I used to be able to earn 20,000 ariary ($9.30) a day,’ said Soloniaina Rasoarimanana, who has been selling clothes from a pavement stall for 10 years. ‘Now, with the political crisis and more competition, I earn around 5,000 ariary ($2.30) a day.’”
Knock-on effects in neighboring countries (Mauritius, Swaziland, Lesotho, South Africa) which made inputs like zippers to Madagascar’s factories.
Among the effects we are NOT seeing: signs of increased interest in arriving at a power-sharing agreement or instating democratic governance on the part of Rajoelina’s government.

Ineffective sanctions, effective job destruction.  An unaccountable branch of the US government hurts poor people far away who have no voice in US politics. Deeply saddened…we don’t know what more to say.

Some comments at the end of the post:

akatsuki wrote:
Perhaps it is just realizing that the US’s own “sunshine policy” towards oppressive regimes regarding trade has its limits far sooner than we expected – that the empowered middle classes won’t scream for democracy. We are too intertwined with China to back out now, but we can do so in other countries.
Jeff says:
This case just shows how aid is hostage to the world of diplomacy and how diplomacy does not employ evidence based decision making. The evidence clearly shows that instituting trade restrictions will not convince an undemocratic regime. And yet in the logic of diplomacy the US is compelled to do this because it said it would and to remain credible, it has to follow through. It is indeed sad that US credibility becomes more important than the livelihood of so many poor people, including women who Hillary purports to care so much about.

22 February 2010

The eternal cycle of bubbles

Excerpts from a Mint interview with William White of BIS, now with the OECD:
From his perch as the former chief economist at the Bank of International Settlements in Switzerland—the “central bankers’ central bank”—he warned that central banks, his very clients, were dangerously creating too much credit. But up against US Federal Reserve chairman Alan Greenspan, the “Maestro” who had ensured years of stable growth, he sounded like a rabble-rouser. At the 2003 Fed symposium at Jackson Hole, Wyoming, White went against every grain of the zeitgeist, arguing that monetary policy could prick bubbles before they burst; Greenspan remained impassive.

In his own words, RBI is a “full-service central bank”. That description resonates with the Canada-born White, in part because he served for 22 years at the Bank of Canada, another conservative central bank. “I was struck when I was listening to (Subbarao)…it reminded me of the Bank of Canada” which also calls itself “a full-service central bank”.
“When (Subbarao) says that you are where you are, and this is the way we have to behave, he’s right.” And in the real world where India’s economic constraints demand more of RBI, there’s no point in arguing with practicalities. Still, at the back of his mind, is he concerned about what a central bank’s mandate means for its independence?
That’s the elephant in the room: A central bank trying to do too much will inevitably bring it into conflict with political forces, as is already happening in the US. “You can get drawn into politically sensitive issues: You bailed out this guy because he’s your friend, you go to the same golf club… This is the kinda thing that happens,” White says. That invites scrutiny on central banks such as RBI, where monetary and regulatory policy—setting interest rates and overseeing banks—are two legs of the same stool.
To White, though, the world needs to go through a painful “process of adjustment”. Cheap credit last decade created “false demands… So, you have many industries in the advanced countries which are too big. And they are going to have to get smaller,” a process that “is not going to be easy”. If eternal recurrence itself is so amazing a phenomenon, breaking out to attain nirvana sounds too mythical.

18 February 2010

Walk the talk with Steve Keen

Steve Keen is off to walk
On April 15th 2010, I will commence a walk from Australia’s Parliament House to Mount Kosciousko. Below I explain how this event came about. Though it has been triggered by me losing one part of a two-part bet on house prices, its genesis goes back much further–to when I, along with a handful of other non-orthodox economists, predicted that a serious financial crisis was just around the corner.

This is the classic “hair of the dog” cure for a hangover–avoid the consequences of drinking too much one night by getting drunk again the next morning. It worked in the 1970s and 1990s because debt levels were substantially lower than today (45% in the 1970s; 90% in the 1990s; over 150% today) and because there was another group to whom lending could occur. However, now both households and businesses are carrying record levels of debt, and businesses are still rapidly deleveraging while mortgages are the only source of rising debt. I don’t believe that the “hair of the dog” will work this third time: instead debt growth will falter once the impact of The Boost wears off, and Australia will feel the painful effects of debt-deleveraging. I expect this will renew the fall in Australian house prices that The Boost interrupted.
But that’s in the future. For the present, I will be walking to Kosciousko between April 15th and 23rd of this year.
I intend using this event as a way to highlight the absurdity of the economic situation Australia has locked itself into, where continued prosperity is dependent upon house prices forever rising faster than incomes–an outcome that is only possible if debt rises faster than both incomes and prices.
If you agree with me that this situation is absurd, then join me on the walk for an afternoon (or more).
Also consider donating to Swags for Homeless, to help make life slightly less difficult for the homeless. RP Data, who offered to give $1,000 to the charity chosen by whichever of us (myself or Rory) lost the bet, is the first corporate sponsor, and their donation will enable 16 homeless people to sleep more easily in future.
As Keen says, ' “The main bet, over whether house prices here would fall by about 40% over 10-15 years as they did in Japan, is still alive and well”, he noted. “Rory may yet have to follow in my footsteps.”