IHT Blog, "Managing Globalization", synthesizes two interesting articles that shows the two aspects of food price rise: danger for consumers and gains for producers in developing countries.
Particularly interesting is the second article that give some insight on how developing exporter countries should manage and use these additional resources in order to create a long run sustainable growth.
April 10, 2008
Rise of food prices: the two sides of the coin
April 7, 2008
Increasing food prices: what solutions to increase gains for rural poor and decrease risks for urban poor and developing countries?
Dani Rodrik comment in a very insightful post a statement made by Mr Zoellick that show how many decision-makers does not understand neither what is going on in agricultural markets nor what will be the impacts on development and poverty of high prices. In fact, they merge the old discourse (high agricultural prices = gains for developing countries) with a new one (high prices = problems for urban poor). Either discourse it is true but we need an analysis that take into account both and that provide some solutions.
To start, we should remember three elements:
- High food prices are caused by biofuels and emerging countries growing demand but also by speculation on commodities markets.
- 2/3 of the poor lives in rural areas and depends on agriculture and many of the urban poor are former peasants.
- Many developing countries, even if they are net importing countries, have still an important potential in expanding their agricultural production.
These elements mean that high agricultural prices are positive for most poor in developing countries but the risks are very high because urban poor uprising (caused by high food prices) can destabilize several developing countries.
This mean that we need to find solutions to reduce these risks and the adjustment costs. Developing countries need neither more food aid (which often create many problems) nor laissez-faire.
Developing countries need active rural development policies (founded also through Aid), which will increase their agricultural production (also by helping urban poor to come back to rural areas that they leaved) and some policies to decrease food prices in urban areas (notably by creating food stocks filled by national production). These policies need important resources that should be provided by bilateral and multilateral donors. The problem is that, even after the last World Development Report, I do not see an upward trend in Aid dealing with rural development and food policies in developing countries.
agriculture sustainable development WTO food prices
April 3, 2008
A proposal for a co-development contribution index: for an effective assessment on developed and emerging countries role in sustainable development
The Center for Global Development developed an interesting index to measure the developed countries commitment to development. It is based not only on aid but also on trade, investment, migration, environment, security and technology transfer contributions: it is truly comprehensive. This tool is very useful and innovative. It contributes to raising the pressure on developed countries and to advocate for an increasing contribution to development.
Nevertheless, I have some key elements that a development contribution ranking should imperatively include:
- Considering their increasing role in the international economy and politics, such a ranking could take into consideration also the impact of emerging markets (including in their own development).
- In order to improve the ranking, building index for every dimension is not very transparent and effective. I think it will be better to transform all contributions in monetary terms. The index will be based on monetary contribution on development calculated in percent of GDP.
- Both positive and negative contributions will be taken into account.
This index will be very useful to understand the real impact of every developed and emerging country on development. It will pose number of methodological problems but it will be more effective for advocacy and more transparent.
To calculate this raking I propose the following elements (it is only a raw thought that need to be further developed) to be taken into account in the calculations:
- Aid Contribution = Aid flows – food aid negative impacts – debt interests – aid that does not contribute to development.
- Trade contribution = Trade opportunities used (notably for manufactured goods and advanced services) – losses due to protectionism – losses due to subsidies (both on world and developing countries markets) – negative externalities of liberalization measures promoted by developed countries (also through WTO, World Bank, IMF and other institutions).
- Investment contribution = Investment flows – negative impacts of Transnational Companies – developing countries money in foreign banks
- Migration contribution = remittances – losses due to emigration of skilled workers – losses due to death of emigrants (caused by developed countries restrictions) + gains of temporary workers + gains in term of skilled workers that return in their developing country.
- Environment contribution = aid for environmental goals (e.g. GEF) – cost of environmental degradations caused by rich countries and their transnational companies (e.g. pollution of companies and climate change) – cost of policies to protect the environment imposed by developed countries.
- Security contribution = aid to conflict resolution and prevention (included cost of military intervenction that contributed to avoid or stop a civil war) – exports of arms to developing countries – cost of wars against developing countries (included embargos).
- Technology transfer contribution = value of technology transferred – copyrights and licenses cost – cost of property right imposed to developing countries (including cost of implementaing IPR policies)– cost caused by developed countries policies that limit access to technology.
By adding up these elements, we can find the value of a country contribution to development. I guess that many countries will have a negative score. This index will be difficult to calculate but it will be very useful to better understand both why asymmetries exist and how we can reduce them.
Sustainable Development Index ODA trade and development
April 1, 2008
Explaining the rush to regionalism to mainstream economists
Mainstream economists simply do not understand why so many developing countries participated to regional integration processes.
In fact, according to neo-classic economists, Regional and Free Trade Agreements are only a second best solution compared with global free trade. Moreover, often they create trade diversion and they decrease overall welfare.
To understand the reasons and potential opportunities that regional integration we should remember two important elements:
- Economic development works not as mainstream economists tell us. I explain more broadly the real connection between trade and development in another post.
- Regionalism it is mainly about politics and regulating more effectively the global economy.
Regarding the political dimension, there are two quotations that help us to understand why developing countries pursue a regional agenda:
The myriad of forces that are present in “globalization” generate uneven impacts and opportunities both within and between states. One reaction to such unevenness is to advance regionalism to both contain and exploit globalization. Boas, Marchand and Shaw (2005, p. 168)
In a globalized economy, where countries individually have reduces options for national economic policy-making and where the multilateral institutions framework is insufficient or lacks a strong development dimension, the creation of regional institutions may very well be a pragmatic response, and its success would extend the principle of “adaptative efficiency” (1) to cross-border relations. UNCTAD (2007, p. 40)
In conclusion, mainstream economists should remember that in order to understand the reality we should adopt and interdisciplinary model based more on empirical evidence than on mathematical models. The consequence is that mainstream economists fail to aknowledge the large number of potential positive impacts of regionalism for sustainable development.
Footnotes
(1) According to UNCTAD “adaptative efficiency” is the strategy that was adopted by successful economies that means: “the capacity to develop institutions that offer a stable framework for economic activity, but at the same time are flexible enough to provide the maximum leeway for policy choices, at any given time and in any given situation, in response to specific challenges” (idem)
UNCTAD, Trade and Development Report, Regional Cooperation for Development, Geneva, 2007
regionalism trade and developmant globalization
March 26, 2008
Interesting books
If you want to better understand how economic development work and how to explain that in the last decades some countries succeed to develop and other remain in the poverty trap, I give you as advice to read the following two books:
These two books look at history to show some lesson that we can learn on development and its relationship with trade. The two authors go beyond models and provide a clear analysis rooted on reality. What is more, both have a direct experience on how economies and economic development work. In fact, Reinert worked in the private sector as entrepreneur and Chang grew up in the middle of the “Korean Miracle”. Their experience and thinking outside the box is very valuable because they support their arguments with precise examples and historical analysis.
Both authors give me some hope that economics will stop to be highly dependent on ideological assumptions and supporter by mathematical models that oversimplify the reality and have as a main function to show this king of economics as scientific.
economics books trade and development
March 20, 2008
Some thought on globalization: How to define it?
[…] Two periods, the 1840s and the 1990s, experienced the strongest faiths ever in the market as he only way to ensure harmony and development. In the 1840s this phenomenon was called “free trade”, today the same phenomenon is called “globalization".
Erik S. Reinert (Reinert, 2007, p. 56)
Many definitions try to find out the essence of the globalization. This concept is still, however, far to be clear.
One way to avoid that the concept can be used to explain everything is to give a quite narrow definition. We can define it, as Drezner do, as
the cluster of technological, economic, and political process that drastically reduces the barriers to economic exchange across borders. (Drezner D. W., 2007, p. 10).
This definition show the crucial element of the current globalization phase that many actors called neo-liberal.
What is missing in this definition is that it does not underline that globalization it comes from and is developed by political and economic decisions of some actors that are in constant struggle to define the future world. It is important to view “globalization as a dialectical process” as Birchfield did (Bichfield, 1999, p. 30). In fact, as Payne underlined (Payne, 2005, p. 30), even if globalization can be seen as a massive shake-out of societies, economies, institutions of governance and world order, “the direction of shake-out remains uncertain, since globalization is understood as a long-term historical process characterized by contradictions, shaped by conjunctures and contested by increasingly aware and hostile political forces”.
Moreover, many globalization definitions are based on technological changes that enable people to be more closely connected. The problem with such kind of definitions is that they understand technology as an external variable with a unidirectional impact on societies. Nevertheless, as Cox underlined, “it is more realistic to see technology as being shaped by social forces at least as much as it shapes these forces. Technology is the means of solving the practical problems of societies, but what problems are to be solved and which kind of solutions are acceptable are determined by those who hold social power” (Cox, 1987, p. 21).
References
Bichfield, V. (1999). Contesting the hegemony of market ideology: Gramsci's "good sense" and Polanyi's "double movement". Review of International Political Economy , 6 (1), 27-54.
Cox, R. W. (1987). Production, Power and World Order. New York: Columbia University Press.
Drezner, D. W. (2007). All Politics is Global. Explaining International Regulatory Regimes. Princeton: Princeton University Press.
Payne, A. (2005). The Global Politics of Unequal Development. Houndmills et New York: Palgrave Macmillan.
Reinert, E. S. (2007). How Rich Countries Gor Rich ... and Why Poor Countries Stay Poor. New York: Carroll & Graf Publishers.
globalization definition
March 19, 2008
Multilateralism is not a goal per se
Many scholars place at the center of their analysis the role of multilateralism. The last example that I red was a post from Richard Baldwin that considers regionalism only as a risk for multilateralism without thinking on its impacts on sustainable development.
Multilateralism should not be a goal per se but a governance tool to achieve sustainable development. It is true that, often, bilateral relations are more asymmetrical. Nevertheless, we should not forget that multilateralism is not a perfect democracy system: power asymmetries matters.
Even if the presence of a bad multilateralism is probably better than its absence, we should maintain our criticism regarding its function and how it works in the reality. In fact, as Cox underlined (1992, p. 496), in the post-World War II,
[…] economic multilateralism meant the structure of world economy most conductive to capital expansion on a world scale; and political multilateralism meant the institutionalized arrangements made at that time [after World War II] and in those conditions for inter-state cooperation on common problems. There was, for some people, an implicit compatibility, even identity between economic and political aspects of multilateralism: political multilateralism had as primary goal the security and maintenance of economic multilateralism, the underpinning of growth in the world capitalist economy.
Furthermore, the main goal of economic multilateralism was to ensure growth in developed countries even if this depended on keeping developing countries in a poverty condition. The problem is that there is not alternatives to multilateralism even if South-South regionalism can help to solve some problems. We can only try to reform it.
In fact multilateralism is still crucial because, as Cox (1992, p. 492) pointed out:
multilateralism can only be understood within the context in which it exists, and that context is the historical structure of world order. But multilateralism is not just a passive, dependent activity. It can appear in another aspect as an active force shaping world order
Multilateralism it is not good per se. It should be assessed against another normative principle: sustainable development.
Economic multilateralism, if we use this kind of assessment, does not achieve spectacular results in the last decades. In fact, it does not avoid the rising asymmetries and inequalities at the world scale. What is more, the only countries that succeed in economic development (i.e. emerging countries) did it by breaking many multilateral rules (WTO agreements, World Bank advises, etc.).
Nevertheless, now multilateralism is changing. The rise of emerging countries change the power equilibrium in global governance institutions. In another post, I will try to assess if this phenomenon is positive or negative for others developing countries.
Bibliography
Cox, R. W. (1992), Multilateralism and world order. Review of International Studies , 18 (2), 494-523
multilateralism global governance emerging countries
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