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.
02 November 2009
06 August 2009
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.
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.
03 August 2009
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.
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.
13 April 2009
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.
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.
02 February 2009
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.
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.
24 December 2008
Cocoa prices hit a 'record high' - or do they?
The Financial Times reports a sudden increase in the cocoa price, as bad weather and black pod disease lead to lower-than-expected deliveries to ports in Cote d'Ivoire. Good news for cocoa farmers, if the price spike is passed onto them. My concern is, it won't be - the traders will take a profit and the underlying conditions that led to the price spike will return. In the medium term, prices are likely to fall anyway, as global demand for chocolate (and especially high-quality chocolate, such as that coming from Latin America and Ghana) flattens after years of steady increases. (See this from the same paper).
Viewed over the last 15 years, the current price of £1,820 per tonne certainly looks impressive:
However, the current price may be less impressive than it looks, for two reasons. First, this chart reveals a similar spike in 2002 (presumably a result of the civil war in Côte d'Ivoire) that was followed by a 50% drop in prices and a 5-year slump. That would now equate to a price of around £900. Second, cocoa futures are priced in pounds, but the biggest cocoa producers and consumers use euros. Since the pound's value has declined from around €1.40 a year ago to €1.10 today, a cocoa price of £1,800 today is equivalent to around £1,400 a year ago - namely €2,000. The effective export price in Côte d'Ivoire, whose currency is tied to the euro, is some 10%-15% lower now than in July, when cocoa prices peaked at £1,700 (then €2,200 or $3,000).
In the meantime, what might be the effect of cocoa prices on the second round of Ghana's presidential elections, scheduled for 28 December? Probably very little, since the Cocobod fixed its annual price in August. But with only a percentage point between the two candidates, small psychological factors could make the difference. To all friends in Ghana and friends of Ghana, I wish you a peaceful Christmas and an even more peaceful election.
Viewed over the last 15 years, the current price of £1,820 per tonne certainly looks impressive:
However, the current price may be less impressive than it looks, for two reasons. First, this chart reveals a similar spike in 2002 (presumably a result of the civil war in Côte d'Ivoire) that was followed by a 50% drop in prices and a 5-year slump. That would now equate to a price of around £900. Second, cocoa futures are priced in pounds, but the biggest cocoa producers and consumers use euros. Since the pound's value has declined from around €1.40 a year ago to €1.10 today, a cocoa price of £1,800 today is equivalent to around £1,400 a year ago - namely €2,000. The effective export price in Côte d'Ivoire, whose currency is tied to the euro, is some 10%-15% lower now than in July, when cocoa prices peaked at £1,700 (then €2,200 or $3,000).
In the meantime, what might be the effect of cocoa prices on the second round of Ghana's presidential elections, scheduled for 28 December? Probably very little, since the Cocobod fixed its annual price in August. But with only a percentage point between the two candidates, small psychological factors could make the difference. To all friends in Ghana and friends of Ghana, I wish you a peaceful Christmas and an even more peaceful election.
07 December 2008
What to do about Rwanda?
Right now, if you're in development in Britain or America, Rwanda is a good place to be. Please note I'm not talking about economic growth or political stability (though it has both of those), but things like NGO presence, media attention, politicians visiting to show they care. If you have ever read accounts of the Rwandan genocide, or remember those dark days in 1994, Rwanda's peaceful reconstruction is surely something to celebrate. It even has the ultimate capitalist accolade: a business-school case study.
Unfortunately, there is a dark side to Rwanda: its role in the never-ending conflict in Eastern Congo. This disturbing account comes from the New York Times. Notice that the Rwandan officials do not deny that Rwandan citizens are crossing into DRC to fight, merely that their government is encouraging or paying them. But then who needs pay when mineral riches await?
I know very little about Congo and would not dare to take sides or argue that Rwanda's fears about Hutu extremists hiting in the jungle are unjustified. But I still feel wary about a country celebrated as a model of enlightended leadership in a troubled region intervening in its neighbour's affairs militarily. Yes, Congo is a threat to regional stability; yes, the Congolese government has failed to gain control of Eastern Congo or disarm the Hutu militia; but that is still not a pretext for unilateral military intervention, even by proxy. (As this guy, or this one, could tell their Rwandan friends).
It may suit Western governments to continue supporting President Kagame's regime (except for France); it may well be the best regime for Rwandans as well. But let's not allow the West's failure to prevent the Rwandan genocide become a pretext for inaction in the Congo, or get caught up in some stupid neo-colonial rivalry. We need a united approach and we need it now.
Unfortunately, there is a dark side to Rwanda: its role in the never-ending conflict in Eastern Congo. This disturbing account comes from the New York Times. Notice that the Rwandan officials do not deny that Rwandan citizens are crossing into DRC to fight, merely that their government is encouraging or paying them. But then who needs pay when mineral riches await?
I know very little about Congo and would not dare to take sides or argue that Rwanda's fears about Hutu extremists hiting in the jungle are unjustified. But I still feel wary about a country celebrated as a model of enlightended leadership in a troubled region intervening in its neighbour's affairs militarily. Yes, Congo is a threat to regional stability; yes, the Congolese government has failed to gain control of Eastern Congo or disarm the Hutu militia; but that is still not a pretext for unilateral military intervention, even by proxy. (As this guy, or this one, could tell their Rwandan friends).
It may suit Western governments to continue supporting President Kagame's regime (except for France); it may well be the best regime for Rwandans as well. But let's not allow the West's failure to prevent the Rwandan genocide become a pretext for inaction in the Congo, or get caught up in some stupid neo-colonial rivalry. We need a united approach and we need it now.
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