Thursday, October 30, 2008

Law and poverty: the legal system and poverty reduction

Cause and effect: exploring the relations between law and poverty Authors: L. Williams; A. Kjönstad; P. Robson Publisher: Comparative Research Programme on Poverty , 2008
Full text of document
Poverty tends to be considered as an economic subject area rather than a legal one. And yet, a society’s distribution of income and opportunity is the outcome of its legal system which may encourage or fail to prevent various forms of marginalisation. Even when individuals are responsible for their poverty, modern notions of citizenship enshrined in national and international law entitle them to various forms of state protection. Under these circumstances, the law becomes an instrument for redistribution. Much of this work is still cutting-edge but a start was made at a workshop held in Onati, Spain in 1999 which aimed to explore the theme of “Law and Poverty”. The twelve papers presented at the workshop are now reproduced in a book brought out by the Comparative Research Programme on Poverty (CROP) of the International Social Science Council. The book is divided into four sections which look into:
>poverty as a legal construction
>the responsibility for alleviating poverty
>establishing legal entitlements
>legal initiatives to address poverty

The paper titles comprise of:
>the right to development as a basic human right
>cross-border reflections on poverty: lessons from the United States and Mexico
>poverty as a violation of human rights: the Pinochet case and the emergence of a new paradigm
>the politics of child support
>the state, laws and NGOs in Bangladesh
>exclusion and rights
>poverty and property – human rights and social security
>the effect of legal mechanisms on selective welfare strategies for needy persons: the Greek experience
>gender mainstreaming as an instrument for combating poverty
>does alcohol and tobacco legislation help reduce poverty: the evidence from Sri Lanka
>child labour: a threat to the survival of civilization
>labour organization and labour relations law in India: implications for poverty alleviation
The book comes to the following broad conclusions:
>improved understandings of and approaches to poverty require broad analysis that takes into account different angles, frameworks and lenses
>while poverty is culture and nation-specific, it also has an increasingly important global >dimension which needs to start being taken into account
>support initiatives for poor people are more powerful when framed as citizenship rights – >particularly in the context of social exclusion and gender inequality
>more effective poverty reduction in an age of globalisation requires reconsidering traditional >distinctions between public and private areas of responsibility

Wednesday, October 29, 2008

Climate change: feed it and weep or lead and reap

Jeffrey Sachs
Australia will reap important benefits from the carbon pollution reduction scheme. Properly, the Government has left itself considerable flexibility on several points, which will depend heavily on what other countries do. But the value of the scheme lies not in the details but in three more basic considerations. Australia can now lead economically, technologically and diplomatically in the global effort that lies ahead.
A global climate control regime is on its way. It will almost surely not be a global emissions trading system, but a regime in which participating countries commit to national targets implemented through national means. The Government's proposals can work whether or not global trading comes to pass.
Until now Australia, like the United States, has absented itself from a carbon policy. Some may have viewed this as clever "free riding" on the exertions of others, but that view was short-sighted and wearing thin. A global system will come, and the laggards will face sharper economic dislocations than those who have taken a running start.
In the US, for example, the financial sector has basically stopped financing conventional coal-fired powerplants. Nuclear power is also a huge question mark for market financing, given public worries and the lack of an agreed national strategy. The automotive industry, long betting on cheap oil and a lack of public interest in climate change, is flat on its back. Australia will spare itself the risks of backing into a stalemate on energy technology and infrastructure investment by charting a course consistent with long-term climate change mitigation.
Emissions trading can support the transition to sustainable energy in Australia but will surely not be enough, a fact acknowledged by the Government's initiation of complementary programs such as the Climate Change Action Fund, to spur the adoption of innovative energy technologies.
Transformative technologies, such as carbon capture and sequestration at coal-fired power plants, large-scale solar power, plug-in hybrids, green buildings and perhaps nuclear power, are even more important in achieving a low-cost transformation.
Australia stands to benefit enormously by speedier action on technological development and demonstration. As the world's largest coal exporter, and as a continent with vast solar potential, Australia could find itself a sustainable energy technology leader in just a few years. I think the same could be true about nuclear power in Australia, despite the obvious grounds for public reservations.

One of the greatest benefits from the Government's new initiative will be geopolitical. Australia needs to be at the global negotiating table, not only to defend its national interests but also to help broker the global grand bargain. There is probably no world leader better placed than Kevin Rudd to help intermediate the complex pas de deux that will begin between China and the US next year. Only a solid agreement between the two largest emitters can underpin global actions beyond mere gestures.
China will have to understand that it can no longer hang back and call on rich countries to lead first. China is already rich enough, and emitting enough, to bear major global responsibilities. In any event, the US Senate will not ratify an agreement that puts US industry at a competitive disadvantage. At the same time, China will not move unless it sees a way to combine its continued rapid economic growth with emissions restraint.
Since Australia and China are close neighbours and major trading partners, and share such basic challenges as coal-based power sectors, increasing water stress and solar potential, Australia is especially well placed to help identify global principles and a technological pathway that can accommodate the concerns of China, the US and Europe.
I don't subscribe to every detail of the green paper. I would have leaned more heavily on upstream carbon taxes than downstream carbon permits as the way to put a market price on carbon with least administrative difficulty and most long-term predictability. I am more sympathetic to nuclear power. But Australia has taken a huge step forward to protect its economy, its fragile climate-stressed ecology, its long-term technological leadership and its geopolitical role.
Jeffrey Sachs is the director of the Earth Institute at Columbia University and a special adviser to the Secretary-General of the United Nations, Ban Ki-moon, on the Millennium Development Goals. He is author of Common Wealth: Economics For A Crowded Planet.

Why no bailout for the hungry?

Could all those bailout billions been put to better use? How about feeding poor, starving people?
From the Washington Post:
"The amount of money used for the bailouts in the U.S. and Europe -- people here are saying that money is enough to feed the poor in Africa for the next three years," said Stephen Muchiri, head of the Eastern Africa Farmers Federation.
No question: On its face, there is an obscene disparity between the trillions of dollars that will be spent by Western governments to keep financial markets from breaking down and the paltry $12.3 billion pledged in July by governments and other donors in Rome to tackle the world food crisis. Even just in the United States, the Department of Energy appears to see little problem with loaning GM $5 billion to purchase a nearly worthless Chrysler, but the White House couldn't find the cash to expand the State Children's Health Insurance Program from $5 billion to $12 billion a year so as to cover everyone. These are the kinds of funding gaps that drive caring people insane.
But suppose that the U.S. and various European governments had decided not to bail out their banking systems, and in consequence, credit markets completely collapsed and world trade ground to a halt. It's quite possible that global poverty and hunger would drastically worsen. If farmers have no access to credit, they are unable to pay for seed and fertilizer and labor. If shipping companies have no access to credit, food doesn't move across the oceans. If enough banks collapse, mass unemployment is sure to follow.
I do not mean to privilege one form of spending over another. I think one of the clear lessons from the efforts of governments to address the financial crisis is that when properly motivated, political leaders will throw astonishing amounts of money at a problem. If we can find $700 billion to bail out our banks, surely we can fund national health care and end starvation. But it's also not an either-or question. We would all likely be worse off, in Africa and the United States, if the wheels came completely off the global economy.
― Andrew Leonard

It's Time for Poverty to Have the Spotlight

by Chelsea Wieber
After a few fumbled attempts on their own, global financial leaders gathered in Washington D.C. last weekend to develop a joint plan to prevent the spread of the financial crisis.
Imagine if they focused just a fraction of that attention on alleviating global poverty. After all, high food and fuel prices pushed an additional 75 million people further into poverty this year.
"When food prices peaked and began to come down, despite the fact that conditions within poor countries remained hugely adverse, attention already started to wane," development economist Jeffry Sachs told Reuters. By contrast, the world's finance ministers jumped to commit incredibly large sums of money when credit markets started to fail — a crisis that continues to hold the world's attention.
"The amounts that are needed (to help the poor grow more food) are in the low billions of dollars and we're talking every day now about a new commitment of hundreds of billions for this and hundreds of billions for that," says Sachs. "The truth about poverty is that the poor don't need very much."
In other words, $700 billion — or whatever the astronomical total the worldwide bailout turns out to be — would go a long, long way.

The Real North Korean Crisis

by Manasi Sharma
When you think of North Korea, you may first think of the ongoing nuclear weapons debates and political squabble with the U.S. Yet according to the latest United Nations report, the most significant problem affecting North Koreans is the current shortage of food there.
The UN report found that more than three-quarters of North Korean families have cut their food intake to two meals per day. Even city dwellers are facing higher food prices. A recent Time magazine article says many children have stopped attending school due to hunger, while their parents search for food instead of going to work.
North Korea hasn’t seen such a devastating food crisis since the 1990s, when a famine took more than a million lives. Time blames the government for the current food shortage. In the 1990s, government officials privatized food distribution to some extent so that farmers could sell grains and food throughout the country. The result was that famished North Koreans could still find food. But in 2005, according to Time, the government broke up these markets and confiscated grain from farmers, leading to the current shortfall of production. Destructive floods in 2007 further hampered the country's agricultural production.
The UN also reported a rising number of children suffering from malnutrition and diarrhea. The food crisis guarantees more hunger-related deaths according to an expert on North Korean economy at the Peterson Institute for International Economics in Washington.
North Korea’s leadership does not want to pursue market reform according to Nicholas Eberstadt, a North Korea expert at the American Enterprise Institute in Washington. He says allowing open markets to emerge in the state dominated food distribution sector would imply a significant change of Pyongyang’s policies. Major reforms are not a part of North Korean culture or government, a regime that requires government permission to own a cell phone or computer. However, without changes in policy and perhaps even ideology, North Koreans will continue to experience health-related problems if the government is unable to provide basic necessities such as food.
The World Food Program has expanded their food aid program in North Korea in hopes of reaching 6.5 million people. Without additional help from donor countries, North Koreans may see the 1990s famine repeat itself.

World Vision warns of looming food crisis in southern Africa

Christian relief and development agency World Vision has warned that there will be no long-term fix to the impending food crisis in southern Africa unless the international community unites to combat its root causes.
“As we mark World Aids Day, the international community must focus its attention on the looming food crisis in southern Africa, whilst also addressing its long-term causes – including the Aids pandemic currently devastating countries such as Malawi and Zambia,” said World Vision policy adviser Stephen Doughty.
The appeal from World Vision comes as world leaders meet in New York this week to discuss the impact of soaring food and fuel prices on developing countries.
World Vision Emergency Officer, Nick Wasunna, was recently in Zimbabwe where he encountered the effect of high Aids infection rates on the food crisis.
"I saw queues of people at food distribution centres," he said, in a report on the agency’s website. "After talking to them you discover they are all affected in some way by HIV.
"The impact of HIV/Aids across the region cannot be underestimated," he continued.
"When a family cannot work or grow food because carers are sick or dying from Aids, the problems facing them and their community are severely compounded. Children, especially girls, drop out of school as they are required to look after dying family members.”
The long-term consequences, he said, would be a persistently “uneducated, unskilled and poverty-stricken generation” and less development.
World Vision launched an emergency appeal on Wednesday to assist the 12 to 14 million people it says are facing hunger across southern Africa, most seriously in Malawi and Zimbabwe.
On the web:

In India, Global Crisis Is Not All Bad News

By Rama Lakshmi
GURGAON, India -- In the mortgage crisis that has enveloped much of the Western world in recent weeks, Manoj Malhotra's outsourcing company sees an enhanced business opportunity.
As lenders in the United States and Europe move to firm up loans, sharpening quality control and fraud verification, the Gurgaon-based company that Malhotra heads has designed a Web program to help them do just that.
"The loan processing industry needs less of manual intervention and subjectivity and more of technology-based solutions, especially in the current climate," said Malhotra, who launched the program at a mortgage industry conference in San Francisco last week.
His company, Salient Business Solutions, is not the only one in this country to see opportunities and lessons in the global financial meltdown.
Indians working in information technology and outsourcing have long shared a joke: "When America sneezes, our industry will catch a cold here in India."
But as the credit crisis drags down the U.S. economy, India's booming technology and outsourcing industry is taking steps to boost its resistance to infection. Taking the crisis as a warning, it is hastening efforts to reduce dependence on U.S. and European companies, scale up high-end products and services, find new ways of billing and move beyond merely leveraging the low-cost, English-speaker advantage. (washingtonpost)

Financial Meltdown Worsens Food Crisis

As Global Prices Soar, More People Go Hungry(washingtonpost)

SHANGHAI -- As shock waves from the credit crisis began to spread around the world last month, China scrambled to protect itself. Among the most extreme measures it took was to impose new export taxes to keep critical supplies such as grains and fertilizer from leaving the country.
About 5,700 miles away, in Nairobi, farmer Stephen Muchiri is suffering the consequences.
It's planting season now, but he can afford to sow amaranthus and haricot beans on only half of the 10 acres he owns because the cost of the fertilizer he needs has shot up nearly $50 a bag in a matter of weeks. Muchiri said nearly everyone he knows is cutting back on planting, which means even less food for a continent where the supply has already been weakened by drought, political unrest and rising prices.
While the world's attention has been focused on rescuing investment banks and stock markets from collapse, the global food crisis has worsened, a casualty of the growing financial tumult.
Oxfam, the Britain-based aid group, estimates that economic chaos this year has pulled the incomes of an additional 119 million people below the poverty line. Richer countries from the United States to the Persian Gulf are busy helping themselves and have been slow to lend a hand.
The contrast between the rapid-fire reaction by Western authorities to the financial crisis and their comparatively modest response to soaring food prices earlier this year has triggered anger among aid and farming groups.
"The amount of money used for the bailouts in the U.S. and Europe -- people here are saying that money is enough to feed the poor in Africa for the next three years," said Muchiri, head of the Eastern Africa Farmers Federation.
The U.N. Food and Agriculture Organization estimates that 923 million people were seriously undernourished in 2007. Its director-general, Jacques Diouf, said in a recent speech that he worries about cuts in aid to agriculture in developing countries. He said he is also concerned by protectionist trade measures intended to counteract the financial turmoil.
Although the price of commodities has come down in the past few months, Diouf said, 36 countries still need emergency assistance for food, and he warned of a looming disaster next year if countries do not make food security a top priority.
"The global financial crisis should not make us forget the food crisis," Diouf said.
Commodity prices have plummeted in recent weeks as investors have shown increasing concern about a global recession and a drop in the demand for goods. Wheat futures for December delivery closed at $5.1625 on Friday -- down 62 percent from a record set in February. Corn futures are down 53 percent from their all-time high, and soybean futures are 47 percent lower.
Such declines, while initially welcomed by consumers, could eventually increase deflationary pressures -- lower prices could mean less incentive for farmers to cultivate crops. That, in turn, could exacerbate the global food shortage.

Tuesday, October 28, 2008

Evaluation of African organic farm products-export programme

This evaluation of an organic agricultural products export programme,in Africa, may be of interest to readers. The complete booklet isdownloadable from the SIDA website and from:

Extract from Executive summary pasted below.
Export Promotion of Organic Products from Africa. An evaluationof EPOPAseries: Series - Sida Evaluationissn: 1401-0402isbn: 91-586-8864-1format: Booklet
EPOPA is a programme for development of production and export ofdifferent organic products from Africa. It is a trial and researchprogramme and comprises three projects in Uganda and two in Tanzania.The rationale of the evaluation was to consider the programme fromdifferent aspects such as the EPOPA concept, achievements of theprojects, the performance of the different actors as financier,consultants, exporters, field officers, small farmers etc. Based onthat draw conclusions and make recommendations.
Executive SummaryThe Export Promotion of Organic Products from Africa (EPOPA) programmewas initiated in the mid-1990s by Sida. In the period 2002 to 2007 itwas considerably scaled up and subsequently phased out in 2008. Itoperated in Tanzania and Uganda and briefly in Zambia. EPOPA was a"development through trade" programme with the objective of improvingthe livelihoods of rural communities through exportsof organic products. Exporters were the main partners and theprogramme worked directly with them to develop exports of organicproducts. In addition, the programme worked to support emerginginstitutions in the organic sectors.A summary of key data for the export projects in Tanzania and Ugandashows that farmers have sold organic products for approximately US$15million per year and the total export value is more than double thatamount. A total of 110,000 farms have participated, but only 80,000have actively delivered products to the exporters. Considering thesize of households, it means that some 600,000 peoplehave been beneficiaries of the programme. The cost of the programmefor the Swedish taxpayers is one cup of coffee per taxpayer....Some projects are yet to reap the benefits from EPOPA support, as theyare not yet certified and therefore can't access the organic market.EPOPA leaves behind a very vibrant organic sector in Uganda and anestablished sector in Tanzania; 30 export projects in operation;consolidated organic movements; internationally accreditedcertification bodies in Uganda and Tanzania; and finally a largenumber of people with increased understanding of organic agricultureand capacity to develop the sector. In Zambia EPOPA worked too short atime to make any strong impact.In order to set up a successful export project, there was a need tofind the right mix of the following:– a willing and capable exporter– a production base, i.e., willing farmers in an area with suitableconditions and basic knowledge of production– market demand– products that could be competitive in quality and priceHardly any funds were made available for investments or otherincentives for the participating exporters. The focus of the programmewas to create viable business,and EPOPA assisted the actors through awide range of services, from farmer and field officer training tomarketing and certification.The participating farmers were smallholders. Most of them were"organic by default"'; i.e., they used almost no agrochemical inputsbefore participating in the programme. Organic farming itself posedfew problems for the participating farmers. Despite the great varietyof crops and the large number of farmers, there were no insurmountableproblems in the production or with pests.There were expectations from the project implementers, Agro Eco andGrolink, that the farmers would respond to the project by theimplementation of all the positive features of organic farming(improved crop rotations; better nutrient recycling; cover crops andgreen manures and soil conservation) but that didn't happen to a verysignificant extent. Farmers experienced improved food security,largely as a result of increased income, as well generally improvedlivelihoods, as demonstrated by improvement in housing, childrenattending school, and investments in farming.A number of projects were very successful; some were moderatelysuccessful; a handful completely failed. Reasons for failure includedlack of commitment from the exporter or the owners of the company;problems in food processing; a vanishing resource base (for thefishing projects); and management problems. Successfulprojects featured a well-managed and committed company, good fieldwork, and farmers seeing the exporter as a partner and a good market.Generally, EPOPA was more successful in Uganda than in Tanzania. Thisis attributed to implementation and management factors, but it ismainly the case that logistics and geography are more challenging inTanzania and that Uganda has more enabling policies and a betterbusiness climate.EPOPA worked very little with the governments, although towards theend of the programme this changed and EPOPA participated in theorganic-policy development of the countries. The importance of propergovernment policies is felt by the organic sectors in East Africa. Itconcerns both the lack of supportive policies,but perhaps even morethe existence of policies that are harmful to development.Therefore, a programme like EPOPA, despite its private-sector focus,also has to engage in policy dialogue and action.The continued strong demand of organic products and the increasedpolicy support contributed to the success of EPOPA. Other importantsuccess factors were:– Clear market focus of the projects and focus on tangible results;using commercial actors to link farmers to markets– Integrating extension work into the commercial chain so that theexporters are responsible for extension work, financed by income fromthe trade– The use of group certification to facilitate the certification processCentral to the implementation of the projects was the establishment,by the exporter, of a field organization for extension work and forinternal control of issues related to certification. All in all, thefield organization worked, but most of its energy was absorbed bycertification issues, and the efficiency of the agronomic advice inmany of the projects can be questioned. This is not a main interest ofthe exporter.A main challenge to the programme was finding competent and committedexporters. The organic market represented something new for theexporters, and it took quite a while to adjust to. Project periodswere three years, but this clearly was too short in most cases;agricultural projects need longer time in general. Extensionswere awarded mainly to improve the sustainability of the venture.Value addition in developing countries is an appealing proposition,but it is not always so easy to do. Many of the projects that includedvalue addition experienced big challenges, inparticular regarding product design and imported packaging materialsand inputs. In most of the projects, large groups of farmers wereinvolved, and they did experience a substantial increase in income,expressed as a percentage. However,especially for those producingbasic commodities, the increased income was not sufficient to liftthem out of poverty. For farmers producing high-value crops, suchas cashew, fresh fruits, and spices, the increased income issubstantial in absolute terms also.The support to emerging institutions, such as local certificationbodies and national organic movements, was successful. There are noworganic standards and internationally accredited certification bodiesin Tanzania and Uganda and the national organic movements are involvedin local market development, advocacy,and policy development.Working with the commercial sector to develop agri-business involvingmany smallholders has proven to be successful. One needs to keep inmind that the business objectives of the commercial actors may not bethe same as the objectives of development cooperation, but with gooddesign, dialogue, and pragmatic implementation, they can work welltogether.Much of what was accomplished by EPOPA could also be accomplished byother programmes, also without the organic component. However, theorganic markets do provide special incentives. The organic productionsystem is well-adapted to African smallholders and is sustainable.Apart from the effects on income, organic farming also produces publicgoods and ecosystems services such as carbon sequestrationand biodiversity. In future development programmes such services suchpublic goods should be part of the package. The EPOPA programme, orprogrammes with a similar market-led approach, can be recommended formany other African countries. The market is there and the farmers arethere.

Hydropower in Uttarakhand: Is `Development' the Real Objective?

This superb Article by Sri Dunu roy, a man who as the EPWtruly says is known for his outstanding work in rural development and inspreading environmental awareness.The facts that he has stated including the ones regarding all the dam sitesfalling within Seismic Zone IV bordering Zone V, or in Zone V near centralthrusts or regarding having ignored or being silent on so many issues likeenvironmental assessment, damage to flora and fauna etc are in themselves ofgreat relevance. Similarly, the examples he has quoted from USA, the ultimatelocation for scientists and development managers are equally revealing andstartling.The alternatives he has suggested have come from his long experience in thesefields and would prove highly beneficial for our country if they are properlyadopted.
The entire article can be downloaded from:

Mobile poverty research: Substitutions for mobile phone services

Does owning a mobile phone drive people further into poverty, or is it advancing the livelihoods of the poor? A study conducted by Kathleen Diga in a rural district of Uganda found that owning a mobile phone did both, depending on how it was used.
The research looked broadly at technology spending patterns, specifically mobile phone use in households and what people were giving up to get mobile phones. This ethnographic study in rural Uganda focused on women. The study found that the women got income either from husbands – about $1 a day, or from small business. In 2007, when the study was conducted, 3 minutes off-peak talk time on the same network cost about 40c – which equated to about 40% of the daily household budget.
Given this substantial comparative cost of communication, the question was hence what were they giving up in order to use mobiles? Giving up travel, for instance was seen as a benefit given the costs of transport. Other households were giving up store-bought food – sugar, flour, oil, etc. In this case, those who had gardens could substitute with home produce while those without gardens actually gave up food.
Women were still disempowered in terms of access to the mobile phone because in most instances the male head of the household controlled it. An interesting question not covered in this study is the phone as a status symbol, because it would appear that even when possessing one was seen as beneficial, the costs of operating were eating into the meager household income. Hence it would seem that the benefits might be overstated.
It emerges that whereas there are organized groups that are moving ahead in terms of innovative and cost-effective phone usage, at the level of individual usage, where the phone is already in the hands of an individual, there is little concern with education/ information outreach and training to reduce costs and increase efficiency and benefits. This need for outreach must be the onus of service providers, NGOs, or governments through regulation and licensing procedures.
Consumer protection organizations that should be taking up this fight are frequently weak and ineffectual. The mobile phone, like any form of technology needs to be used appropriately, and its users empowered, for it to yield any positive change.

Increasing World Food Prices: south Asia at Risk

Expanding existing social assistance programs that directly targets poor households is necessary to protect South Asia’s poor in the face of a dramatic increase in global food prices, a World Bank South Asia expert said today.Shanta Devarajan, World Bank Chief Economist for South Asia, said many countries in the region have cash-transfer programs and schemes that provide grains at lower costs directly to the poor. He advised the governments “to enlarge the safety nets by increasing the amount of cash- transfers and the number of people receiving low cost grains while still passing on the price increase to other domestic consumers who can better afford it.”World food prices have been increasing rapidly since 2006, and the rate of increase during 2007 had been much higher than average. According to the Food and Agriculture Organization (FAO), overall food prices have increased by 75 percent in dollar terms since 2000. “Most countries in South Asia are net importers of food and have suffered severe terms of trade shocks of 1 percent of GDP,” said Devarajan. The foreign exchange earnings and international purchasing power for these countries have also decreased.Devarajan believes that food prices are likely to continue to increase in the near future. He attributed this phenomenon to raising standards of living in countries like China and India, increased use of food crops for bio-fuels and animal feeds, and increased oil and fertilizer prices.In South Asia, which has the largest concentration of poor people in the world, the increase in food prices is particularly damaging since food accounts for a substantial share of poor people’s income. South Asian countries, however, have very few options available to deal with the challenge. Devarajan advised that governments have to be careful that such measures do not end up hurting those they want to help.

Shantayanan Devarajan, World Bank Chief Economist for South Asia talks about the impact of high food prices on South Asian.
Options for South Asian Governments
Price Controls:
In the past, South Asian governments have resorted to imposing price controls which actually created food shortages that ultimately hurt the poor. “Imposing price controls benefits the middle-class families and the non-poor,” said Devarajan. If food prices are controlled, it makes farmers less likely to produce crops to meet the increasing demand. This will have an even more adverse impact on food prices.
Devarajan also recommended against untargeted subsidies, which are mostly counter-productive as they put bigger stress on the budget because governments have to pay for the support. Borrowing from the central bank is one way of financing the subsidies, but this lead to higher inflation.Devarajan said targeted subsidies are a better option. They have been used in South Asia to provide relief for poor families in the past, and, by definition, they are not universal and exclude the better-off who can afford to pay market price. As an example, he cited Bangladesh where mostly poor people consume low-cost coarse grain. The government was able to provide relief following the recent floods and cyclones by targeting poor people with this type of grain.By using targeted subsidies, governments will be able to protect poor families without distorting the relative prices of food products, while reducing the overall cost to the budget.
Long-term Solution:
Even with targeted subsidies, many of the programs will be seen as permanent if food prices continue to rise. Targeted or untargeted, eventually these programs will be a drain on the treasury. Therefore, such schemes have to be time bound, and governments have to develop a long-term strategy to address food price increases.One of the best ways to reduce food prices is to increase agricultural productivity. The World Development Report 2008, entitled "Agriculture for Development," has called for a revival of agriculture in South Asia.
Suggestions for South Asia
Most affected by price increase:Bangladesh, which imports a substantial portion of major grains consumed by its people, has been particularly badly affected by the continued increase in world food prices. Natural disasters in the past year – two major floods in July and August 2007 and a cyclone in November 2007 - destroyed about 2 million metric tons of rice crops.Bangladesh is currently importing rice from its immediate neighbors, India and Myanmar, to meet the shortage. Devarajan pointed out that this has already created a problem because, several times in past few months, India has imposed ban on rice exports or has increased the minimum export price, and each time, the price of rice in Dhaka spiked. (Read Beggar thy neighbor?)However, Devarajan is confident that Bangladesh “has the potential to cushion the blow on its poor. The country has very well run social assistance programs that have worked well during the floods and cyclone of 2007. At the same time, Bangladesh should try to avoid measures such as price controls or untargeted subsidies even if they are politically popular,” cautioned Devarajan.
New Government:Unlike Bangladesh, Pakistan does not have a widespread social assistance program that targets the poorest of the poor. In addition, most Pakistani families consume the same kind of wheat, making it difficult to target poor people. Any subsidy on wheat will thus be an untargeted subsidy. Since a newly elected government has just come into power, it is imperative that it withstands pressure to act in ways that may not be efficient in addressing the needs of poor.During a recent visit to Pakistan, Praful Patel, World Bank Vice President for South Asia, said that high international prices for petroleum and food commodities are creating challenges for the Pakistan’s economy. Patel discussed with Pakistani leaders ways to protect the poor as domestic prices are adjusted. Patel offered World Bank technical assistance to build upon international best practice in responding to the current situation.“Any adjustment will be painful,” said Patel. “But there must be an appropriate safety net for the poor. The incoming government has requested our support, and we will help ensure there are smart subsidies to the poorest. These must be well targeted and efficient programs, including cash transfers, where leakage is minimized. We know this can be done because we saw the excellent response from the government after the earthquake where affected families were provided relief and cash transfers quickly and effectively.” (Read More)
Phase out Minimum Support Price (MSP):The Indian government buys wheat from farmers at a Minimum Support Price (MSP), which is highly distortionary and contributes to high costs for its budget. Devarajan suggests that the government should use this opportunity to do away with this policy, since the world food prices are about the same as MSP. “The subsidy has a high leakage to higher-income groups,” he said.
Sri Lanka:
High Inflation:Devarajan said Sri Lanka is also a net importer of food products, and food price inflation is estimated at 34 percent. However, the country is already facing high inflation with an average of 20 percent, independent of food prices. The high inflation is partly due to government borrowing a large amount of money from the central bank.
Scale up:Nepal also depends on food imports from India and other countries to manage its needs. Devarajan said “Nepal needs to expand already existing social assistance programs in rural areas.” However, he pointed out that Nepal has a limited social assistance program to protect the urban poor.
Urban and Rural Poor
While almost all urban poor people are net food consumers, the situation with the rural poor is different. Farmers who are net producers are benefiting from higher food prices. However, farmers with small arable lands and landless laborers are net consumers of food, as they may not produce sufficient amounts for their families’ requirements.

Global Financial Crisis: Effect on South Asia

October 21, 2008 - Over the last 10 years, South Asia witnessed a rapid and robust growth of more than six percent per annum, which enabled millions of people to escape poverty. In 2006, the region recorded a growth rate of nine percent – the highest in the last 25 years.However, in the last five years, price increases of global commodities, especially those of oil, metal, and food, took a toll on South Asia. Budget deficits widened and trade balances worsened. With this, the growth softened and inflation reached double digits. Before the region could recover from the adverse impact of high commodity prices, the global financial crisis has come knocking. The cascading effects of these crises will present daunting policy challenges to South Asia.The adverse impact has the potential to reverse elements of the impressive development gains that South Asia has achieved over the past decade and impede its progress towards achieving the Millennium Development Goals (MDGs).“The slowdown in the global economy will adversely impact South Asian exports and thus foreign earnings,” said Sadiq Ahmed, World Bank Acting Chief Economist for the South Asia region. “Coupled with lower foreign capital flows and domestic investment, this will significantly reduce growth for South Asia.” (Download Analysis - pdf)

Read analysis about the global financial crisis and its impact on South Asia

Monday, October 20, 2008

Capital and capitalists nannied by the states: An Interview with Amiya Kumar Bagchi

Saturday, 18 October 2008
"Capital and capitalists will continue to be nannied by the states they control, unless the crisis intensifies the struggles of workers and peasants to change this horrendously unjust and murderous social and political order. Nor will borrowers of recapitalized banks or the insured of the US company AIG benefit from lower interest rates, better access to credit or insurance or less discriminatory insurance rates. The new managers will be busy guarding the capital of their respective managed entities. Unless the rulers are made to see that money market instruments are not the proper vehicles to deliver affordable credit or insurance to the poor and are forced to carry out the structural changes needed to embody that perspective in practice, the old order will continue when the recession subsides."
Radical Notes: Can you explain the nature of the current crisis and how it developed?
Amiya Kumar Bagchi (AKB): A full explanation of the current crisis will be a book-length study. The immediate causes of the crisis can be put as follows: (a) unbridled financial liberalization, the most significant components of which have been the further elaboration of derivatives, including securitized products, increasing the non-transparency of the financial market, (b) the effective demolition of the distinction between deposit banks specializing in loans and investment banks, (c) conversion of the dollar into virtually the sole source of global liquidity, even while keeping a major fraction of the world’s economies in a condition of endemic deficiency of effective demand and (d) the rapid emergence of housing and related markets as sectors of the most intense speculative activity.
Radical Notes: As an economic historian, do you find any uniqueness in the present crisis in comparison to the past ones?
AKB: Capitalism has been racked by speculative crises, almost from the moment of its birth. One of the earliest of such crises was the Tulip Mania in the Netherlands in the 1630s. The second speculative crisis in order of occurrence was the crisis of 1720-21 centring around the so-called Mississippi project in France and the South Sea Company in England: this crisis threatened to engulf much of Western Europe at the time. If we take England only, there were severe banking crises in almost every decade from the 1820s , with the Baring Crisis of 1890-91, characterizing the last decade. In that crisis, the inability of Baring Bros to meet its obligations arising out of its over-exposure to loans to the Argentine government threatened to involve the whole British financial system. That is arguably the first time that the Bank of England acted as the lender of last resort. (Baring Bros collapsed in 1995, as a result of Nick Leeson, its bureau chief in Singapore, losing his bet on movements of Nekkei and the firm’s capital of £800 million disappeared). Then you have the biggest financial crisis of the twentieth century, namely, the Great Depression of the 1930s, which really ended with the onset of World War II that saw the stepping up of military and other public expenditure to unprecedented heights. But as any student of history knows, you never step into the same stream twice. Capitalism in particular has been like a super-chameleon, transforming not only its colour but also its apparent structural relations every few decades. The changes preceding the current crisis are no exception. The uniqueness of the crisis can probably be described as a situation in which governments, so-called specialists in finance not only ignored the totally non-transparent manner in which banks, investment brokers and non-bank financial institutions carried on their business, but positively cheered them in the belief that this was the way to create wealth. One of the most ironic symbols of this atmosphere is the compilation and celebration of the growth of wealth of the 'High Net Value Individuals' (HNVIs) by Merrill Lynch, a firm that had to merge with Bank of America in order to stave off bankruptcy.
Radical Notes: Can we understand the present crisis as a crisis of imperialism and the US hegemony?
AKB: Yes, we can. But we must remember that other G7 countries are also implicated in the US hegemony, and even China’s current pattern of growth is symbiotically related to US hegemony. Whether the crisis will lead to a decline in the murderousness of the US military operations remains an open question. As I have argued earlier, capital wants to win in competition, if necessary in the last instance by using armed conflict. The prospect of a USA threatened with the loss of hegemony using its fearsome arsenal of weapons of mass destruction is mind-numbing.
Radical Notes: How do you assess the impact of the crisis on the developing countries?
AKB: In many developing countries, there are no real stock markets and even if there are, their operations do not have much of an impact on firms which are often too small to be able to raise money in the stock market. In many of them, earlier depredations of imperialism, its domestic collaborators and its agencies such as the IMF and the World Bank have led to the exclusion of most economic agents from formal credit markets. The so-called success of micro-credit agencies in Bangladesh, for example, was built not only on loans extended by foreign lenders but also on the destruction of public sector banking by local businessmen defaulting on their loans. Organizations blessed by the World Bank and foreign donors fished in such turbid waters. The direct effect of the present crisis on such countries may not be great. But they will suffer through the further decline in the demand for their output in foreign and domestic markets because of the global recession. The countries, which have depended greatly on foreign capital for stimulation of their economies such as India, will also suffer through minor or major currency crises and the downsizing of the transactional enterprises operating in those countries and badly affected by the crisis. In the immediate future, the most distressing effect for the common people will continue to be the loss of employment in construction, services and the manufacturing sector and the high cost of food grains, induced by underinvestment in agriculture in developing countries, speculation in commodities by the big finance houses and others and the diversion of cropland to the highly subsidized biofuel in developed market economies, especially the USA.
Radical Notes: A recent report says that India and China - which are considered by many as the bulwark of capitalist growth in the 21st century - have witnessed the steepest market declines between December 2007 and September 2008. They "have lost almost 51% of market capitalization, or m-cap, and this figure could be much higher if the declines of the last fortnight are taken into account." As latest reports indicate, industries in India, especially the aviation industry, have already started shifting the brunt of the crisis on labour, through various means. Do you think these developments are indications toward a full-fledged crisis around the corner? AKB: As far as China is concerned, the slide in stock prices will not have a major effect on the economy, because stocks traded in the Shanghai market provide finance only to a small fraction of firms in the Chinese economy. But the effect on India is obvious not only from the retrenchments already announced by aviation companies and IT firms but also by the continued outflow of FII funds from India and consequent decline in the value of the Indian rupee. The Indian manufacturing sector was already showing a downward trend in fiscal 2007-08, and that trend has strengthened in recent weeks as shown by the Index of Industrial Production (IIP). It is disingenuous of the Finance Minister to call the IIP "not very reliable" when his government has done so much to massage the official statistics so as to produce a favourable picture of its performance in the economic field.
Radical Notes: The Reserve Bank of India (RBI) too is taking measures to ensure liquidity and boost confidence. As a historian of India's banking sector, how do you assess India's financial-structural ability to withstand such crisis at this juncture? How much do you think the neo-liberal policies that subsequent governments have pursued eroded this ability?
AKB: Fortunately, despite all the attempts of successive governments at the Centre since 1991 to force the pace of 'economic reforms', the worst of their designs could not be carried through. These include full capital account convertibility, complete privatisation of the banking and insurance sectors, and total abolition of the distinction between banks and non-banking finance companies. Every time either major international crises or electoral compulsions have stayed their hand. In 1997 and this time around, financial crisis in Asia and the global financial crisis have prevented the enforcement of capital account convertibility. The strength of Indian public sector banks compared with their private counterparts is there for all to see. The worst development under the neo-liberal regime is the naked play of money and communalism in determining the positions all major centrist or right-wing parties have adopted. Another major casualty has been the fiscal stance of the state. It will take quite an effort to get the rich to pay their taxes and to stop the indulgence the state has displayed towards punters and hot money merchants in the financial sector. The quality of Indian democracy has been further sullied under the neo-liberal regime. Hence the ability of the regime to handle the resolution of the crisis in national interest has been badly impaired.
Radical Notes: Various commentators have suggested that the bailing out strategies of different governments throughout the world has ultimately brought the state back in. What is the merit of such conclusion? Can we see this return of the state as just a moment, for which Milton Friedman once said the role of government is "to do something that market cannot do for itself"?
AKB: Yes, the state has been brought in but only to save the illegitimate earnings of the crony capitalists. Will Mr Richard Fuld, CEO of Lehman Bros, be made to disgorge the nearly $500 million he earned from his stock options and bonuses? In the financial year 2007-08 alone, according to, Fuld earned $71.50 million and in the preceding 5 years he had earned $354 million. When Lehman applied for Chapter 11 bankruptcy, Fuld took $22 million from the firm as retirement benefit. What applies to the top managers of Lehman also applies to those of Wachovia and Merrill Lynch, to UBS of Switzerland which is being recapitalized by the Swiss government or Northern Rock, the hosing mortgage bank, which has been bailed out by the Bank of England. In 2004, I published an article with the self-explanatory title, "Nanny state for capital and Social Darwinism for Labour" (Indian Journal of Labour Economics, 47(1), January-March). Capital and capitalists will continue to be nannied by the states they control, unless the crisis intensifies the struggles of workers and peasants to change this horrendously unjust and murderous social and political order. Nor will borrowers of recapitalized banks or the insured of the US company AIG benefit from lower interest rates, better access to credit or insurance or less discriminatory insurance rates. The new managers will be busy guarding the capital of their respective managed entities. Unless the rulers are made to see that money market instruments are not the proper vehicles to deliver affordable credit or insurance to the poor and are forced to carry out the structural changes needed to embody that perspective in practice, the old order will continue when the recession subsides.

Amiya Kumar Bagchi is India's foremost political economist and economic historian. He is the Director of the Institute of Development Studies Kolkata. He was a member of the State Planning Board until 2005, Government of West Bengal and was recently Chairman of a committee appointed by the Government of West Bengal to report on the finances of the government during the Tenth Five Year Plan period. He acted as the official historian of The State Bank of India until 1997. His recent works include (co-edited with Gary A.Dymski) Capture and Exclude: Developing Economies and the Poor in Global Finance, Tulika, New Delhi, 2007, The Perilous Passage: Mankind and the Global Ascendancy of Capital, Rowman and Littlefield, Lanham, Maryland, USA, 2005, The Developmental State in History and in the Twentieth Century, Regency Publications, New Delhi, 2004, and Capital and Labour Re-defined: India and the Third World, Tulika, New Delhi and Anthem Press, London, 2002.

Millions face starvation in Horn of Africa

Food crisis in Africa

Friday, October 17, 2008

Don’t Ignore Poverty Data

Latest figures show an urgent need for inclusive growth
Vinod Thomas
Robust economic growth in the first few years of the 21st century has helped reduce poverty worldwide. But new numbers show that the actual extent of deprivation in India and elsewhere is far greater than previously thought. This insight does not question the role of growth in improving livelihoods, but it spotlights the need for much greater inclusiveness in the growth process in the face of the scale of poverty. Sustained growth remains a high priority. But it is not just how fast a country grows; crucially, it is also how it grows. Widening gaps between the rich and the poor dampen the impact of growth on poverty. Countries such as Brazil or Mexico have historically had a much higher income inequality than India or Indonesia. But disparities have been rising in recent years in the large Asian countries, while they have been falling in major Latin American nations. The new poverty estimates from the World Bank incorporate the finding that living costs are actually higher than estimated before, reflected in a global poverty line of $1.25 a day. These calculations suggest that as of 2005 there were 1.4 billion people worldwide living in extreme poverty. One-third of them would be in India, signifying the largest number of poor compared to other countries — and even relative to the country’s own past by these measures. Rapid growth has helped reduce India’s percentage of people in poverty, though far slower than in East Asia. And when coupled with high population growth, the numbers of the poor, which is what matters, show an increase. What’s striking is how close to the poverty line tens of millions live in India, making for a large change in the poverty numbers from a small shift in the chosen threshold. Even modest shocks can push millions below the poverty line. How well do these poverty measures mirror deprivation and its changes? For one thing, they do not adequately reflect access to schooling, health care, water and sanitation, or other public services that mark people’s well-being. Nor do they capture crime and violence or environmental destruction, which are especially serious in low-income localities. Across countries, some of these attributes — especially those affecting the underprivileged — have improved in recent years, but others have taken a turn for the worse. But regardless of the precise numbers, the urgency is clear in India for achieving more inclusive growth. Experience across countries tells us that it is important to get at inequalities, but in ways that do not derail growth. In this respect, generating opportunities and jobs for the poorer segments of the population would seem to be the best way forward. Policy leaders and policy documents in India recognise the directions needed: the key would be to spur actions and achieve results. High on the agenda for greater inclusiveness would be actions to address disparities in education that contribute to large earning differentials. Compared to Korea or Russia, education inequalities are large in India or Indonesia. What matters, of course, are not only greater access to schooling, but also the relevance and quality of the education — and learning outcomes that determine its usefulness in the workplace and contribution to growth. Narrowing earning gaps also calls for efforts to address the growing skill differentials, worker mobility and the functioning of labour markets. A second issue concerns rural-urban and regional differences in incomes. Expansion of agricultural productivity, complemented by the construction of all-weather rural roads and rural electrification, would have important impacts on rural poverty. Systematic differences in income levels across states and sub-regions also merit attention. In China and India, the poorer states or provinces have, in general, grown slower than the richer ones, while it has been the other way around in some other middle- and high-income countries. A third policy area for inclusion involves improved ways to provide income support to the poor. Many countries have relied on the provision of subsidies for consumer items, but the programmes have seldom been well targeted or effective.On the other hand, conditional cash transfer programmes have looked promising. Mexico and Brazil provide cash support to poor families conditional on children attending school and going to clinics for check-ups. These approaches have shown encouraging results in reducing poverty today, and improving education and health that help sustain future growth. And then there is the new danger that is affecting all: climate change and natural disasters wreaking havoc in the lives of people, especially the poor who are most likely to be in harm’s way. The Indian Ocean tsunami left more than 10,000 people dead and about 5,600 missing in India alone. The fury of the Kosi river affected 2.5 million people in 1,600 villages in Bihar, and 70,000 people in the immediate shock in Nepal. If combating damages to the environment was once considered a diversion from growth, its neglect now represents a central threat to growth. The poverty data reminds us that it is not enough to grow, it is also vital that increasing numbers of people benefit from the growth. India can generate high growth with a far greater impact on poverty through policy actions. As it turns out, inclusive growth is not only key to social progress, it is indispensable to sustaining growth itself.
The writer is director-general, Independent Evaluation Group, World Bank. Views expressed are personal.

Thursday, October 16, 2008

Social Entrepreneur: Harish Hande (Part 1)

Dr. Harish Hande is the co-founder of Selco, a rural sustainable energy company which has over 80,000 installations and 25 retail sales and service centers all over Karnataka, a state in Southern India. Among it’s many accomplishments, Selco has created India’s first rural solar financing program using regional banks. I recently talked with Harish about the development of Selco and his journey as a remarkably committed social entrepreneur.
SM: Tell us bout your childhood, where you grew up and what kind of education you had. This will help us put the interview in context. HH: I grew up in a steel town in Orissa, a state on the East Cost of India. I did all of my schooling up to 12th grade there, and then I went to the IIT for undergraduate work in Energy Engineering. I did my Master’s and PhD at the University of Massachusetts, Lowell, also in Energy Engineering.
SM: All of your educational background is in Energy Engineering? HH: Yes. I concentrated on one discipline and have all of my training there.
SM: What did you do after you finished your Masters, did you work anywhere? HH: No, I have not worked anywhere else. Selco Is my first job, and hopefully it is my last.
SM: Did you just decide to pick up the pieces, leave Massachusetts and go to India to start Selco? HH: It did not happen exactly like that. My PhD revolved around rural electrification, and during my fieldwork I looked at Sri Lanka and India. However, while I was doing my Master’s I also focused on rural electrification, I was looking at the Dominican Republic. I had gone there for a very brief visit.
The person installing solar panels there later on became my friend. It was at that moment that I realized solar power was such a viable energy solution. When I came back to the US, and I prepared for my field work in Sri Lanka and India, the questions about what was a reliable solution for rural electrification which was also feasible, emerged. There were various solutions which seemed could be applied, but while I was doing the actual solution design work, I came upon the solution that became Selco. I also met my cofounder then.
SM: What year was this? HH: Sometime between 1992 and 1993.
SM: Can we then say that you started Selco in 1993? HH: As a concept, that is correct. As a formal company we started it in 1995.
For more click on the title

INTERVIEW-UN prepares to feed more as financial crisis bites

By Megan Rowling
DUBLIN, Oct 15 (Reuters) - The U.N. food agency expects to feed around a third more hungry people next year, as the global financial crisis adds to the pressure of high food prices on poor nations, a top official said on Wednesday.
Sheila Sisulu, deputy executive director at the U.N. World Food Programme (WFP), said an increase of around 30 million in the number the agency helps would offset a decline in food and fuel costs.
WFP is providing aid to some 90 million people in 2008, and plans to widen assistance to the newly poor in urban areas who have been hit hard by food inflation in the past two years.
"If those people now lose their jobs as a result of the financial crisis, then we will see the effect again possibly in insecurity in some countries -- riots and so forth," Sisulu told Reuters ahead of a conference on hunger organised by aid agency Concern Worldwide.
"We will see the effect of the financial crisis on the village road."
People who have survived on money sent by relatives working overseas are also likely to need help as tough economic times translate into fewer jobs and lower remittances, Sisulu said.
As a result, the agency expects to request the same level of funding from donors in 2009, she said. Earlier this year, soaring food and energy prices forced WFP to double its budget to close to $6 billion.
International food prices have since declined, partly due to the slowing world economy. They fell to a nine-month low in September but were still 51 percent higher than two years ago, according to the U.N. Food and Agriculture Organization.
Sisulu said the impact of the global food crisis would deepen just when it was slipping down the agenda.
"I think it will get worse -- less as a direct correlation of the financial crisis but more because people are getting complacent," she said. "Just because it's off the headlines, people think it's gone."
But in the coming months, countries where crops have failed, such as Ethiopia and Zimbabwe, will need increased food aid.
Last week, WFP said the number of Zimbabweans facing severe food shortages would rise from more than 2 million to 5 million early next year, before the next harvest.
The agency appealed for $140 million to provide food rations there over the next six months. It warned that without fresh contributions, it would run out of stocks in January, just when the need was greatest.
Sisulu said she hoped donors would understand the urgency of the situation at a time when global financial turmoil could start to have a domino effect in poor countries.
"If you take southern Africa, we are entering the lean season. Anybody who loses their job now loses the planting time, and that will add pressure to those numbers like in Zimbabwe," she said. (Editing by Alison Williams)

Global Food Crisis: Meet Three Families Fighting for Survival

by Scott Cotter
While many of us are feeling the squeeze of higher prices, sponsored families supported by Children International now find themselves facing a real crisis.
Many already teeter between calamity and survival. To stay afloat, they often master the fine art of eking out an income in jobless communities through persistence, hard work and ingenuity. They've summoned the courage to keep going, and to work harder for just pennies a day.
Sponsorship helps by covering the cost of many basic necessities so families can focus their resources where they're needed most. But with every cent being stretched to the limit, the food crisis has pushed many over the line. Some remove children from school so they can work and provide additional income. They may forego medicine or health care for the sick, resort to collecting water from contaminated (and free) sources, or simply go hungry.
As this crisis unfolds, we're taking a closer look at those most affected - the poorest of the poor - and examining how rising prices are taking a toll.
The Bisa Family: Tabaco, Philippines
Ailene feels all alone.
Just a few months ago, lightning struck and killed her husband, Ronnie, as he fished to put food on the table and earn a living. In his absence, Ailene is raising three daughters - Ronilyn, Maria and Melody, ages 13, 8 and 4 - all by herself.
"We're still not used to my husband being gone," she utters. "My youngest keeps asking when he'll come back. I still can't believe how we're able to survive."
Scared - and terribly lonely - she has turned to the only things she knows for the survival of her family...laundry and weaving. The result of her hard work and mountains of worry is less than $5 a week. It's enough to buy a little fish, some rice and bread and a few vegetables; there's never anything left over for other necessities.
"We still haven't reached the point where my daughters have nothing to eat at all," she offers, "but we have experienced missing some meals. It doesn't matter if I don't eat as long as my daughters don't go hungry."
Ailene's two youngest, Marie and Melody, are sponsored and have recently been diagnosed with malnutrition. They're enrolled in Children International's feeding program in Tabaco, and Ailene says the school supplies and tuition, medical care and clothing helps alleviate some of the financial strain. Still, she adds, the future seems uncertain at best. "In the coming weeks, I'm not sure what will happen."
The Chisala Family: Lusaka, Zambia
The winds whip up a small dust cloud that tumbles across the patch of bare earth in front of the Chisala home before carrying it down the road and off toward other block dwellings scattered here and there.
It's lunchtime, yet in the compounds it is eerily quiet. Not a single person can be seen outside tending to a charcoal cook stove preparing something for lunch. There is no capenta (staple fish), there is no mealie meal (corn meal), not even a few withered vegetables to prepare.
Paul Chisala stands looking at the lifeless road and squints against the searing midday sun. Quietly, he laments the situation. "I can no longer buy a 25 kg bag of mealie meal because I can no longer afford it."
The Chisala family isn't alone. While rising food prices - as much as 75 percent - have devastated families around the globe, sub-Saharan Africa may be ground zero for this crisis.
Families already in trouble because of overwhelming unemployment, rampant disease and an undervalued currency survive on next to nothing. The average income in the communities Children International serves is just $20 a month.
The outcome is easy to see. Paul says his daughter, Kareen, 10, often goes to school hungry because they have nothing to feed her. Or, she refuses to go because her hunger leaves her feeling weak and unable to study.
"I have tried to look for a job, but there are no jobs," Paul reveals. "All I manage to get are part-time jobs. There are times when I go for two months without any work. I end up begging for food from my brother, who is a soldier."
Children International is attempting to alleviate the problems by supporting community schools where children can get breakfast before starting the day. This not only helps prevent more malnutrition and helps children concentrate, it gives families more incentive to make sure their children - children like Kareen -go to class.
The Lozot Family: Guatemala City, Guatemala
Olivia Lozot is known as "The Garbage Lady," an unflattering nickname she shrugs off without a thought.
Her family, she and her four children, eat and earn a living from what others throw away. "I have always worked," explains Olivia. "But now that I have small children, I can't get a job."
The family lives in one of Guatemala City's many slums, amidst a backdrop of gang warfare, drugs and depression. They have no electricity, running water or everyday comforts beyond two small beds. For a mother of four who can't read or write, there are few opportunities.
That's why Olivia makes her own. And her children, Ana, 15, Donal, 11, Marcos, 3, and Jesus, 1, are often there by her side. They look for nylons, glass bottles and aluminum cans ... anything they can sell.
"When we go to the dumpster," says Olivia, "I carry extra clothes because the smell of garbage gets in their clothes."
Although Olivia can't read or write, she wants her children to attend school. Donal attends school for children who work, going in the morning before he joins his mother and siblings in the garbage around noon. Ana, however, refuses to go, choosing instead to dig in the trash all day and care for her younger siblings.
"Sometimes, I feel sad and desperate," confesses Olivia. "I tell the children when there is food they can eat but when there isn't they must tolerate it."
Still, despite the difficulties, Olivia wants her children to someday realize a better life ... something that has always eluded her.
Children International's sponsorship program helps by reducing her expenses for school supplies, clothing, health and dental care and other basic needs. But as prices for basic necessities go up - especially for food - the money she could use to help them improve their future also remains elusive.
Making Do
As prices for food and other staples continue to send shockwaves throughout the global economy, families most affected - those earning just a few dollars a day - will have to learn how to cope. Many will work even harder than they do now. While others will simply be forced to do without.
Sponsorship is one answer, helping reduce the expenses families face for many of their most basic necessities. And your additional support can help assist families in critical need. Please call now or visit this link to make a donation to help ease the struggle families face during this food crisis.
About Children International:
Children International is a nonprofit, humanitarian organization that works to ease the burdens of poverty on children through one-to-one child sponsorship. Our programs and services provide health, educational, material and emotional assistance to impoverished children and families in 11 countries around the world.

Bailout, fallout

From Business world Online:
Hold the cheering. The modest upturns — after major crashes — now being reported in global stock markets in response (possibly) to massive govern- ment bailout plans in the US, Germany, the UK, and France do not indicate that the present crisis is over. The sad fact is that the "rescue" packages do not resolve problematic conditions in the US and the networked rest of the world. These conditions still mean a deep US recession and a global economic slowdown that will affect everyone.
To realize why, one needs only to revisit how the US Federal Reserve Board’s easy money policy over the past several years brought the world to the mess it now finds itself. It began with easy credit causing American consumers to go on a home-buying binge, developers to embark on a construction rampage, aggressive Wall Street firms to "securitize" pools of even "subprime" home mortgages and peddle these as low-risk securities, and hitherto conservative savings and commercial banks to ignore their traditional credit standards and take on debt instruments whose risk-return character they did not fully appreciate. It continued with American spending leading to huge US trade deficits, with financial institutions in countries running huge trade surpluses with the US needing places to invest their dollars and parking these in high-yielding subprime mortgage notes insured via credit default swaps, with increased demand for American debt paper fueling an even greater production of the same, and with a steep inflationary spiral in the US. It ended with the housing bubble finally bursting, with real estate prices plunging, with homeowners failing or unwilling to make good on their mortgage payments on reduced-value houses, with insurance companies (like AIG) unable to make good on all their default guarantees, and with a financial tsunami raging through markets that had the sophistication (or was it naivet√©?) to embrace exotic credit derivatives.
In effect, over the past several years, the rest of the world funded America’s consumer spending boom by lending America money. This is why banks and investment funds outside America are holding vast amounts of American debt paper and why they are now reeling from seeing these assets turn "toxic" and lose much of their value. The bailout plans supposedly address this problem.
The main elements of those rescue plans involve using public money to take toxic assets off the hands (and books) of private institutions and to inject additional capital to shore up the diminished equity of badly hit banks. What the bailout aims to do, in essence, is hold up prices of overvalued American securities by effectively introducing an artificial price floor. As I argued in my column three weeks ago ("Failure of nerve?") when the American plan was still being discussed in the US Congress, this will not work as expected. Astute investors would see through this and, consequently, would consider a government "rescue" as merely a short-term window for dumping bad assets before the supports collapse and prices drop even further.
In that September 25 column, I further argued that a US government rescue of Wall Street "fat cats" was the wrong thing to do, not only from a moral standpoint but also from a practical problem-solving standpoint. I said that spending an enormous amount of public money to take bad assets off the balance sheets of private financial institutions would simply hold back the equilibrating forces of the market from quickly pushing prices of these securities down to their intrinsic values. I thought that this would therefore only delay the restoration of some measure of certainty — the certainty that prevailing prices are reflecting what other investors actually think certain pieces of paper are worth — to an already frightened market and raise uncertainty to the level that leads to a selling frenzy. As it turns out, this is what has been happening. What compounds the problem is that governments of other countries whose own financial markets have been affected by the American tsunami have decided to throw substantial amounts of their own taxpayers’ money into bailing out private institutions of their own.
In fairness to the architects of these bailouts, their objective seemed merely to provide some temporary respite to allow the prices of overvalued American securities to ultimately stabilize in a less frenzied fashion and provide the institutions holding them the time to somehow make the capital adjustments that will cover the holes in their balance sheets created by the sudden dissipation of significant asset values. Much of the pressure, however, for extensive government action to "stabilize" markets appears to come from politically important financial players, both in the US and other countries, who just want the chance to get out before the market hits bottom and want as much of their losses as possible to be absorbed by taxpayers. No one can reasonably believe the rhetoric of these big moneymen that their concern is about the "system" surviving. Their only concern (I believe) is making sure that they themselves survive this sudden downturn that has caught them "long" on overpriced assets. What quick passage by developed-country governments — over public protests — of these rescue packages demonstrates is that, like moneymen everywhere, fat cats have greater clout with their government than the ordinary taxpayer.
In any event, much as bailouts of fat cats grates against all notions of fair play, this might be tolerable to the taxpayers who will pay for these bailouts if the expenditure of their money will actually fix what’s wrong with the financial system, both in America and in the networked rest of the world. The problem is that these bailouts only delay a real resolution. Markets don’t really turn back up until they have hit true bottoms.
I don’t believe that those bailouts will restore to investors the hoped-for level of confidence in American paper or in American institutions. I think that the confidence that has hitherto caused the rest of the world to channel its collective savings into America — thereby financing for years America’s expanding debt and fueling its housing boom — has already been irreparably damaged, at least for now. This is already evident. Investors all over the world are getting rid of American paper as quickly as they can and seeking refuge in commodities and other assets with more tangible values. Those with large holdings of American dollars must be scrambling for ways to convert these into assets denominated in other currencies. By now, everyone must have concluded that — given America’s persistent and increasing current account deficits — the American dollar must be seen as even weaker than it has been taken to be, and weakening. The US Fed will probably raise interest rates to slow down the momentum to sell dollars but that will also dampen economic activities in the US, aggravating its recession.
Necessarily, the end of easy credit and a drop in American consumption means that firms in countries now supplying the US with goods and services are going to experience serious contractions in demand. Since the US is the world’s biggest importer and consumer, a US recession means significant slowdowns in countries with export-driven economies. Moreover, given the protracted boom period in the US and the price heights reached in its inflationary spiral, this recession is likely to be long and deep.
The fallout will definitely affect us. Not as much as it will affect other countries, though, because we do not have large accumulations of American paper and our economy is not as dependent on our exports to America as others (the US accounts for only about 15 percent of our exports). Also, Filipinos have not been — fortunately, in an ironic sort of way — in any kind of consumer spending bubble, so there is nothing that can burst. Still, we need to brace ourselves. Even the wake of a tsunami can sweep flimsily built structures away.

Don't Blame Capitalism

From Washington Post
By Peter SchiffThursday, October 16, 2008;
Amid the chaos of recent days, as the federal government has taken gargantuan steps to stabilize the financial markets, realigning the U.S. economic system in the process, comes a nearly universal consensus: This crisis resulted from government reluctance to regulate the unbridled greed of Wall Street. Many economists and market participants who were formerly averse to government interference agree that a more robust regulatory framework must be constructed to cage the destructive forces of capitalism.
For the political left, which has long championed the need for such limits, this crisis is the opportunity of a lifetime.
Absent from such conclusions is the central role the government played in creating the crisis. Yes, many Wall Street leaders were irresponsible, and they should pay. But they were playing the distorted hand dealt them by government policies. Our leaders irrationally promoted home-buying, discouraged savings, and recklessly encouraged borrowing and lending, which together undermined our markets.
Just as prices in a free market are set by supply and demand, financial and real estate markets are governed by the opposing tension between greed and fear. Everyone wants to make money, but everyone is also afraid of losing what he has. Although few would ascribe their desire for prosperity to greed, it is simply a rose by another name. Greed is the elemental motivation for the economic risk-taking and hard work that are essential to a vibrant economy But over the past generation, government has removed the necessary counterbalance of fear from the equation. Policies enacted by the Federal Reserve, the Federal Housing Administration, Fannie Mae and Freddie Mac (which were always government entities in disguise), and others created advantages for home-buying and selling and removed disincentives for lending and borrowing. The result was a credit and real estate bubble that could only grow -- until it could grow no more.
Prominent among these wrongheaded advantages are the mortgage interest tax deduction and the exemption of real estate capital gains from taxable income. These policies create unnatural demand for home purchases and a (tax-free) incentive to speculate in real estate.
Similarly, the FHA, Fannie and Freddie were created to encourage lending by allowing primary lenders to turn their long-term risk over to the government. Absent this implicit guarantee, lenders would probably have been much more conservative in approving borrowers and setting interest terms, and in requiring documentation of incomes and higher down payments. Market forces would have kept out unqualified buyers and prevented home-price appreciation from exceeding the growth in household income.
Interest rates contributed the most to creating the housing boom. After the dot-com crash and the slowdown following the attacks of Sept. 11, 2001, the Federal Reserve took extraordinary steps to prevent a shallow recession from deepening. By slashing interest rates to 1 percent and holding them below the rate of inflation for years, the government discouraged savings and practically distributed free money.
Artificially low interest rates invigorated the market for adjustable-rate mortgages and gave birth to the teaser rate, which made overpriced homes appear affordable. Alan Greenspan himself actively encouraged home buyers to avail themselves of these seeming benefits. As monetary policy caused houses to become more expensive, it also temporarily provided buyers with the means to overpay. Cheap money gave rise to subprime mortgages and the resulting securitization wave that made these loans appear safe for investors.
And even today, as market forces deflate the credit bubble, the government is stepping in to re-inflate it. First came the Treasury's $700 billion plan to purchase mortgage assets that no one in the private sector would buy. Now it has recapitalized banks to the tune of $250 billion, guaranteeing loans between banks and fully insuring non-interest-bearing accounts. Policymakers say that absent these steps, banks would not be able to extend loans. But given our already staggering debt burden, perhaps more loans are not the answer. That's what the free market is telling us. But the government cannot abide solutions that ask for consumer sacrifice.
Real credit can be supplied only by savings, so artificial steps to stimulate lending will only produce inflation. By refusing to allow market forces to rein in excess spending, liquidate bad investments, replenish depleted savings, fund capital investment and help workers transition from the service sector to the manufacturing sector, government is resisting the cure while exacerbating the disease.
The United States reached its economic preeminence on the strength of its free markets. So far, the economic disaster exacerbated by government policies is creating opportunities for further government interference, which will lead to bigger catastrophes. Binding the country to a tangle of socialist ideals will seal our fate as a second-rate economic power.
The writer, who was economic adviser for Ron Paul's 2008 presidential campaign, is president of Euro Pacific Capital. He is the author of "The Little Book of Bull Moves in Bear Markets."

Tuesday, October 14, 2008

Farewell to the Tatas: Costs and benefits of the Tata-Singur Project, a detailed dissection of the deal

October 3, 2008
By Dipankar Basu, Sanhati. Open for comments
Summary of findings:
Costs: the total cost of the Tata-Singur project incurred by the exchequer, and hence ultimately the tax payers, will be approximately be Rs. 3000 crores on a net present value basis when we add up the costs pertaining to the land subsidy, the tax holidays, the soft loan, the real estate gift and the subsidized electricity using an interest rate of 11%. This is about 58% of the total realized industrial investment in the state of West Bengal in 2007.
Benefits: Maximum cap of 12,000 direct jobs with 10% unskilled employment, minus employment destruction. The other claim about the Singur project generating prospective investment in the future rests on equally shaky foundations. The question really boils down to whether the Tata plant can attract other major investments and lead to an industrial rejuvenation of Bengal. The example of Jamshedpur in neighbouring Jharkhand should be carefully looked at. Tata’s factories in Jamshedpur did nothing for the overall industrialization of the state of Bihar or now Jharkhand. It remained an enclave of industrial activity, without forging strong forward or backward linkages in neighbouring areas.
Tata’s net worth versus what they demand from tax-payers: If we add up the figures for the Tata Group’s overseas acquisitions, we arrive at a rough figure of $14,062 million, which converts to roughly Rs. 56,248 crore (using an exchange rate of Rs 40/$), and this is not even a complete list of Tata’s recent acquisitions. And, what does all this lead to? It inevitably leads us to the conclusion that a corporation which can invest more than Rs. 56,000 crores for acquisition of strategic foreign corporate assets requires the financial support of India’s impoverished taxpayers, to the tune of Rs. 1140 crores in real terms, to set up a small car manufacturing plant in India!
A discussion of TINA is given.
Cost and Benfits
The Agreement
Land “Acquisition” and Use
Total Cost of the Project
Hidden Land Subsidy
Cost of Circumventing the Law
Soft Loans and Tax
More Gifts from Santa: Real Estate and Subsidized Electricity
Adding up the Costs
What are the Benefits?
Oh! So Poor Tata
TINA Logic
Agreement between Tata Motors Ltd., Government of West Bengal and WBIDC
Singur stands for many, often contradictory, things. It stands for the model of neoliberal industrialization that the Indian state is trying to push down the throats of it’s citizens at the behest of big capital. It stands for the unprincipled and populist politics of dormant right-wing forces. It stands for the abject surrender of an erstwhile communist party to the dictates of capital, the full flowering of a tendency that surfaced in the Indian political firmament circa 1967. But Singur also stands for the struggle of labour against capital, decidedly in confused and masked manners, but a struggle that has the potential to galvanize resistance against neoliberalism. When the Tata Group, forced by the long-standing struggle of the small farmers and landless labourers in Singur, was reported to be planning a move to Pantnagar in Uttarakhand, there were simultaneous reports of a possible Singur waiting for them in Pantnagar. A Singur in Pantnagar! That is the real significance of the struggle of the landless labourers and peasants of Singur.
Right from day one, the West Bengal government and the mainstream media has been building up the case for the manufacturing plant in Singur on the basis of half-truths and untruths. For a long time, the West Bengal government continued denying the fact that it had “acquired” a large tract of the proposed 1000 acres from unwilling farmers by using coercion, strong-arm tactics and certainly without their consent. Towards the later part of 2006, after considerable protests and a public hearing organized by intellectuals and activists, it had to finally accept it’s own earlier statements as false. Now it is known by all and sundry that 411.11 acres of the total 997.1 acres has been acquired without consent of the relevant farmers. For a long time, again, the West Bengal government continued denying the fact that most of the land that was sought to be “acquired” was fertile and multi-cropped agricultural land. It was only when earlier this year the Supreme Court pointed towards a possible violation of the Land Acquisition Act, responding to a petition filed for immediate halt of the Nano car project, that the West Bengal government finally accepted that it had been willfully misleading the public in this regard for so long; the SC had pointed out that acquiring and using fertile, multi-crop agricultural land for industrial purposes goes against even the Land Acquisition Act, which the West Bengal government was, paradoxically, trying to use to “acquire” that land. Now it has been established beyond any shadow of doubt that the land on which the proposed plant is to come up is, in the main, fertile, multi-cropped agricultural land. Another myth that had been in circulation for some time was the following: the land in Singur could not be used for agricultural purposes for most parts of the year because of water logging. This claim has also been contested and shown to be untrue. Now it is accepted by all serious commentators that the land had, before being fenced off by the West Bengal police, been in constant use throughout the year for growing various agricultural crops, and that it provided livelihood for more than 12,000 families. Even though these and other such claims of the West Bengal government and the mainstream media have been refuted point by point, over and over again, with facts and arguments and lot of patience and care, they keep turning up ever and ever again like bad coins. They will, as long as the social forces whose interest they represent continue their efforts to hegemonize society; and we will continue refuting them point by point, with patience and care and logic and facts.
But even when these particular canards are discounted, there seems to be a larger argument for industrialization that Singur purportedly represents. The West Bengal government and large sections of the mainstream media tend to equate Singur with industrialization and portray any and every opposition to Singur as opposition to industrialization. The apparent strength, or shall we say charm, of this argument becomes obvious when we see even an preeminent thinker like Amartya Sen falling for it. But this argument is deeply flawed. Opposition to Singur is not opposition to industrialization, it is opposition to neoliberal capitalist industrialization. Opposition to Singur is opposition to the conflation of industrialization with neoliberalism, a scenario where the State steps up it’s efforts to subsidize capital and shore up it’s profits while capital externalizes it’s costs onto labour and the environment with impunity. It is this model of industrialization that we oppose.
An alternative model of industrialization, as far as we can see, would operate in an exactly opposite fashion. It would tax capital and not subsidize it, prevent capital from externalizing it’s costs onto labour and the environment rather than facilitating it, intervene in decisions related to the choice of technique to be used in production, force private capital to do proper cost-benefit analysis before embarking on a (socially) costly industrial project, intervene through fiscal and monetary policy to maintain overall levels of aggregate demand and try to ensure full employment with living wages for workers. In the alternative vision, the State would use tax revenues to build infrastructure, provide social sector services and closely monitor and improve the well-being of the people. Singur, and the model of industrialization that it stands, takes us in the exact opposite direction; that is why it needs to be opposed. It destroys livelihoods tied to agriculture without creating compensating jobs in industry, it willfully snatches away fertile, multi-crop agricultural land for industrial purposes when so much fallow (and other unused and misused) land is there to be used, it externalizes the costs of production on the most vulnerable sections of the population and the environment, and all this while the State steps in to massively subsidize private capital even further. If, therefore, due to the struggle of the project affected people the Tata’s finally leave West Bengal, it should call for rejoicing not for middle-class chest-beating that is so much on display these days. For it would be one of the important victories in the emerging struggle against neoliberalism in India.Cost and Benfits
In this article we will try to study details of the costs and benefits of the proposed manufacturing plant in Singur on the basis of information that is available in the public domain. But a caveat is necessary. This is not a full blown cost-benefit analysis because we shall not venture to quantify the indirect benefits of possible net employment generation and the income that might arise from there. At this point, it is not even clear whether there will be positive net employment generation; it is not at all obvious, in other words, that the employment destruction entailed by the project will be exceeded by the employment generated by it. Moreover, a full cost-benefit analysis would require much more information than has presently been made available by the West bengal government; on the basis of the available information, which pertains mostly to the benfits that the West Bengal government plans to make available to the Tata’s, we shall mainly try to approximately quantify the costs to the exchequer, and ultimately to the people of the state.
A careful study of the details relating to the proposed project in Singur, to the extent possible by the publicly available information, is important for two main reasons. First, it is important to do a dispassionate analysis of the costs and benefits of this project; since the West Bengal government has been continually making largely unsubstantiated claims about the putative benefits of this project, it is high time we carefully analyzed the foundations of this claim. Second, this project is very much in line with the current trend of neoliberal capitalist industrialization in India anchored tightly in the visions of the Special Economic Zones (SEZs); hence a study of this project will highlight, and help us evaluate, many of the important characteristics of neoliberal capitalist industrialization that has been envisioned and aggressively pushed by the Indian state since the early 1990s. Parenthetically, one should also note how acceptance of the logic this project signals the gradual dissolving of social democracy in India: from”managing” the conflict between labour and capital, social democrats are increasingly moving towards “managing” labour for capital.
The main document that we will use for the purposes of this study is the text of the recent “agreement” signed between the Government of West Bengal, the West Bengal Industrial Development Corporation (WBIDC) and the Tata Motor Ltd. (TML) pertaining to the proposed manufacturing plant in Singur. By a careful analysis of the information contained in this document, and complementing this with some more information from other sources we will, hopefully, be able to arrive at a true picture of the costs and benefits of this project. But before we get into the nitty-gritty of the agreement, let us remind ourselves about the severe difficulties that we have faced over the past few years in just trying to get hold of the information that is relevant to this project. Recall that the details of the “deal” wasn’t made public initially because the West Bengal government believed it was a “trade secret”. Once this argument was properly trashed, the government shifted gears. During this period, it wasn’t made public despite repeated Right To Information (RTI) applications because, according to the government, the Tatas didn’t want it to be made public! Finally what has been made public, mainly because of pressure from the standing committee on industry of the West Bengal state assembly, are only parts of the “deal”; this all we have for the purposes of study and analysis. The TML filed a case in the Calcutta High Court and got a stay against the rest of it being made public. What is there in the rest of it? We, and the more than 12000 project affected families in Singur, can only guess. The entire episode, to say the least, is patently undemocratic, and makes a mockery of the intent of the recently passed Right to Information Act. One does not, of course, discern even an iota of concern about this important matter displayed by the “peoples’ government” in West Bengal!

To read the entire article click Farewell to the Tatas: Costs and benefits of the Tata-Singur Project, a detailed dissection of the deal at Sanhati