Thursday, August 28, 2008

Map on water poverty

Another interesting map from UNEP on freshwater resources.  Africa, despite vast freshwater resources is still very water poor mainly due to challenges with access, capacity, use and the environment.

The definition used to compile the map is as follows:
Freshwater, as a natural resource, represents a fundamental key to sustainable livelihoods - for health, economy and development. The water poverty index (WPI) is an aggregate index, describing the lack of freshwater. The index is calculated based on five components: resources, access, capacity, use, and environment, using indicators describing these.

Water poverty index, by country in 2002. (2006). In UNEP/GRID-Arendal Maps and Graphics Library. Retrieved 09:58, August 28, 2008 from

Economics of broadband

(Serious) broadband is finally coming to Africa.  It is expected that the speed of connectivity will increase and the price of connectivity will drop.  This brings local infrastructural challenges, but on average is expected to increase business opportunities in especially the IT sector (See How Seacom will change SAs world).  A recent analysis by InfoDev and the World Bank highlighted the high prices of broadband in sub-Saharan Africa, highlighting the need for better service and more competition in broadband services in this part of the world.

A question worth asking is what the expected additional socio-economic gains of increased broadband will be, and whether there will be any clear winners and clear losers.  The academic literature for example points to the social benefits of national information infrastructures and the importance of information and knowledge as key business assets.

The message is that in an increasingly connected world the ability to manage these connections to the benefit of the enterprise becomes increasingly important.  Not only the private enterprise, but also society is expected to benefit. Not to be connected means to fall further and further behind relative to the rest of the world. One important question is by how much we will benefit, and whether everyone will be better of.

In an empirical study done by the Economic Development Administration in the US on the impacts of broadband on the economy, it was argued that "broadband access does enhance economic growth and performance, and that the assumed economic impacts are real and measurable". The study concluded that "...between 1998 and 2002, communities in which mass broadband was available by December 1999, experienced more rapid growth in employment, the number of businesses overall, and business in IT intensive sectors, relative to comparable communities without broadband at that time". The study hastens to point out that broadband have to be used and not only be available, making the case for broad-band related policy interventions also focussed on demand side issues such as training. Estimated tangible magnitudes for this study are as follows:
- Broadband added 1-1.4% in the employment growth rate
- Broadband added 0.5-1.2% in the number of business establishments 
- Housing rents are 6% higher in areas where broadband is available
- Broadband added 0.3-0.6% to the share of establishments in IT intensive sectors
- Broadband reduced the share of small (defined as <10>

Increased broadband is expected to bring benefits to private enterprise and to broader socio-economic development, but local negative effects on smaller industry sectors will have to be managed well.  The magnitude of the benefits will also differ from area to area. 

Monday, August 25, 2008

On limits to growth, again

Some wisdom from the Environmental Economics blog: "...there are limits to unsustainable increases in per capita incomes but no limits to sustainable increases in per capita incomes."

As elegant as this quote may look it brings us back to the question that keeps haunting us at least since the Brundtland report: 

What do you mean with sustainable?  

This also makes me think about that guy who, on hearing that we wrote a book called Sustainable Options, sarcastically asked what we are sustaining.

Ultimately it depends on your value system I guess.

Friday, August 22, 2008

On Cape Town's Monopoly vote

In contrast to Cape Town's relatively low cost of living when compared to international destinations, the City was voted third most expensive in the new edition of Monopoly.

The following cities were selected:
Dark blue: Montreal, Riga
Green: Cape Town, Belgrade, Paris
Yellow: Jerusalem, Hong Kong, Beijing
Red: London, New York, Sydney
Orange: Vancouver, Shanghai, Rome
Magenta: Toronto, Kiev, Istanbul
Light blue: Athens, Barcelona, Tokyo
Brown: Taipei, Gdynia

The euphoria of having Cape Town on the board game probably overshadows this minor misrepresentation.

On reflection,  Monopoly games can have quite an impact. For instance, I can't help thinking of Eloff and Jan Smuts streets as very expensive and Musgrave Road as the worst place to be (apart from the jail of course).

Wednesday, August 20, 2008

More income, more energy consumption.

Gapminder never fails to amaze. This time an excellent dynamic representation of data on energy consumption and income from 1965-2007.

Sunday, August 17, 2008

Ecotourism as development option for Africa?

Thank you, Martin, for this opportunity as guest blogger to follow up on a question asked in an earlier blog entry (Is ecotourism a development option for Africa?) and coinciding with the closing date for the Imvelo Awards (for responsible tourism in South Africa).
Tourism - including rural tourism and ecotourism (some definitions) - have become important in the economy of many African nations. Mass Tourism has been notorious for concentration of profits by foreign owners or a local elite and we should seriously look at options of how tourism can assist in equitable development. This is where community-based and eco-tourism can be of interest for development in Africa.
Just like other “miracle” development plans involving the “green revolution” (in the late 1960s and resurfacing again and definitely not convincing all) or “the informal sector” in the past, ecotourism struck a chord with governments and NGO`s as an “easy” option for community development and reducing poverty. Yet such “miracle” solutions tend to promise more than they can deliver, especially if proposed as isolated one-track development options. Over-enthusiasm often ends up with very unimpressive results (like in this very critical article about Latin America) or causes unexpected side-effects which need to be addressed (one suggested way is working towards fair trade in tourism).

However, if tourism forms part of a multidimensional development strategy rather than an intended “miracle” solution for poverty, it can certainly be interesting for development. This is especially interesting on a local level in communities with a certain set of basic conditions. To mention a few:
· A reason for tourists to visit.
· Reasonable access from existing tourism centers.
· A group of people committed to invest many working days with low or no short-term returns.
· A real interest in offering sustainable and responsible tourism.
· An understanding of the concept of quality service.
· Social cohesion and internal organization.
· An understanding of the importance of communication and promotion.
(Ignoring these last two so often leads to failure that they are worth looking at in more detail in a future blog entry)
written by Gerhard Buttner
Photo: Wupperthal, South Africa (part of Africa ecotourism flickr group)

Friday, August 15, 2008

Do Americans believe in global warming?

A new report released by the Brookings Institute based on interviews with 1500 Americans came to the following conclusion:

This report offers preliminary evidence regarding the factors that lead individuals to believe that the Earth is warming.  Declining polar ice and glaciers along with individual experience with warmer local temperatures appear to be significant reasons why Americans believe global warming is occurring. Dramatic events that receive massive media attention, such as horrific hurricanes and blockbuster documentaries, appear less consequential. But there are significant differences in responses of various subgroups divided by place of residence, partisanship, gender, and age, suggesting that no across-the-board consensus on climate change has emerged at the time when federal institutions are giving unprecedented attention to this issue.

Polar ice and local temperatures are the major determinants. There is an important caveat though: the report further points out that this is not the case for those voting Republican.

Interesting. Are people's underlying value systems and interpretations of how the world works so 'hard-wired' that no amount of hurricanes, blockbuster movies, evidence of polar and glacier melting or computer modelling will easily change that?

Policies for a complex and dynamic world

This week I had the opportunity to work with a progressive provincial department on the nature of policies and policy making processes for the environment.  This is a summary of the paper we are writing on the issue:

The policy making process is traditionally viewed as a linear three stage process of problem identification, policy formulation and implementation.  The focus is on the correction of failures in markets or in the broader society and motivated by a desire for change towards a better outcome.  Another feature of the traditional approach is that the policies are designed to achieve normative criteria such as economic efficiency, environmental effectiveness and social justice and are finally usually based on an inflexible view on how humans behave. This deterministic, normative and behavioural simplistic view on the policy making process is applicable in a certain, closed world where policy is viewed as a means to steer society to a desired optimum equilibrium.  This may be an applicable approach in systems with very small degrees of freedom, but becomes increasingly deficient in broader and temporally sensitive real world complex and dynamic open systems, where there is little, if any, basis for future certainties on the emergence of events or the desirability of certain states above another.  This paper acknowledges the increasingly complex and dynamic nature of human-environment interactions and outlines the elements of a more nuanced alternative model for policy design and the policy making process in complex and dynamic applications.

Can Zimbabwe fall any further?

Read a gripping account on Zimbabwe's fate on this blog by Eddie Cross, who is part of  "... a Zimbabwean family with deep roots in Zimbabwe".  

Eddie has posted since October 2006.

Wednesday, August 6, 2008

Updated graphs on poverty, 1980-2005

Just above 40% of Africans live under $1 per day: 

Most income poverty is rural:

Tuesday, August 5, 2008

Sydney's expensive water

In a recent post on 'The wisdom of water restrictions in Cape Town' the point was made that certain response options are more costly then others.  Sydneysiders are starting to feel the pinch of an expensive desalination plant.

As reported in the Sydney Morning Herald two environmental economists quantified the costs. Most households  will pay 25% more for the water they actually use up to 2010 - amounting to 'a shockingly large' $700 per household.  

The solution is in a more flexible pricing regime for water:

The alternative to building a desalination plant is to price water flexibly so that when water storages are low households pay more, and when water storages are high households pay less. In other words - just like we do with items such as bananas - we should pay more when it is in short supply. The extra revenue from charging higher prices when there is less water in the dams could be used to decrease fixed water charges and/or provide assistance to low-income households independent of their water consumption.

At current dam levels, flexible pricing would mean a water price for consumers of $1.30 per thousand litres. Postponing this investment generates very big savings for water consumers and avoids environmental losses that may occur from operating the plant. Provided that water is priced flexibly, we show that the desalination plant would only need to be built when water storage in the dams was at 21 per cent capacity. This has a less than one in three chance of occurring over the next 15 years.

In parched South African cities we should learn from this. Building expensive supply options might actually cost more then having flexible tariffs. It is at least worth looking at.

H/T: Oikos

Corporate welfare?

With an estimated 12 million South Africans on welfare, persistent poverty and increased pressure on expanding the welfare system, an important question is how future 'care' will be financed. Will the private sector come to the rescue?

Anthony de Jasay provides some insights into this question for European welfare systems in his article Topping up welfare:

Throughout Western Europe, redistribution remains an electoral must. Right practices it no less than Left. However, the doctrinal climate in which it flourishes is undergoing a change. Capitalism is still condemned as selfish, inegalitarian and chaotic, but it is no longer treated as the evil that must be uprooted, destroyed and replaced by the purposeful, responsible and just socialist order. It is only the half-crazed, wild-eyed intellectual flotsam that still clings to the old dreams of doing away with exploitation. More and more socialists quietly realise that since private industry is better at exploitation than state-owned enterprises, it is better at capital accumulation too, and will create more riches for governments to lay their hands on.
Lately, however, it has dawned even on left-leaning politicians and union leaders that there is a trade-off between redistribution and economic growth. One cannot have both an extensive system of welfare provision in kind, complex protective regulation, high taxes and endemic budget deficits as well as low unemployment, technical progress and vigorous growth. Scared a little by the perspective of stagnation or breakdown, since before the turn of the century Britain, Holland, Sweden and Germany have tried to put a brake on the luxuriant spread of the welfare state. The share of GDP taken by government and the social welfare agencies seems to be levelling off. The European average is now hovering at just over 40 per cent, with Germany at 44, Britain at 45, though France is still defiantly leading the pack with 54 per cent.
The "Third Way" that Tony Blair learnt about from his sociologist guru Anthony (now Lord) Giddens (and that Vaclav Klaus branded the fastest way to the Third World) included the idea that business enterprises did not belong to their owners alone. Along with its shareholders, a corporation had other "stakeholders" to whom it owed some responsibility and who ought to have a say in its conduct. Employees, suppliers and customers were the obvious ones, but the townspeople, cultural and educational institutions, the environment and for that matter the whole nation had a "stake" in each business and it was management's clear duty to respect these stakes.
Corporations are sternly asked to be "good citizens", though only individuals can do that. Managements do yield to this moral pressure; doing so passes for "best practice" in most business ethics courses. The net effect is that state provision for welfare and good works, running at a level that stretches government finances to critical limits, is topped up by the private sector without taxation and budget deficits being further increased.

Corporations can certainly play an important role in the provision of social goods, but corporations, by their very nature, are highly unlikely to become pseudo-welfare organisations. The question is more about finding a balance between cooperation and competition, between state and market and between production and redistribution.  

The traditional economic theoretical division between state and market does not help in providing structure and function to such an emerging theory.

Image from fourletterword.