New product hits the market, old one hits the dumpster

iPad, I'm your father

A company that makes computers, phones and mp3 players brought out a new product yesterday. After months of feverish speculation in the world’s media that the new product might be a kind of computer, the company unveiled the product — a kind of computer — to the surprise and delight of a few thousand of its closest friends at a press conference in North America.

A company spokesman explained that the device, which we’ll call the iPaid, was bigger than a big phone but smaller than a small computer. He also pointed out that although you couldn’t phone with it, it could do many computer-type things like keeping you amused, and it was magical and revolutionary.

The questions not on everybody’s lips include how can they make these things so cheaply, and are they good for the planet? (more…)

The road to Davos

All eyes turn to the Swiss ski resort of Davos this week for the World Economic Forum (WEF) . The annual meeting will bring together 2,500 business, government and civil society leaders (including OECD Secretary-General Angel Gurría) to discuss some of the key challenges facing the world today.

After a couple of years of grim economic news, Davos may well be buoyed by the latest economic forecasts from the IMF, revealed on the eve of the forum, which point to global economic growth of 3.9% in 2010, up on the IMF’s previous forecast of 3.1%. Speaking to reporters ahead of Davos, Mr. Gurría indicated that the OECD, too, was also likely to raise its growth forecasts this year. However, any relief among attendees is likely to be tempered by concern over the challenges still facing the global economy – challenges reflected in this year’s Davos theme“Improve the State of the World: Rethink, Redesign, Rebuild”

The forum will reflect shifting balances in the global economy in other ways, too. As several reporters note, emerging countries like China will have a bigger presence than ever before: According to The New York Times, “the number of attendees from the BRICs — Brazil, Russia, India and China — has more than doubled since 2005. Another change at Davos: No more Angelina Jolie or Bono. Without mentioning anyone specifically, Klaus Schwab, the chairman of the World Economic Forum told The New York Times that “the media overplayed the presence of those people, so we don’t invite them anymore.”

Davos runs until Sunday. If you’d like to follow the action you can catch live webcasts or follow the forum blog . As usual, media outlets like the The New York Times, BBC and Financial Times will also be bringing regular updates.

Haiti: We knew what to do even before the earthquake

Brian Tucker, President of Geohazards International (GHI) contributed this article to the Guardian. GHI’s work focuses on reducing loss of life and suffering due to natural disasters in the world’s most vulnerable countries, through preparedness, mitigation and advocacy.

The disaster that struck Haiti, in the form of an earthquake measuring 7.0 on the Richter scale, has delivered death and devastation, ruin and suffering, on a deeply tragic scale. But this was not an “act of God”, in that it was not an event that could not have been foreseen.

While earthquakes are not as frequent as hurricanes in the Caribbean, they are common. Today it is well known that poor design and construction practice results in buildings that are sure to collapse during earthquakes of this magnitude, killing and maiming those caught in them and leaving a trail of social disruption, sometimes for generations.

It’s like seeing an accident caused by a drunk driver you’ve tried repeatedly to stop drinking and driving.

Japan and the US state of California have improved their building codes and construction standards to reflect their seismic vulnerability, and the lethality of earthquakes in both places has been massively reduced during the last century. We know how to mitigate the devastating effects of earthquakes.

For someone like myself, who has devoted most of his professional life to reducing loss of life and suffering due to natural disasters, to see the images coming out of Haiti is like seeing the scene of an accident caused by a drunk driver you have tried repeatedly to stop drinking and driving. (more…)

Fueling hunger? Biofuel grain “could feed 330 million”

Over a billion people already suffer from hunger, and food security in 70 developing countries is projected to deteriorate over the next decade according to USDA’s Economic Research Service.

It’s not that there isn’t enough food. A new study by the Earth Policy Institute  shows that the grain grown by US farmers in 2009 to make biofuels was enough to feed 330 million people at average world consumption rates.

The report argues that in a fight between cars and people, the cars would win. The amount of grain needed to fill the tank of an SUV with ethanol just once could feed a person for a year. Even if the entire US grain crop were converted to ethanol, it would satisfy at most 18% of US automotive fuel needs.

The grain needed to fill an SUV’s tank with ethanol just once could feed a person for a year

So are people going hungry to keep cars running? Biofuels push up prices for agricultural commodities, but as an OECD report  points out, this is only part of the explanation.

Food is a relatively minor item in the spending of most families in OECD countries. It represents only 10% to 15% of the household budget, and as this post shows, much of the food bought is thrown away. (That said, the USDA estimates that 14.6% of US households were “food insecure” at some time during 2008.)

In developing countries, food represents half to three-quarters of budgets, so anything that pushes up prices has a more dramatic effect. Moreover, the diets of lower income families have higher shares of cereals, roots and tubers. Prices of these staples tend to increase more strongly due to biofuel expansion than meat and dairy products.

On the other hand, most of the poor in developing countries live in farm households, so higher prices for agricultural commodities  can create new opportunities, at least for farmers with a surplus to sell and the means to get it to market.

The increase in the prices farmers get for their products, whether due to biofuels or not, may help some rural households. But for most people, especially in rapidly expanding urban centres, it’s bad news, and being poor makes it even worse.

Useful links

OECD Agricultural Outlook 2009-2018 on food, feed and fuel

OECD on bioenegy

Solow run

Nobel laureate Robert Solow has some interesting things to say about the risks of blind faith in financial markets: “The market evangelists, who tend to claim more for unregulated markets than solid theory can justify, are ideologically motivated,” writes Solow.

“They dislike and distrust governments so much that they overlook the exceptions and the implausible assumptions, and simply propose the blanket principle that the market knows best. What is improper in this manner of argument is the frequent casual hint that it is authorized by economic theory. Nothing so general is ever authorized by economic theory.”

Solow is especially critical of free-market fans who excuse everything that happens in financial markets: “What is inadmissible is the assumption that, if the market creates a large and convoluted financial system, the market must be right,” he writes.

While a functioning financial system is at the heart of a successful modern economy, he argues that this shouldn’t be an excuse for financial firms to do whatever they like – especially as some of their activities seem to benefit almost no one but themselves:

 “I have read that a firm such as Goldman Sachs has made very large profits from having devised ways to spot and carry out favourable transactions minutes or even seconds before the next most clever competitor can make a move,” writes Solow, referring to so-called high-frequency trading.

As The Economist reports this week, this sort of trading is “attracting suspicion” and coming under greater scrutiny from European and American regulators.

Solow, too, has doubts: “Now ask yourself: can it make any serious difference to the real economy whether one of those profitable anomalies is discovered now or a half-minute from now? […] It remains hard to believe that it all adds anything much to the efficiency with which the real economy generates and improves our standard of living.”

 To find out more about OECD work on financial markets, click here.

What does re-building Haiti mean?

This post contributed by John Mutter, Professor of Earth and Environmental Sciences/Professor of International and Public Affairs and Director of PhD in Sustainable Development, Columbia University, NY

The January 12th Port-au-Prince earthquake is almost unique in modern history. It is about the worst natural extreme to affect some of the worst-off people on Earth.   What does disaster recovery mean when this happens?

Poor countries suffer more from natural extremes like hurricanes, droughts and floods than do rich countries.  Everything about richer countries makes surviving such extremes an easier task.

They usually have good institutions of government and, the sad catastrophe of Hurricane Katrina in New Orleans notwithstanding, that can respond quickly to save lives and help re-build them after the disaster.

Insurance is common.  Relatively few lives are lost and although the cost of the damage can seem large in absolute numbers, the losses in proportion to the size of the economy is quite small and can be coped with easily.  Look at the Dow in September 2005; the US economy as whole didn’t notice Katrina.

sand castles waiting to kill their inhabitants

And the Chinese economy didn’t notice the Sichuan Earthquake of 2008 either though around 70,000 people died.  China is still relatively poor in an absolute GDP per capita sense, but growing rapidly.

Both countries are large enough geographically to isolate the physical effects of disasters and have large enough economies that the effects of economic losses can be isolated as well; buffered by the total economic power of the country.

Locally these disasters are immensely harmful; nationally they are not. (more…)

For richer, for poorer

This post was contributed by Jeff Dayton-Johnson, Head of the Americas Desk at the OECD Development Centre

John Stuart Mill decried Nature’s “injustice, ruin and death.” We tend to throw up our hands in despair before natural disasters like the earthquake earlier this month in Haiti — the human cost of which, though not yet tallied, is certain to be catastrophic: unjust, ruinous and deathly.

But is it “natural”?

A Policy Brief by the OECD Development Centre argues that “hazards” — drought, earthquakes, epidemics, floods, windstorms–are naturally occurring, but that “disasters” are not. It’s unfavourable conditions–like irregular urban settlements, environmental degradation and weak regulatory practices–that render a society more vulnerable and less resilient to shocks.

Consider the example of Hurricane Mitch, which struck most of the Central American countries in October 1998, ultimately killing nearly 19 000 people.

Though loss of life, injury, and economic damages of the hurricane were widespread in the region, one of the disaster’s most striking features was its uneven impact across the affected countries. Different countries had differing underlying vulnerability to a hurricane.

If we take per capita income as a crude approximation of vulnerability–richer countries are better able to withstand and recover–we find that the ranking of Central American countries in terms of the severity of the hurricane and a ranking in terms of the poverty of the country would be almost identical. In general, poorer countries fare worse when exposed to a similar shock.

Unfortunately, then, Haiti was not only exposed to the risk of earthquake (a geophysical fact), it was vulnerable to a disaster (a social fact). The coming weeks will demonstrate how resilient Haiti is after the quake.

In societies exposed to risk of natural hazards, there is much that policy makers can do to reduce vulnerability and build up resilience.

This starts with improving the health and education of the poorer members of the society, and extends to monitoring and enforcing building codes and standards.

International agencies and the private sector can play their part by exploring ways to create innovative financial instruments to pool disaster risk and to provide insurance against it.