Monday, June 30, 2008

Jeffrey Sachs on resource constraints and growth


Jeffrey Sachs argues that the world needs to save resources in order to continue growing (Project Syndicate):

Limits to growth...
Reconciling global economic growth, especially in developing countries, with the intensifying constraints on global supplies of energy, food, land, and water is the great question of our time. Commodity prices are soaring worldwide, not only for headline items like food and energy, but for metals, arable land, fresh water, and other crucial inputs to growth, because increased demand is pushing up against limited global supplies. 
..
Are these limits real?
Many free-market ideologues ridicule the idea that natural resource constraints will now cause a significant slowdown in global growth. They say that fears of “running out of resources,” notably food and energy, have been with us for 200 years, and we never succumbed. Indeed, output has continued to rise much faster than population.

This view has some truth. Better technologies have allowed the world economy to continue to grow despite tough resource constraints in the past. But simplistic free-market optimism is misplaced for at least four reasons.

Limits incur real costs...
First, history has already shown how resource constraints can hinder global economic growth. After the upward jump in energy prices in 1973, annual global growth fell from roughly 5% between 1960 and 1973 to around 3% between 1973 and 1989.

Second, the world economy is vastly larger than in the past, so that demand for key commodities and energy inputs is also vastly larger.

Third, we have already used up many of the low-cost options that were once available. Low-cost oil is rapidly being depleted. The same is true for ground water. Land is also increasingly scarce.

Finally, our past technological triumphs did not actually conserve natural resources, but instead enabled humanity to mine and use these resources at a lower overall cost, thereby hastening their depletion.
Sachs's solution seems to be in cooperation...
If we continue on our current course – leaving fate to the markets, and leaving governments to compete with each other over scarce oil and food – global growth will slow under the pressures of resource constraints. But if the world cooperates on the research, development, demonstration, and diffusion of resource-saving technologies and renewable energy sources, we will be able to continue to achieve rapid economic progress. 

Coupled with a massive program of technology development...
A good place to start would be the climate-change negotiations, now underway. The rich world should commit to financing a massive program of technology development – renewable energy, fuel-efficient cars, and green buildings – and to a program of technology transfer to developing countries. Such a commitment would also give crucial confidence to poor countries that climate-change control will not become a barrier to long-term economic development. Cooperation and technology for conservation. That sounds like something that can easily be misused as an excuse for more and more intervention where in fact the challenge is to create better functioning markets that include signals about resource limits. For instance, are we not already seeing a lot of market price adjustments happening in response to scarcity - carbon, oil, commodities without any massive continuous intervention? And are we not witnessing a new creative growth opportunities through eco-innovations

We do need the market competition to reflect resource scarcity and we need cooperation and innovation (many times in the public domain) to respond to the opportunities presented by more expensive resources. Governments have a very important role to play in assuring that these markets outcomes do not clash with a sense of fairness in the broader society.  

The hard questions still needs answering.


Photo: Harvard Gazette, Staff Photo Jon Case

Friday, June 27, 2008

300 satellite photos of Africa's environmental change

Africa: Atlas of Our Changing Environment features over 300 satellite images taken in every country in Africa in over 100 locations. The ‘before’ and ‘after’ photographs, some of which span a 35-year period, offer striking snapshots of local environmental transformation across the continent (AMCEM press release)


This is truly an amazing project. See the satellite photos of the environmental pain and the gain on African soil.


Photos: Fynbos Western Cape: 1978 and 2007 (AfricaAtlas)



Are you happy? Thoughts on Africa's development paths and the philosophy of happiness



South Africa, and many other African countries, are in a phase of active economic development.  Infrastructure programmes are launched, houses are built, services provided and new neighbourhoods rolled out.  The implicit assumption is that these activities will lead to an improvement in the lot of Africa’s people.  Will this be the case? A short detour in happiness research and philosophy sheds some light.


Human happiness: a fertile research field


It has come as a shock to many that the extent to which rapid socio-economic advancement has improved human well-being is now being questioned.  The standard indicators of economic, political, and social progress are not very good at tracking human happiness. Despite many years of economic growth and associated increases in income in most developed countries, happiness studies send out very mixed results (e.g. the apparent difference between aggregate happiness and individual happiness, happiness is U shaped over one's lifetime, happiness declines after a certain level of income, improve happiness by giving, happiness is related to personality).  Happiness research has become fertile ground and continues to fascinate scientists from very different disciplines (see for example this debate by ABC News on the science of happiness).  


Development paths for developing countries


In developing countries, with high levels of poverty and deprivation a lot of catch-up is still needed and the dynamics of achieving human well-being are somewhat different.  Rising income is generally associated with an increase in happiness as it releases people out of 'very unhappy' states of poverty.  Although absolute poverty has decreased substantially among a segment of the world’s population when compared to the start of the Industrial revolution, widening inequality worldwide seem to threaten the stability of the current system.  Recent evidence from Africa suggests that the benefits of economic growth does not translate into social development.  Some recent research argues that it is not so much the fact of being unequal in itself, but the inequality of economic opportunity and mobility, often driven by unemployment, that makes people really unhappy. 


The question of worldwide sustainability, ecological thresholds and reinforcing system feedbacks places increasing pressure on the “tried and tested” development path of the accumulation of income and wealth. Unequal playing fields in increasingly globalised markets also fuel the state of unhappiness.  The questions whether developing nations will have the space to develop as developed nations did is often asked. Whether this type of development path is the wise thing to pursue do is a second, just as important question.


This again brings to the fore the age-old concept of human well-being.  Human well-being is much more then only materialistic well-being, normally measured through indicators such as GNP and income.  This is recognised in the vast and growing literature on well-being and human happiness, but the translation of such a new theory of well-being to African situations is still lacking. This vital disconnect would continue to support the choice of development paths that does not really increase human well-being. New measurements of well-being are slowly created to take account of such concerns, but are far from being applied in a consistent policy supporting framework yet.    


For the love of wisdom - and beyond..

It may well serve as a reminder that the concept of human well-being fascinated philosophers from the earliest times. The Platonic interpretation of well-being is to search for the good in fixed principles and underlying laws with a primary focus on an unchanging reality in another world. Plato separated mind and body and happiness therefore closely corresponds to the organisation of human society in city-states, the best imitation of stability in this world at that time, while providing the context for a rationalistic inquiry into substantive, unchanging realities in the other world. 



Aristotlean philosophy, however, was much more focussed on well-being derived from the process of life itself. Mind and body are treated as one and human happiness became much more associated with bringing potential into full action in the real world.  As a result of this view and after the demise of city states, subsequent Stoic philosophers divorced human happiness from Platonic political life in favour of living well or being virtuous in a changing physical world. 


Both the Platonic and Aristotelian traditions departed from the assumption that reason can bring a better understanding of the world, and, in turn, can be used to create a better future.  Later philosophy brought beliefs back, either as a partner in dual spheres (sic. the philosophy of St. Thomas of Aquinas) or as a context wherein reason is embedded (St. Augustine). After the Renaissance, belief and reason, faith and knowledge, became separated again.  


Platonic rationalism dominated up to the 17th century when British empiricism brought back the philosophers of experience.  They argued that reality can be understood through observation, experimentation and controls.  In both these strands of thinking, the initial ontological question on the nature of being has changed to the epistemological question on the nature of knowledge. 


It was Immanuel Kant who continued to strive to reconcile rationalism - the then new empiricism - and moral certainties in one framework.  He could not, however, escape an integration by placing each in their own domain. Not surprisingly, post-Kantian philosophy developed into two broad schools of thought: (substantivist) positivistic rationalism (Comte, Smith, Mill) and a much smaller processional historical dynamics school (Hegel).  A third school of thought continue to emphasise the importance of a reality beyond human implication (whether through reasoning or empirical observation) and an appeal to normative values transcending beyond our own limited rationality or experience.


It is this first school of thought that came to dominate the Western world.  Among others, it was the discipline, structure and optimism of this school of thought that provided the stage for the most rapid economic progress of mankind in recent Western history.  This progress has brought us a lot, but also left us with many unanswered questions on human well-being.  


It may well be that perceptions on what human well-being really is became associated with an economic development logic underpinned by a particular philosophical point of view. Being latecomers to the development party, Africans do have the window of opportunity to critically assess their development paths.  This search is not only for the love of wisdom, but has very real outcomes. 

Thursday, June 26, 2008

Super rich wealth increase of 9.4% in 2007


From the 12th Annual World Wealth Report released by Capgemini & Merrill Lynch: 


Driven by market capitalization growth in emerging economies, the wealth of the world’s high net worth individuals (HNWIs1) increased 9.4 percent to US$40.7 trillion in 2007, according to the 12th annual World Wealth Report, released today by Merrill Lynch (NYSE: MER) and Capgemini. The number of HNWIs in the world increased 6 percent in 2007 to 10.1 million, the number of ultra high net worth individuals (Ultra-HNWIs2) increased by 8.8 percent, and for the first time in the history of the Report, the average assets held by HNWIs exceeded US$4 million.

..

This year’s Report found that the number of high net worth individuals, and the amount of wealth they control, continued to increase in 2007, with the greatest wealth being created in the emerging markets of India, China, and Brazil.

..

Due to overall heightened interest in the environment, green investing has become widely popular across the globe in recent years, offering investors lucrative returns and an opportunity to become actively involved in social responsibility. An array of vehicles through which to back green initiatives drove robust growth in green sectors in 2007, such as mutual funds, ETFs and other pooled products, or alternative investments. The total investment in clean technology, for example, increased to US$117 billion in 2007, up 41 percent from 2005, with notable strength in wind and solar segments.   


Download the full report.

Photo: HuffingtonPost

Monday, June 23, 2008

Solving complex problems

Came across these words of advice today:

To truly solve a complex problem requires an approach as subtle and multifaceted as the problem itself (Plektix)

Doing nothing may at times be the best option. I feel much better about today then.

Global cost of carbon mitigation

With carbon caps in Europe and suggested in the US, and with more and more pressure that the main carbon-emitting developing countries should also join the party, the focus on where to achieve the most carbon reduction for every dollar or euro invested has never been that pertinent.  

A 2007 report by McKinsey ('A cost curve for greenhouse gas reduction') highlights the importance of efficiency in buildings and vehicles, the need to engage power producers and industrial companies with long term incentives, incentives for specific technologies such as carbon capture and storage, and addressing the potential of forestry and agriculture. 

The pertinent question, as always, given that energy efficiency can lead to so much gains, why has this not been done before? (Eg. negawatt power). In other words, which existing (maybe often non-monetary) costs are not counted? 

Cartographer/designer/author: Emmanuelle Bournay, UNEP/GRID-Arendal



Beyond physical poverty: Pay attention and treat us with respect


Adam Smith in his Theory of Moral Sentiments observed that the reason poverty causes pain is not just because it deprives them physically, but it is associated with unfavourable regard:
'The poor man … is ashamed of his poverty. He feels that it either places him out of the sight of mankind, or, that if they take any notice of him, they have, however, scarce any fellow–feeling with the misery and distress which he suffers. He is mortified upon both accounts; for though to be overlooked, and to be disapproved of, are things entirely different, yet as obscurity covers us from the daylight of honour and approbation, to feel that we are taken no notice of, necessarily damps the most agreeable hope, and disappoints the most ardent desire, of human nature. The poor man goes out and comes in unheeded, and when in the midst of a crowd is in the same obscurity as if shut up in his own hovel.'

Don Arthur, from Club Troppo, wrote in his article What if Adam Smith was right about poverty?:
Well-being isn’t just about our relationship with things, it’s also about our relationships with each other. Poverty hurts, not just because it can leave you feeling hungry, cold and sick, but because it can also leave you feeling ignored, excluded and ashamed. In The Theory of Moral Sentiments Adam Smith argued that all of us want others to pay attention to us and treat us with respect.

Human beings want to belong to something.  This desire for belonging may become so strong that it can easily be used by skilled manipulators for their own gains.  
That is why decent work is so much more then an income - for many it is often the only license to earn attention and respect.

Picture Adam Smith: Wikipedia.

Friday, June 20, 2008

New report warns of threats to progress in Africa

From the Africa Progress Panel report 2008:

Four crises dominate the global economy today - a financial crisis in the developed countries, an energy crisis that is worsening by the day, climate change which is becoming both better understood and more urgent, and a food crisis which is devastating to the world’s poorest citizens.


Against the background of these immediate challenges, the substantial progress that Africa has made in recent years is threatened. Climatic and geographic factors are exacerbating the problem of food shortages and of other economic or disaster-related shocks.


Source: Polity.org.za

Thursday, June 19, 2008

The unintended consequences of development aid in Africa

Development Aid is killing Africa. More governance, less corruption, less aid, more trade is what is needed. Do not create poverty traps by creating dependancy traps.  Oh yes, and do not forget this quote from Oscar Wilde: Philanthropic people lose all sense of humanity.

Read the full article in De Spiegel

Having acknowledged that aid, in many instances, does not work, how do we avoid the trap of falling into a capitalism without a heart?

Cape Town and Port Louis offer the highest quality of living in Africa and the Middle East

Cape Town (80) in South Africa and Port Louis in Mauritius are the region’s cities with the best quality of living followed by Dubai (83) and Abu Dhabi (87). In contrast, Johannesburg slips from 90 in 2007 to 94 in 2008 and Harare in Zimbabwe slips from 168 in 2007 to 174. Out of the 25 lowest ranking cities, 19 are from Africa including Lagos (198), Port Harcourt (207) and Bangui (214). Two are from the Middle East including Sanaa (207) and Baghdad (215) – the city with the world’s lowest quality of living and lowest levels of personal safety. Cape Town scores 87.9 compared to Baghdad’s 13.5.

 

For personal safety, apart from Baghdad, Kinshasa is the worst location, ranked 214, and Nairobi (212). Lagos and Port Harcourt rank equally at 209. Jerusalem and Beirut both rank 199 and Harare, 184. Abu Dhabi (33) is the region’s best city for personal safety, followed by Dubai (47), Port Louis (60). Lusaka and Manama rank equally at (118). According to the personal safety index, Abu Dhabi scores 112 against Baghdad’s 3.8.


Source: Mercer

Wednesday, June 18, 2008

Writing about Africa. Because you care.

I came across this very tongue in the cheek, but probably dead serious piece, on how to write about Africa (from Granta).

A few of my favourites from the article:

Africa is big: fifty-four countries, 900 million people who are too busy starving and dying and warring and emigrating to read your book. The continent is full of deserts, jungles, highlands, savannahs and many other things, but your reader doesn’t care about all that, so keep your descriptions romantic and evocative and unparticular.

Establish early on that your liberalism is impeccable, and mention near the beginning how much you love Africa, how you fell in love with the place and can’t live without her. Africa is the only continent you can love — take advantage of this. 

Among your characters you must always include The Starving African, who wanders the refugee camp nearly naked, and waits for the benevolence of the West. 

Bad Western characters may include children of Tory cabinet ministers, Afrikaners, employees of the World Bank. When talking about exploitation by foreigners mention the Chinese and Indian traders. Blame the West for Africa’s situation. But do not be too specific.

The biggest taboo in writing about Africa is to describe or show dead or suffering white people.

Animals, on the other hand, must be treated as well rounded, complex characters. They speak (or grunt while tossing their manes proudly) and have names, ambitions and desires. They also have family values: see how lions teach their children? Elephants are caring, and are good feminists or dignified patriarchs. So are gorillas. Never, ever say anything negative about an elephant or a gorilla.

After celebrity activists and aid workers, conservationists are Africa’s most important people. Do not offend them. 

Anybody white, tanned and wearing khaki who once had a pet antelope or a farm is a conservationist, one who is preserving Africa’s rich heritage. When interviewing him or her, do not ask how much funding they have; do not ask how much money they make off their game. Never ask how much they pay their employees.

When writing about the plight of flora and fauna, make sure you mention that Africa is overpopulated. When your main character is in a desert or jungle living with indigenous peoples (anybody short) it is okay to mention that Africa has been severely depopulated by Aids and War (use caps).

Always end your book with Nelson Mandela saying something about rainbows or renaissances. Because you care.



Responsibility for carbon mitigation includes the South - Centre for Global development

A new working paper 'Another Inconvenient Truth: A Carbon-Intensive South Faces Environmental Disaster, No Matter What the North Doespublished by the Centre for Global development, makes the case that the South need to mitigate carbon as well, this time for their own good:


As a major source of greenhouse gas emissions, developed countries (the North) have an indisputable responsibility to address global warming. But many developing countries (the South) and their advocates embrace an additional principle: As ostensibly blameless victims of climate change, poorer countries should be unfettered by emissions regulations and left alone to develop along a carbon-fueled path for decades into the future. In this CGD working paper, senior fellow David Wheeler and research assistant Kevin Ummel empirically test that assertion and come to a startling conclusion: The South would soon face a climate crisis even if the North and all its emissions had never existed.


With the best available data on historical carbon emissions in hand, Wheeler and Ummel use a carbon cycle model to translate cumulative emissions from the North and South into their respective concentrations of atmospheric carbon dioxide. Using scenarios from the Intergovernmental Panel on Climate Change (IPCC) to project Southern emissions into the future, they find that a carbon-intensive, isolated South would witness unequivocal global warming, widespread glacial and polar melting, and a rising sea level by 2040 at the latest. And by 2060, atmospheric carbon dioxide would pass critical thresholds that the IPCC associates with large, irreversible impacts on developing countries. Even in the world spared the historical and future emissions of the North, a carbon-intensive South would undermine its own development long before reaching prosperity.


Wheeler and Ummel conclude that the conventional wisdom is dangerously misguided. For its own sake, the South and its advocates must recognize this hard truth, accept the necessity of serious, immediate mitigation, and embark on a low-carbon development path with the assistance of the North.

Eskom tariffs: The verdict is..

an increase of  27.5% (Engineering News).  See also earlier post.

Click here for a statement by Nersa.

How to support ecological innovation

In response to a declining and consistent supply of cheap environmental goods and services a new term has emerged in the last 10 years or so: Eco-innovation or Ecovation.

Ecovation
 is the process by which responsible capitalism aligns with ecological innovation to construct products which have a generative nature and are recyclable back into the environment for usage in other industries. (See full article on Thought Leader)

According to the Wikipedia: Eco-innovation is a term used to describe products and processes that contribute to sustainable development.Eco-innovation is the commercial application of knowledge to elicit direct or indirect ecological improvements.  It is often used to describe a range of related ideas, from environmentally friendly technological advances to socially-acceptable innovative paths towards sustainability.

Innovation flourishes in creative space. Rather then being heavy-handed only (e.g. you must sort your waste), the challenge is to come up with creative solutions that ignites the human ingenuity in responding to the ecological crises.  I see interventions are needed on least three levels: First, prices need to reflect the value of natural resources and the damage to the environment.  Second, institutions need to be redirected to explicitly support the process of innovation, and third support systems need to be designed to ease the transition for the needy losers in the process towards a more sustainable development path.

Institutional failure, big time

I can deal with darkness, spiking food and fuel prices, a slowdown in economic growth, inflation (you name your favourite dismal topic), but this is testing the limits of resilience:

Amazon Bans South African Post Office (H/T protocolinpractice)

Small wonder I have been waiting almost 2 months now for that package to arrive.

Saturday, June 14, 2008

Development 1.0 and 2.0 explained in pictures

Ever wondered what the difference between development 1.0 and development 2.0 is? 

These pictures will help you out of your misery (H/T Osocio):



What about the balance between age and youth, between fast and slow, between structure and creativity, between organisation and innovation, and between bureaucracy and entrepreneurship?

Monday, June 9, 2008

More growth, less poverty, less environment? - Commission on Growth and Development

This morning I had the privilege listening to Michael Spence, chair on the Commission on Growth and Development, and 2001 Nobel Prize Laureate,  whom delivered a keynote address at the Annual Bank Conference on Development Economics in Cape Town.   

According to their website the Commission has been brought together by the belief that the world's challenges - poverty, environment, misunderstandings within and between nations, vast differences in living standards within and across countries - are best met in conditions of rising and sustained prosperity, and expanding economic opportunities. The Commission was established "to take stock of the state of theoretical and empirical knowledge on economic growth with a view to drawing implications for policy for the current and next generation of policymakers." 

The Commission recently released its final report.  Specifically with regards to Africa, the main highlights are that economic growth is the strongest in decades, but that poverty remains persistent.  

If there is one thing the Commission does argue for is that it is impossible to lift large amounts of people out of poverty without growth.  However, much more attention is needed on the distinguishing features of that growth: amongst others it should be inclusive - sharing the benefits of globalisation and within a context of leadership and support from the population. 

On the topic of natural resources and the environment the report is refreshing.  The report does not support the misplaced idea to grow first and pay attention to the environment at a later stage.  It is recognised that this approach is expensive in the long run and has largely adverse effects on the poor.  Cleaner growth is by definition better growth for all. 

Subsidies on the consumption of energy, and implicitly on carbon, need to be phased out and correct signals given to the market to support higher energy efficiency and longer-term mitigation of carbon.

With regards to food, and although understandable that short term emergency relief measures are needed, the report argues that the long-term solution to ensure continued supply is not to impede price signals in the market, but to rely on high supply-side elasticities.  According to Spence, agricultural productivity and output can still be increased a lot (also in Africa) and correct price signals will certainly do its part.

An interesting recommendation is that Africa needs to adopt best practices in the exploitation of natural resources, such as the setting up of a fund for resource rents, paying out the percentage of the total each year to all its citizens.

Not less growth, but more (inclusive, transparent and environmentally friendly) growth is what Africa needs.  The poor are knocking at the gate.

More economic growth, less poverty, and more environment - there is no other sustainable option for Africa.