The Needs of Pakistan

The tragedy unfolding in Pakistan is mind boggling.   Robert Reich discusses why you should be concerned about it:

Flooding there has already stranded 20 million people, more than 10 percent of the population. A fifth of the nation is underwater. More than 3.5 million children are in imminent danger of contracting cholera and acute diarrhea; millions more are in danger of starving if they don’t get help soon. More than 1,500 have already been killed by the floods.

This is a human disaster. It’s also a frightening opening for the Taliban.

 Laura Freschi suggests ways one can help.

Haiti

In 1995 I went to Haiti to help build a school. It was a great experience for me on many levels. Among other things, it created a lot of questions for me about economic development. It also reminded me of the years I spent living in Africa as a child. This current tragedy in Haiti has brought back many of the memories and questions from that trip. Given my background, it has been especially interesting to read the many commentaries on Haiti's problems. While there are many pieces I could mention I want to take note of Daniel Erikson's article in Foreign Policy titled The Ghosts of Port-au_Prince. Daniel manages the Haiti project for the Inter-American Dialogue. Tyler Cowen has also had some interesting insights on Haiti and recommends we contact the White House to grant Haiti Temporary Protected Status. For those who are interested in donating, Daniel Drezner provides links to organizations on the ground in Haiti.

Update: Two blogs worth following on Haiti and on economic development in general are Chris Blattman's blog Research, International Development, Foreign Policy, and Violent Conflict and William Easterly's blog Aid Watch.

There is Hope for Zimbabwe

Time to find a new poster child for hyperfinflation. Zimbabwe's economy seems to have turned the corner by (1) allowing foreign currency to be used in transactions and (2) abandoning any further production of Zimbabwe dollars. Here is one news report:

HARARE (AFP) — A man whistles as he picks groceries from the shelves of a supermarket in Zimbabwe's capital. Another shopper, spoilt for choice, compares cooking oil bottles while queues form at the tills.

In Zimbabwe, these were simple and almost forgotten luxuries.

For more than a year, supermarket shelves were bare and shops resembled empty warehouses as the country reeled under an economic crisis that turned sugar and the staple corn meal into rare commodities.

Now shops are stocking up again, after the government in January agreed to allow retailers to conduct business in foreign currency.

The government has even stopped printing Zimbabwe dollars, which it once churned out in trillion-dollar denominations that quickly became worthless under inflation that independent economists estimated in the quadrillions.

The switch to foreign currency has already started bringing prices down in US dollar terms, according to official statistics which are being borne out at the till.

The BBC also notes that prices are now falling in Zimbabwe and further claims the following:

The US dollar was adopted by Zimbabwe's government following the inauguration of the unity government between the MDC and President Mugabe's Zanu-PF.

So Zimbabwe has dollarized. This is certainly an improvement in policy, but why not adopt the South African Rand? The economies of South Africa and Zimbabwe surely are closely to an optimal currency area than the U.S. and Zimbabwe. Does Zimbabwe really want to import U.S. monetary policy? With all that said, this is good start for Zimbabwe.

More Julian Simon, Less Thomas Malthus Please

The Economist reminds us why the Malthusian perspective for today's world continues to be wrong...and why the Julian Simon perspective--absent some cataclysmic event--continues to be right.

Malthus the False Prophet
MID an astonishing surge in food prices, which has sparked riots and unrest in many countries and is making even the relatively affluent citizens of America and Europe feel the pinch, faith in the ability of global markets to fill nearly 7 billion bellies is dwindling. Given the fear that a new era of chronic shortages may have begun, it is perhaps understandable that the name of Thomas Malthus is in the air. Yet if his views were indeed now correct, that would defy the experience of the past two centuries.

[...]

It was the misfortune of Malthus—but the good luck of generations born after him—that he wrote at an historical turning point. His ideas, especially his later ones, were arguably an accurate description of pre-industrial societies, which teetered on a precarious balance between empty and full stomachs. But the industrial revolution, which had already begun in Britain, was transforming the long-term outlook for economic growth. Economies were starting to expand faster than their populations, bringing about a sustained improvement in living standards.

Far from food running out, as Malthus had feared, it became abundant as trade expanded and low-cost agricultural producers like Argentina and Australia joined the world economy. Reforms based on sound political economy played a vital role, too. In particular, the abolition of the Corn Laws in 1846 paved the way for British workers to gain from cheap food imports.

Malthus got his demographic as well as his economic predictions wrong. His assumption that populations would carry on growing in times of plenty turned out to be false. Starting in Europe, one country after another underwent a “demographic transformation” as economic development brought greater prosperity. Both birth and death rates dropped and population growth eventually started to slow.

The Malthusian heresy re-emerged in the early 1970s, the last time food prices shot up. Then, at least, there appeared to be some cause for demographic alarm. Global-population growth had picked up sharply after the second world war because it took time for high birth rates in developing countries to follow down the plunge in infant-mortality rates brought about by modern medicine. But once again the worries about overpopulation proved mistaken as the “green revolution” and further advances in agricultural efficiency boosted food supply.

If the world's population growth was a false concern four decades ago, when it peaked at 2% a year, it is even less so now that it has slowed to 1.2%. But even though crude demography is not to blame, changing lifestyles arising from rapid economic growth especially in Asia are a new worry. As the Chinese have become more affluent, they have started to consume more meat, raising the underlying demand for basic food since cattle need more grain to feed than humans. Neo-Malthusians question whether the world can provide 6.7 billion people (rising to 9.2 billion by 2050) with a Western-style diet.

Once again the gloom is overdone. There may no longer be virgin lands to be settled and cultivated, as in the 19th century, but there is no reason to believe that agricultural productivity has hit a buffer. Indeed, one of the main barriers to another “green revolution” is unwarranted popular worries about genetically modified foods, which is holding back farm output not just in Europe, but in the developing countries that could use them to boost their exports.

[...]

Read the Rest

Getting Real

In a previous posting I reprimanded Paul Krugman for not being more cheery about the future of commodity prices. I argued human ingenuity in the face of increased scarcity has been the source of many innovations over the past couple hundred of years and this commodity price crisis should be no different. However, I was probably too sanguine about the transition to this new world--it is and will be a painful ride. The Economist did a good job last week documenting the pain and the dynamics behind the transition: surging demand from growing Asia, possible speculation due to loose monetary policy, and diversion of farming capacity to biofuel production. This last factor is particular frustrating since some of the biofuel production is more about special interest groups than cleaning up the environment (e.g. ethanol). I would encourage you to take a look at The Economist article on this issue as well as Trade Policy for a New Deal on Hunger.

Update: Josette Sheeran, executive director of the U.N. World Food Program, on the food crisis via Foreign Policy:

I’m optimistic because the world knows how to beat the cycle of hunger and the world knows how to produce enough food for the global population. A lot of global hunger is an infrastructure and distribution problem—maybe half. We see up to half the food lost in developing countries simply because there’s no way to get it from farm gates to markets. We see virtually nonexistent agricultural markets, so there’s no place for buyer and seller to meet. These are things that can be solved. They don’t require a new scientific breakthrough or a Nobel Prize-winning team to find out how to produce enough food for the world. So, we need to focus our attention on a green revolution in Africa that will help break this cycle. In a way, the higher food prices may inspire more people to stay in farming as they see that it’s a good investment. But there will be a lag between what I hope will be a pretty robust response to world demand, and what I know will be a pretty difficult three to four years.