Eight ways the world should be spending its money

The MIT Poverty Action Lab has a fantastically simple, compelling list of seven ways to help achieve the Millennium Development Goals. I'm going to print these and put them in my wallet.

My favourite finding is still that deworming kids in Kenya at 50 cents each adds a year to their schooling. It's widely known in the academic community, but not enough outside it (and are there any case studies outside Kenya?).

My nomination for an eighth high-impact way to spend money is REDD: Reducing Deforestation and Forest Degradation. If done properly this could make a big contribution to carbon emissions cuts and help improve the productivity of smallholder agriculture at the same time. I have high hopes that this will form part of whatever deal emerges at Copenhagen; paradoxically, it may be easier to get it through if the rest of the summit is a flop, because the world will be desperate for some good news (though beware countries who think they can buy their way out of climate change on the cheap. We still has to replace those coal fired power stations with something better) . See here for a new Economist article about it.

What doesn't make the list? Stimulus packages, the war in Afghanistan and bank bail-outs. Personally, I think all three of the above are necessary to avert worse disasters (after all a global economic collapse would also cut the amount we can spend on development) but the ease with which we shovel vast amounts of money down the banks' throats is still staggering.

Liberte, egalite et . . Francafrique

Depressing article from NY Times on French quasi-colonial policy in Africa. Plus ca change, plus c'est la meme chose.

(I'm not being smug: US and UK aren't much better. Corrupt politicians not given US visas - unless they have oil and a villa in Malibu, of course)

Climate change in Australia vs healthcare in the US

I’ve spent the last month in Australia, working on the role of forests in combating climate change. It’s hard to avoid noticing that Australia is the world’s largest emitter of carbon dioxide per head. Relying on coal for power and an energy-intensive lifestyle lead to emissions of 27 tonnes per person per year, higher even than the US. Australians have dragged their feet over climate change for years: they only signed the Kyoto Protocol in 2008 and while Prime Minister Kevin Rudd travels the world drumming up support for ‘global deal’, at home he is struggling to force through Australia’s first ever emissions trading scheme without watering it down to meaninglessness. Large chunks of the Liberal Party are oppose any kind of emissions trading and some of them happily proclaim they “don’t believe” in climate change.

There is a paradox here. Australians are among the most ecologically stressed people in the world. Every year, wild bushfires lay waste to coastal forests, but the fires in Victoria last year were the worst in living memory. The antipodean climate is harsh and unreliable: a decade of drought may be followed by torrential floods as the warm waters of the El Nino-Southern Oscillation wallow back and forth across the Pacific. European invaders cleared swathes of inland forest to make farms and pasture, but much of the thin soil is exhausted and the land has reverted to bush. Even the once-rich agricultural lands of the Murray-Darling basin are being abandoned as there just isn’t enough water to feed the fruits, vines and Adelaide at the same time. So how can any reasonable Australian doubt that climate change is a serious threat to their beautiful country and way of life? After all, most forecasts suggest that a warmer world will exacerbate the fluctuations of their climate even further.

Some of the people who should lose the most from climate change are therefore among its stoutest deniers – while the population of certain European countries, whose idea of a heat wave is a week above 30 degrees, are up in arms. Why this self-defeating short-sightedness? Are the people in the pockets of BHP Billiton?

The healthcare system in the USA is even more perplexing. The strongest opponents of healthcare reform in the US include many who should benefit from it: middle-class white people, whose employee-linked health benefits are more precarious than ever thanks to the recession, mass unemployment and spiralling costs. Almost any American, veterans excepted, risks losing their healthcare if they lose their job. Yet the right spent much of 2009 creating the impression that universal healthcare meant “losing your healthcare” – which is a bit like saying that a programme to end famine will make your family go hungry. I would love to find an unemployed Republican who cannot get insurance her- or himself, but continues to protest against the “government takeover” of healthcare.

Is this behaviour economically explicable? Selfishness does not explain why, in effect, people vote to increase the risk of bushfires or their chances of being undiagnosed with a disease for lack of insurance. Is it short-sightedness, a fear of uncertainty or simply a contrary instinct, one that assumes it is best to the opposite of whatever the government is advising? My current best guess is that it is to do with a long and tangled chain of causation. The link between burning coal in Australia and bush fires is evident, but as long as China opens two new power stations every week, an Australian might be rational in continuing to burn coal, as long as China does. How about Greenpeace stop trying to shut down nuclear power plants and blockade the port of Newcastle, the source of much of China’s coal, instead?

Can biotech cure world hunger?

Last week we learnt that there are now 1 billion hungry people in the world, more than ever, albeit a smaller proportion of the population than in the 1950s. I found this debate from the New York Times a useful guide to how to respond. On the one hand, it would be absurd to condemn millions to malnutrition because we don't like high-tech farming in Europe. On the other hand, genetic modification has delivered very little for poorer countries so far: herbicide-tolerant maize and soybean varieties, yes, but none of the drought-resistant crops that the biotech companies promised.

Beyond the biotech dichotomy, most contributors recognized that the solution to the food crisis will involve a combination of technologies, including some that don't exist yet. High-input farming depends on natural gas, which won't be around forever; water is running short in many grain-growing regions; a strictly organic world food system would be a disaster for forests, but many techniques from organic farming are useful and should be spread. It would probably help if the NGOs and corporations stopped insulting each other and worked together for a change.

If I could contribute to the debate, it would be on prices and the signals they send. High food prices are in general a disaster for development, but we need higher prices for meat, fish and air-freighted vegetables for richer people (not just rich countries) to change their destructive eating habits. We need to tax water and energy use in such a way that basic grains and vegetables are cheap enough for everyone, but beef becomes an expensive luxury for the Americas, Europe and Australia just as it is for the rest of the world. A serious carbon tax would stop us agonising between strawberries grown in Dutch greenhouses or flown from Kenyan orchards: they will be too expensive to eat anytime they're not in season.

In the absence of carbon and water taxes, more information can help: just publishing the emissions associated with beef burgers led 20% of diners to switch to chicken or the veggie option, according to this photo essay. Ultimately, though, the most powerful information is provided by the price.

Measuring economic growth from outer space

I love the satellite picture of the world at night - the one where Europe and America are seas of light, North Korea is invisible and the only lights visible in much of Africa are in South Africa and the oil flares in the Gulf of Guinea. Obviously, there is a strong correlation with economic development, or at least people having stuff to do at night.
J. Vernon Henderson, Adam Storeygard and Vernon N. Weil at Brown University take this insight a step further: why not use lighting levels to measure changes in development over time? This turns out to be a particularly useful method for countries where statistics are erroneous or missing, for example because of civil war. Governments can manipulate figures, but lighting never lies. Here are the two main findings (also summed up by the Wall Street Journal and Marginal Revolution):

1. Lighting is indeed a proxy for economic development and it goes down as well as up: there are some great pictures of changes in lighting levels in Eastern Europe in the 1990s. Whereas Poland experienced economic growth of 56% and an increase in lighting of 80%, neighbouring Ukraine saw its economic activity decline by 35% and lighting fall by 47%.

2. Increases in agricultural productivity (from high rainfall years)raise economic activity and hence lighting in nearby cities. Are these farmers rushing to sell their goods at the market, buy TVs with the earnings or simply celebrating their good fortune at the bar?

I'd love to see some further work on this data set. One question I have is whether the data might be distorted by certain high-light activities: mining, for example, or oil refining. This might matter for, say, DR Congo, where light levels seemed to increase in the 1990s, in the middle of a devastating civil war. I'd also like to see the impact of power cuts, such as California experienced a few years ago or South Africa in 2008. Most power cuts don't last long enough to show up in GDP figures, but their short-run effect might be severe: think of what happened in Europe this January when Gazprom turned the heating off. Next time that happens, we might be able to measure its effect from outer space.

Climate change migrants in Ghana

When you travel north in Ghana, the climate becomes drier and the villages poorer, until you end up in the Upper East and Upper West regions - friendly, slow-moving places, dry for most of the year and becoming more so. In other words, exactly the sorts of places where you would expect climate change-related migration to begin.

Sam Knight in the Financial Times tries to unpick the climate change migration debate. Is climate change migration something entirely new, or merely a continuation of existing trends? It looks like the numbers will be greater than we have been used (the Stern review suggests anything between 200 and 500 million people over the next 50 years), but that doesn't mean that starving farmers from Burkina Faso or Bangladesh will be pitching up in European capitals. More likely, the children of the rural poor will migrate to coastal cities and the educated youth of the capitals will migrate to richer countries, as they do now.

So what can we do about it? Beyond the obvious priority of containing climate change, I can think of two helpful policies:

1. Invest in agriculture in vulnerable areas - whether it's drought-resistant seeds, irrigation, new kinds of crops that reduce soil erosion or thrive in drier (or more volatile) climates
2. Improve transport links between coastal and inland regions: that facilitates seasonal migration, which keeps remote areas alive through remittances and periodic visits. It will also bring down the cost of living and make it easier for people in the arid areas to sell whatever they grow to richer urban consumers

On the other hand, these two are unlikely to work:
1. Trying to restrict migration - through passports, ID cards, quotas, . People will still move, only they will pay more for it and people traffickers will collect the difference
2. Bribing people to stay at home through welfare payments, social services, etc. Investing in health and education in rural areas is a great area, but it's more likely to promote migration than discourage it

Climate-induced migration is nothing new: we've been at it since the Sahara was green. It may be that the last few millennia were the abnormality and human migration patterns will end up looking more like they did before we invented agriculture.

Sustainable cocoa isn't all it seems

The movement to certify cocoa has taken two steps forward in recent months. Consider these two stories:

1. Mars, which is the world's largest end-user buyer of cocoa, has promised to certify that all its cocoa will come from sustainable sources by 2020. Unfortunately, this article from the Financial Times does not tell us what a 'sustainable source' is, how it will be certified or why it will take over 10 years to complete the process. However, they do hint at the root of the problems of the cocoa sector: very low yields in West Africa, where two-thirds of the world's cocoa comes from. Mars seems to understand that since there is little primary forest left to cut down in Ghana or Côte d'Ivoire, the only way to increase cocoa production is to apply inputs to existing trees and replant them with higher-yielding varieties.

2. Cadbury, the UK's best-selling chocolate maker, has announced all its Dairy Milk bars will be certified 'Fair Trade' by the middle of 2009. The BBC reports this will mean tripling the volume of Fair Trade cocoa it buys from Ghana, to 15,000 tonnes. The more detailed press release points out that they are no longer relying just on Ghana's well-established 'Kuapa Kokoo' cooperative, but will help set up farmers' groups and cooperatives in other parts of the country.

Both Mars and Cadbury promise that chocolate prices won't rise, while promising higher farmgate prices for the cocoa growers. How can they do this without squeezing their profit margins? I can think of two ways. First, certified cocoa has been expensive in the past because it was a niche product. If certification becomes the standard, the economies of scale may make it cheaper to operate the tracing systems, audits and inspections required for certification. Two, Fair Trade (which Cadbury backs, but Mars doesn't) guarantees a minimum price to farmers, but when cocoa prices are as high as they are now, there is no difference between Fair Trade and the world market price. (There is a small 'bonus' for Fair Trade growers, but it's tiny and usually given to the cooperative for community projects, rather than individual farmers).

Will these schemes help cocoa farmers, then? I'd like to see more details of what Mars is planning, but there are some benefits. If certification works, it will make the supply chain more efficient and thus cut out some of the profits made by middlemen. If Fair Trade works, it will reduce the risk of a sudden crash in cocoa prices leaving farmers worse off. Neither of these schemes will do much to reduce poverty in cocoa-growing communities, however. To increase their income, they will need to raise productivity. Higher productivity will come from growing more and better cocoa on the same land, with higher-yielding trees and more inputs including fertiliser (sorry). You can do this through subsidised credit and government- or private-sector led replanting schemes; certification and higher prices alone will not be enough.

Interesting and disturbing food and agriculture news

First, this thoughtful number from Senegal, on the see-saw of global price prices.

Second, a mysterious plague of worms riddles Liberia. There is still no certainty on what they are and many upcountry farmers feel frightened and abandoned - but even though the spray teams from the Ministry of Agriculture come late, at least there are spray teams.

Third, another story on middle income countries buying food through barter deals. This time last year, it was because food was too expensive. This year, food is cheap, but they can't get credit to pay for it.