An age of opportunity?

Click to read the report

As Alphonse Allais pointed out, having money is a great help in coping with poverty. And there’s plenty of data to show that investing in basics like health and education pays dividends.

UNICEF’s 2011 State of the World’s Children Report shows progress across a whole range of indicators, including under-five mortality rates, access to clean water, and vaccinations.

The second decade of life has received less attention though, and without sustained efforts, the gains made in early childhood can be wiped out.

The 2011 report gives statistics showing that in Brazil for instance, the lives of 26,000 babies aged 12 months and under were saved over 1998-2008 thanks to various programmes.

Over the same period, 81,000 15-19 year-olds were murdered.

Global net attendance  for secondary school is roughly one third lower than for  primary school. Worldwide, one third of all new HIV cases  involve people aged 15–24. And in the developing  world, excluding China, 1 in every 3 girls gets married  before the age of 18.

The report also quotes figures suggesting that around 1 adolescent in 5 suffers from a mental health or behavioural problem.

Other, less dramatic, statistics reveal widespread problems. With 81 million young people out of work globally in 2009, youth unemployment remains a concern almost everywhere. An increasingly technological labour market requires skills that many young people don’t have, and in many countries, large teenage populations are a unique demographic asset that is often overlooked.

Yet, the report argues, investing in adolescent education and training can produce a large and productive workforce, helping the young people themselves, and can contribute significantly to the growth of national economies.

However, in Off to a Good Start? Jobs for Youth the OECD says that young people are more than twice as likely to be unemployed as the average worker, yet few governments are taking proactive steps to boost youth employment.

Useful links

OECD work on education and training

OECD work on employment

OECD work on health

White pox, dynamite, cyanide, and coral

OK coral

Coral can tell us a lot about the Earth. In his first scientific book, The Structure and Distribution of Coral Reefs, published in 1842, Charles Darwin sets out the notion that change is the natural state of our planet, an inspiration he was to pursue and refine for the next 17 years, culminating in The Origin of Species.

For Steve Jones, author of Coral: A Pessimist in Paradise, “With every breath and every death we take part in a series of transactions in which the currency of life moves through the reserves held in the soil, the skies and – most of all – the seas. Its slow revolutions made the modern world, but… it may soon break down, with disastrous consequences for the corals and for ourselves”.

In the OECD Insights Fisheries: While Stocks Last? we describe the overexploitation of  coral reefs. The million tons of fish taken from them each year is three times beyond the sustainability limit. Deep-water reefs support fish populations, but they snag nets until bottom trawlers come along and pulverise them. And when nets and traps no longer find anything, fishermen, imitating the aquarium trade, use explosives or cyanide to stun the fish and make them easy to catch.

Urbanisation and the growth of coastal populations are taking their toll as well. Wastes flushed into the sea clog the organisms and provoke coral diseases. Some of these are of human origin. White pox is caused by a bacterium usually found in the human gut and seems to survive in sewage. Herpes viruses are the main cause of coral disease, and the human herpes virus has been found in corals off Panama.

Only a third of the world’s coral reefs are healthy and a fifth have already been destroyed completely, but even without overfishing and sewage, the remainder would probably be doomed anyway. Strong sunlight plus warm water causes coral bleaching, a stress-induced reaction when the coral polyps expulse algae because the algae are photosynthesising too fast and producing too much oxygen. So as the oceans heat up, the stress will intensify, and become more permanent.

The effects of ocean acidification are worse still. The rate of calcification (building shells) is projected to be cut by half by 2100 if carbon emission trends continue unchanged, in a process that one expert has likened to osteoporosis in humans. This makes the coral reefs much more vulnerable to erosion, and they could simply wither away.

Atmospheric CO2 concentration is expected to exceed 500 parts per million and global temperatures to rise by at least 2°C by 2050-2100. This is much higher than the values under which most of today’s marine organisms evolved. The result will be less diverse reef communities and collapse of reef structures.

The World Resources institute has just published Reefs at Risk Revisited, a study on coral reefs, part of a project involving the UN World Conservation Monitoring Centre, the Global Coral Reef Monitoring Network and numerous other agencies including the International Institute for Reef Studies and NOAA.

The new report confirms the Insights description. According to the report, over 60% of the world’s reefs are under immediate and direct threat from one or more local sources such as those mentioned above.

 Overfishing — including destructive fishing — is the most pervasive immediate local threat, affecting more than 55% of the world’s reefs. Coastal development and watershed-based pollution each threaten about 25% of reefs. Marine-based pollution and damage from ships is widespread, threatening about 10% of reefs.

 Approximately 75% of the world’s coral reefs are rated as threatened when local threats are combined with thermal stress, which reflects the recent impacts of rising ocean temperatures, linked to the widespread weakening and mortality of corals due to mass coral bleaching.

There is some hope though. Reefs have shown a capacity to rebound from even extreme damage, while active management is protecting reefs and aiding recovery in some areas.

Useful links

The Biodiversity Benefits of Coral Reef Ecosystems: Values and Markets

OECD work on the environment

OECD work on fisheries

Geomagnetic storms: the fire next time?

5... 4... 3... 2... 1...

The Millennium Bug was a great disappointment to me. While everybody else drunkenly counted down the seconds separating 1999 from 2000, I froze in patient greed at an ATM waiting for it to start spitting banknotes into my waiting bag. It didn’t happen, and none of the other celebrations we’d been promised materialised either. Air traffic stayed controlled, life support systems went on supporting life, and even lifts went on lifting.

Still, the verified reports of Y2K incidents did show how dependent we’ve become on technology. In the most serious case, slot machines at a racetrack in Delaware stopped working, forcing gamblers to give their money to the bookies directly.

But what if the world’s electronic systems really did get seriously damaged? This year’s annual meeting of the American Association for the Advancement of Science had a session called Space Weather: The Next Big Solar Storm Could Be a Global Katrina. Space weather could affect a surprising range of activities. Anything using a satellite, obviously, but that includes a load of things that aren’t so obvious. For example, those ATM machines and many other credit card devices rely on spaceborne communications networks to interrogate your bank.

The OECD’s Future Global Shocks project looks at these issues in a new study on geomagnetic storms. The most powerful storms ever recorded were during the Carrington Event in 1859 (named after the amateur astronomer who recorded the solar outburst). The only important electrical infrastructures at that time were the telegraph networks. In some cases, operators could disconnect their batteries and continue sending messages using current generated by the storms, but the storms also caused outages.  

If a storm similar to the Carrington ones happened today, the costs would be enormous. In 2009, the US House Homeland Security Committee heard that: “The impacts could persist for multiple years with the potential of significant societal impacts; in addition the economic costs could be measured in the several trillion dollars per year range and could pose the risk of the largest natural disaster that could affect the United States.”

At the AAAS meeting, Sir John Beddington, the UK government’s chief scientist, put the bill at a more modest $2 trillion and warned that the potential vulnerability of our systems has increased dramatically.

On Tuesday of this week, a storm brushed the Earth provoking spectacular displays in the northern night sky, but the China Meteorological Administration reported that the solar flare also caused “sudden ionospheric disturbances” and jammed shortwave radio communications in the southern part of the country.

The space weather forecast isn’t great. We’re enjoying a calm period in the 11-year solar cycle just now, but it’s coming to an end, so hold on to your hat in 2013.

Useful links

OECD Project on Future Global Shocks

Africa on the move: the Bamboo Bike Project

 

Bamboo has higher tensile strength than steel. Click on the logo for the project prospectus.

Africa imports an estimated 30 million bikes per year, yet there are no bike manufacturers on the continent. In today’s post, John Mutter of Columbia University describes a project to build bikes locally, using bamboo for the frames.

People in wealthy countries full of young, genuinely well motivated and committed people with honest and very good intentions can always do something to help those in poorer countries – something small, that is.  These small things no doubt can be very good things. You can build a sanitary facility in a village and the health of the villagers will improve. You can introduce better farming practices and yields will improve on the few hectares of a poor farmer’s field.

It is also not very difficult to establish a small business in Africa. There must be millions of roadside vendors selling everything from food to furniture to appliances. In many cases the goods are produced right there on the side of the road. They operate out of stalls as small as the average toilet stall in the US. These businesses support the income needs of perhaps one or two people at a very modest level.

When we first started the Bamboo Bike Project many people suggested that we should emulate that model. We should create new village-level or roadside businesses because “that’s what works in Africa”. People who encouraged that approach said that if we just got a few started then things would “go viral” and next thing you know they would be everywhere, like Starbucks maybe.

The problem is that just about nothing goes viral in Africa except biological viruses like HIV. The singular exception is cell phones. It’s hard to think of anything else that just took off. The roadside vendor selling fruit isn’t on the first step of a path that will lead to opening a Shop Rite supermarket, there isn’t a Pret a Manger chain in the future for the woman cooking food over a wood-fueled fire, the guy walking around with a display of 50 cheap sunglasses isn’t about to challenge Sunglass Hut any time soon.

For us the issue is that we want to make a serious difference to transportation needs and those needs are vast. Our guess is that there is something between 5 and 50 million bikes in sub-Saharan Africa (it is impossible to get a good number), almost every one made in China and every one of inappropriate design and very poor quality. A bike is something that is assumed to break and need constant repair. We want to make good quality bikes designed for the needs of the rural poor and don’t need repair as often.

Most important is that we want to make them at a scale comparable to the needs – millions. That can’t be done on the side of the road or in village settings. Bike building won’t go viral. It needs a factory and now there is one in Kumasi, Ghana.

The whole story is too long to tell here, but thanks to a partnership between the Millennium Cities Initiative at Columbia University, The Bamboo Bike Studio in Brooklyn, New York and a Ghanaian investor, a factory is taking shape that has the potential to produce perhaps 10,000 bikes a year all made locally. That’s not millions but it is a lot closer than what can be done on the side of a road and it has a chance of meeting some significant part of the transportation needs in West Africa.  

We haven’t found the Rosetta stone for scale-up. You can’t scale-up latrines this way. But we have kept a clear focus on the size of the problem from the very start and not been tempted into the much easier path of making a few bikes in a few places, taking pictures of ourselves in Africa, and achieving little more than making ourselves feel virtuous.

Useful links

African Economic Outlook

China in Africa: Debunking myths and debating truths

Linda Richter of South Africa’s Human Sciences Research Council and the Global Fund to Fight AIDS, Tuberculosis and Malaria speaks out against AIDS orphan tourism in this post

Microcredit: Borrowing freely

 

International Network of Alternative Financial Institutions meeting, Benin, 2007

Today’s post is from Mark Hannam, Chair of Fair Finance, a London based micro lender.   His writing is published here.

What’s gone wrong with microcredit? asked Brian Keeley on this blog last month, in response to the growing furore in India and Bangladesh surrounding the activities of micro finance institution.  Muhammad Yunus and the Grameen Bank are under attack from politicians in Bangladesh.  In turn, Professor Yunus has become more vocal in his criticism of commercial micro finance institutions, although the commercial firms continue to enjoy the support of a number of articulate and influential commentators.

It was always likely – and desirable – that microfinance would lose some of its lustre.  It never was the easy solution to global poverty that some of it cheerleaders claimed.  Nor has the discussion around the impact of microfinance been helped by the simplistic characterisation of charitable microfinance  as “good” and commercial microfinance as “bad”.   Good practice is good and bad practice is bad, irrespective of the financial structure of the company. 

Less attention has been paid to what might be called the political economy of microfinance.  What impact have micro finance institutions had on economic relationships in the communities in which they operate, with particular reference to the distribution of power?  Might the current crop of anti-microfinance stories have more to do with fear of changes to the power structure than with the level of interest rate charges?

Back in 1942, the American sociologist C Wright Mills wrote* that, “Not violence, but credit may be a rather ultimate seat of control within modern societies”.  Given the central role of credit in a modern economy, whether this be a Western urban economy or an Asian rural economy, it is not surprising that the control of credit matters both to borrowers and to lenders. 

Where credit is freely available, borrowing can be a purely commercial transaction.  In this case the cost of credit (the interest rate) and the service provided by the lender (the way the borrower is treated) are the two most important consideration.  Borrowers choose from whom to borrow based on the quality of service provided and the cost paid for the service.  If they don’t like the price or the service they can go elsewhere.

Where credit is not freely available, borrowing is often connected to a wider range of activities that are determined by the traditional social structures.  Wealthy families control the flow of money to their clients who, in return, are expected to do more than pay back capital with interest.  Client communities, which might include extended families or, in some cases, whole villages, are expected to work for their patrons and to vote for them at election time. 

Recent fiction by Daniyal Mueenuddin and Aravind Adiga capture the complexities of the power structures of these client communities and document the corrosive impact that they have on the lives of the poor.    In such communities the very idea of providing credit on a purely commercial basis is a direct challenge to the political status quo.

In many parts of the world quasi-feudal relationships between rich landlords and poor clients remain in place.  These social structures are also paternalistic, with women forced mostly into subordinate roles in education, in work and in politics.   It is in communities such as these that microfinance has had a revolutionary impact: credit is now available on purely commercial terms, without regard to traditional social obligations and gender roles.  Micro finance institutions are offering the poor a chance to borrow freely: they pay interest on their loans but that is the only price that they pay. 

Who has most to lose from the growth of microfinance?  The illegal loan-sharks for sure; poorly run state banks too; and, of course, those who benefit from political systems built on patronage, corruption, the buying of votes and the preservation of a culture of dependency. 

Today, micro finance institutions are under attack from members of the political elite in India and Bangladesh.  The only surprise is that it has taken so long for these reactionaries to start fighting back.   

* C Wright Mills, Power, Politics and People, p. 46, Oxford University Press, 1963.

Useful links

 OECD work on poverty reduction

 The OECD Development Centre

 OECD work on India

 The OECD Social Institutions and Gender Index (SIGI)

 Atlas of Gender and Development  

Money alone won’t make Europe innovative

In today’s post, Andrew Wyckoff, Director of Science, Technology and Industry at the OECD, looks at the deep structural changes Europe needs to consider if it’s to keep up in innovation.

 “Innovation” is one of the buzzwords of the moment, as this blog noted last week. That makes sense: Post-recession economies need a kick-start, and bright new ideas in science and technology could give them just that. Indeed, compared to labour or monetary policy, innovation’s role as an economic driver is probably underappreciated.

But if we think of innovation as just a buzzword, nothing much will change. Simply setting targets for increased research and development (R&D) spending won’t achieve results unless they’re accompanied by deep structural changes in our economies. 

Take the European Union, which lags behind the United States in R&D  and is in danger of being overtaken by countries like China, India and Brazil. The EU has set a target of increasing R&D investment to 3% of GDP, and has devised its own innovation strategy, Innovation Union. But if Europe is to achieve its innovation goals it will need to take action in areas that people may not typically associate with R&D – the financial sector, labour markets, competition policy and so on.

For example, Europe will need to ensure high-risk capital is available to entrepreneurs. And – if it’s to engage significant numbers of scientists and engineers to do all that R&D – it will need to think about its approach to education, training and even migration policy. It will also need to go further achieve a real internal market: The competitive forces that would come with that would strengthen the innovation performance of all EU countries.

The size of its internal market – more than 300 million people – is one factor in the US’s strong track record in innovation. Another is the fact that much of its research is geographically concentrated. EU countries do, in fact, produce lots of good research, but too much of it is fragmented.

By contrast, in the US, seven states account for nearly half of all R&D performed: California alone conducts 21% of the national total, or about $77 billion (€57 billion) – more than Germany and about twice as much as the United Kingdom. As a consequence, innovators with good ideas frequently leave Europe for the US where they can perfect their ideas, translate them into innovations and launch their products into that huge, single US market.

Europe already has most of the right elements of a successful innovation system that will drive growth, but these need to be joined-up across the Union. This means accepting that in the short-term some parts of Europe will advance faster as hubs of innovation than others. There may also need to be a greater focus on joint research, which could create economies of scale and scope. Changes such as these need to come quickly – Europe cannot afford to waste any more time.

Useful links

OECD work on innovation

OECD Innovation Strategy

OECD Science, Technology and Industry Directorate

In this video, Andrew Wyckoff talks about innovation:

Green growth strategies: a framework for the future, and the present

Today is the second day of the OECD Green Growth Strategy Workshop. We asked Nathalie Girouard, the Green Growth Strategy Co-ordinator, for her views on some of the topics being discussed.

What is a green growth strategy and why do we need one?

Nathalie Girouard: The aim of a green growth strategy is to provide a clear framework for how countries can achieve economic growth and development while at the same time preventing costly environmental degradation, climate change and inefficient use of natural resources.

We need green growth because risks to development are rising as growth continues to erode natural capital. This is occurring more rapidly in the developing world, but much of the demand driving it is in the developed world. These tensions may undermine future growth prospects for at least two reasons.First, it’s becoming increasingly costly to substitute physical capital for natural capital, for instance as fish become rarer, you need more sophisticated boats to catch them.Second, change doesn’t necessarily follow a smooth, foreseeable trajectory. To stay with fishing, some fish stocks have suddenly disappeared after declining only slowly for years.So if we want to make sure that the progress in living standards we’ve seen these past fifty years doesn’t grind to a halt, we have to find new ways of producing and consuming things. And even redefining what we mean by progress and how we measure it.

But we can’t just start from scratch. Changing current patterns of growth, consumer habits, technology, and infrastructure is a long-term project and we’ll have to live with the consequences of past decisions for some time. This “path dependency” may continue to exacerbate systemic environmental risks even after basic issues such as incentives have been addressed.

We have to be aware of possible path dependency in green growth strategies too. They should be flexible enough to take advantage of new technologies and unexpected opportunities for example, and be able to abandon one approach if a better one becomes available. 

How do you put a value on natural capital?

NG: Ideally, policies should try and mimic markets or provide price signals that are integrated into market decisions. The reason for this is that market-based instruments, such as environmentally-related taxes, tradable permits, and subsidies for reducing pollution, can provide the right incentives for broadly-based actions that reduce environmental damage with the least resource cost, and also promote and guide “green” innovation.Broadly speaking, we can’t say whether pricing is best achieved through permits or taxes. Permit systems tend to work well when the control of emissions can be done at the level of relatively large emitters. Taxation is likely to be more appropriate for small and diffuse sources of pollution such as households, farmers and small businesses.

How will we know that growth is green?

NG: For that, we need objective data and indicators to compare them. The OECD measurement framework explores four inter-related groups of indicators reflecting the environmental efficiency of production and consumption; the natural asset base; the environmental quality of life; and describing policy responses and economic opportunities.

Overall, we’ve identified around thirty possible indicators for monitoring green growth and defined a small set of “headline‟ indicators to track the most central elements of the green growth concept and represent a broader set of green growth issues.

The data have given us at least three indications already. First, environmental pressure is still growing, but each extra unit of growth now puts less pressure on the environment than previously. Second, there is some evidence of displacement of CO2 emissions from OECD to non-OECD countries. Third, the environmental goods and services industries accounts for a modest share of value-added and employment.

How is green growth different from sustainable development?

NG: Sustainable development represents a grand paradigm linking economy, society and environment, whereas a green growth strategy proposes an a policy framework. In that sense, green growth is more concrete. The principles of sustainable development reflect long-term aspirations, while green growth combines efforts to exploit opportunities to shape a more robust economic recovery in the short-term with promoting new, greener sources of growth over the longer-term.

Importantly, green growth policies highlight the complementarities between economic and environmental challenges to identify the best conditions for growth. But there’s no conflict between the two: a green growth strategy contributes to sustainable development by providing an actionable policy framework to generate these conditions.

Useful links

OECD work on green growth