Our Word is Our Weapon

Will Stephens of Samizdata, who seems to specialise in moronic posts linking public spending to genocide, today claims, on the back of some new report from the Globalisation Institute, that millions die every year because of “state failure in water systems”.

In a very limited sense, he’s right, in that if publicy owned water systems in poor countries were fully funded and worked perfectly, then 42% of the population in Sub-Saharan Africa would not have to live without access to decent water and nobody would die for lack of the stuff. But in another - more accurate - sense, he’s wrong, because he seems to think that private sector provision is the answer to this problem.

If that were the case, surely we would be seeing private companies scrambling over each other to invest in water provision in Africa. So how many new investments are private water companies making in Sub-Saharan Africa? Well, for the last year with data available, the figure is roughly … none. Clearly, private companies don’t see the poorest parts of the world as particularly profitable, and so aren’t going to invest there. Unfortunately, it is in precisely those countries that most people without access to clean water reside. This is a simple enough fact, but it seems to have eluded many.

Another point worth making is that many rich countries seem to be still quite keen on the “water statism” which Will Stephens associates with mass murder. For example, only about 15% of the US population gets their water from privately owned systems. Most affluent countries have decent water systems today because they made huge publicly-funded investments in them in the past, and the inescapable lesson of all this is that something similar is going to have to happen in Africa if we want to stop the appalling waste of human life that Stephens highlights.

Sarajevo Survival Map 92-96 is the ultimate visual document, a Topography of Life and Death. It is the only Map in the world that has made a visual reference to the tragedy of a besieged European city at the end of 20th century. Representing a successful combination of it’s hand-drawn illustration quality, topographic precision, text legends and true portray of the siege elements, such are; number and types of guns surrounding the city, the anti-sniper protection barricades, water sources, a secret underground tunnel, survival gardens, sniping zones and other key strategic urban elements. Serving as a document on the Historical level, an event of true value on a Cultural level, and on a Political level a powerful lesson for all of us.

I think this is an amazing piece of work - comprehensive and informative, but also very dramatic and quite disturbing in its detail and slightly child-like quality. And each landmark has its own story:

THE TUNNEL

The Dobrinja-Butmir tunnel, a hole some 1.2 meters wide, 1.6 meters high and 760 meters long, is situated under the Sarajevo airport runway. In the official communication between local politicians and UNPROFOR this public secret has been referred to as “the non-existent tunnel”. Foreigners were not allowed into the tunnel and journalists were offering up to 5.000 DM for just one shot of the tunnel.

Although the tunnel was a military object and intended solely for the army’s getting in and out of town, the privilege of using it was extended to the American ambassador to Bosnia and Herzegovina, Viktor Jakovic, who the aggressor did not allow to leave the city by plane. The tunnel was also used to get the members of Parliament from other towns into the city. Many of them were easily recognized during the sessions of Parliament because they had bruises on their foreheads from hitting the iron support bars within the tunnel. Some comfort was extended to the most respected politicians who were pushed through the tunnel in small wagons.

The commercialization of the tunnel brought about great changes in the economic life of the city. The tunnel became a place full of people dragging bags with potatoes o eggs. Many tradesmen were allowed to “rent” the tunnel from the army. Thanks to the tunnel many became rich, but the prices also fell within the city.

The aggressor also knew about the secret tunnel and by continuously shelling its entrance it hampered its usage. They even tried to dig another tunnel of the other side of the airport in order to redirect the Zeljeznica river and flood the tunnel.

In spite of everything the hole under the airport became the greatest public good of the city and its only link with the rest of the world. If one managed to get a permit to go through the tunnel he or she would be greeted at the exit by a marker-written sign: PARIS 3765km.

The map was created by FAMA, a Sarajevo-based media and publishing group.

Link from Cartography.

The World Bank’s new(ish) report on Latin America is, in comparison to its past output, practically revolutionary:

According to the report, Poverty Reduction and Growth: Virtuous and Vicious Circles, while growth is key for poverty reduction, poverty itself is hindering growth in Latin American countries.

Latin America remains one of the most unequal regions in the world with close to one person in four living on less than US$2.00 a day.

The report looks at how poverty affects growth. It finds that a 10 percent drop in poverty levels, with other things being equal, can increase economic growth by one percent. In turn, a 10 percent increase in poverty levels can lower the growth rate by one percent and reduce investment by up to eight percent of GDP.

This, the report says, is because the poor, who generally lack access to credit and insurance, cannot undertake many of the profitable activities, which fuel investment and growth. This creates a vicious circle in which low growth results in high poverty, and then in turn, high poverty results in low growth.

The report says poor regions lack infrastructure and so fail to attract investment. Poor families, faced with high opportunity costs, substandard schools, and dim prospects of accessing a university education, under-invest in the nutrition and education of their children. And it says poor countries with high inequality experience social tensions, which make it difficult to create a healthy business climate.

“In order to move from a vicious to a virtuous circle, we need to launch a broad-based attack on poverty that feeds back into higher growth that in turn reduces poverty,” says Guillermo Perry, co-author of the report and the Bank’s Chief Economist for Latin America and the Caribbean.

The problem, of course, is that such “broad-based attacks on poverty” are more difficult in more unequal countries because the super-rich can buy a lot more influence than the super-poor. There are no easy answers to the problem, but to be fair the report authors don’t pretend that there are, and their analysis is impressive. There’s a lot to read in the main report, which I’m working my way through at the moment.

Writing in the Mail and Guardian Online, Fredrik Erixon and Razeen Sally argue that “Oxfam’s one-sided trade liberalisation is a policy of self-harm for developing countries in the WTO”. The evidence they put forward is as follows:

According to World Bank and Organisation for Economic Cooperation and Development (OECD) figures, since 1980 developing countries with a total population of about three billion — mostly in Asia — have more than doubled their trade-to-gross domestic product (GDP) ratios, doubled real per capita incomes and have cut average import tariffs by more than one-third. That leaves “less-globalised” developing countries with a combined population of about 1,5-billion, which have stagnant trade-to-GDP ratios and per capita incomes and much lower cuts in average import tariffs. The “new globalisers”, unlike the rest, have also seen dramatic reductions in poverty and improvements in human welfare indicators.

This is rather weak stuff, since it describes a situation - well-off countries with low tariffs, and poorer countries with higher tariffs - which could just as easily have come about through growth causing tariff reduction rather than tariff reduction causing growth. The inability of Erixon and Sally to provide less ambiguous evidence doesn’t strengthen their case.

In fact, there seems to be good evidence that the relationship between trade barriers and growth is far less clear-cut than they claim and may even work in the opposite direction. Halit Yanikkaya reports here that “trade barriers are positively and, in most specifications, significantly associated with growth, especially for developing countries … consistent with the findings of theoretical growth and development literature”, while DeJong and Rippoll say “the relationship between tariffs and growth is negative and significant among the world’s rich countries, while positive (but typically insignificant, depending upon the particular estimator being employed) among the world’s poor countries”. Lastly, Emma Samman sifts through the data here and concludes:

1) countries that reduced their tariffs appear to have fared no better than those that did not;
2) deeper tariff cuts may be associated with lower growth than more moderate cuts; and
3) more generally, the large diversity of experiences precludes drawing any sweeping conclusions.

That last point is important, but taken together these studies suggest that higher trade barriers are not significantly harmful to poor countries, but that cutting them too quickly might be. This is entirely consistent with Oxfam’s position as described by Erixon and Sally, and suggests that the best thing rich countries can do is drop their own tariffs unilaterally rather than trying to extract similar cuts from poorer countries. So Oxfam are right.

The evidence above also suggests a few more important points:
1) This really should not require repeating after how many decades of development theory, but we cannot go on assuming that what applies to rich countries applies equally to poor ones. Clearly, in terms of trade policy, it does not. Based on the evidence, it is perfectly reasonable to oppose both trade barriers in rich countries and pressuring poor countries to liberalise.
2) The time dimension of economic change is important. Countries with under-developed, undiversified economies and lots of people on low incoms seem to adapt pretty poorly to sudden change of the kind that trade liberalisation can cause. Models using comparative statics, like the World Bank estimates of the gains from free trade referenced by Erixon and Sally, don’t cope with this very well.
3) Maybe trade policy isn’t all that important. It doesn’t always show up as significant in growth regressions, and when it does the effect is rarely large. One of the few studies to find really serious effects, Dollar and Kraay’s “Trade, Growth and Poverty”, was also one of the shoddiest, as demonstrated by Samman, Dani Rodrik, and these guys. But at least Dollar and Kraay’s work inspired this excellent paper by Birdsall and Hamoudi, which establishes that the apparent decline of ‘non-globalising’ countries is mostly accounted for by the collapse in export revenues of commodity-dependent countries in the early 1980s. So much current research into international development seems to treat state policy as all-powerful (especially when it’s implicitly criticising the exercise of that power), but it seems to me that governments fundamentally don’t control the shifting patterns of world trade.

On a whim, I’ve changed this blog’s theme to plaintxtBlog, by Scott Wallick. It’s got the minimalism I crave, but the layout seems more sensible than the last one. Plus it’s just prettier. The ability to easily switch themes is something I love about Wordpress, so no doubt there’ll be more change before long.

I was very sad to hear of the recent death of Hans Singer, but what a life he had! He received his doctorate in 1936 under Keynes after a recommendation from Schumpeter, and until a week before his death at ninety-five was still teaching. Having fled to Britain from Nazi Germany, his application for citizenship was supported by Keynes, William Beveridge, Archbishop Temple and the vice-chancellor of Manchester University (’overkill’, thought Singer) and, when interned in 1940, Keynes pressed for his release. He contributed to the war effort by researching the German economy, after which he worked for the Ministry of Town and Country Planning and then in New York for the United Nations, returning to Britain at 59 for a remarkably lengthy and productive tenure as a research fellow at the Insitute for Development Studies at Sussex.

Best known for his thesis on the declining terms of trade experienced by developing countries, he also produced pioneering work on employment, social exclusion, human capital and aid. Only four years ago he published, with Kunibert Raffer, an excellent volume on Six Decades of Unequal Development which I would recommend to anyone interested in the subject.

He will be sadly missed, as evidenced by this affectionate obituary from Richard Jolly, his colleague in the IDS.