The long and short of my hair

Me, 2007

Students at my university are rather amused at the passport photo to the right, which hints at my long hair in 2007. I ask them “what’s so interesting?” but they don’t have much of an answer. I’m guessing that they’re reacting to the difference between then and now (my short hair is not more salt than pepper), but, I think there’s also something of a “whoa, crazy” element to guys with long hair — or maybe economists with long hair?

That reminds me of one of my favorite long-hair scenes: I was in Virginia (the rural side) for a summer school in 2005, and we grad students were climbing the stairs to the bar/pool hall when a guy yelled “hey, where you going hippie?” in my direction. Without a pause, my philosopher friend from Quebec said “he’s no hippie, he’s an economist!” Take that, non-sequitur!

Anyways, back to hair, the long and short…

I had normal hair for most of my life. The first time I got radical was after returning from my post-university European travels, where I merely trimmed my hair at the neck, thereby allowing quite the “fullness” to develop. At that time, I was under a lot of stress (long story), which I escaped by changing job, home and girlfriend. I decided to travel the world for five years, and that kinda fuck-it led to my Halloween mohawk. My “as loud-as-possible” style was popular with the guys on the shop floor (they were Vietnam vets recovering from drugs, alcohol and other issues). “Hey man,” one said, “I used to have hair like that.”

Oct 1994: Nic (left) and Mike (right). Mike died of HIV/Aids a few years later

From that “base,” my next step was obvious: grow my hair as a clock during my travels.

As anyone will tell you, there’s an “ugly” phase of growing out your hair, where it’s too long to manage but too short to tie back. That stage (and many others) don’t matter when you’re traveling and meeting new people every day, so my transformation was just my private source of amusement (some people wouldn’t recognize me if we met after too many “hair days”). A few years later, I had a mane:

Me and Mike, with a dodgy Somali guy (he tried to “sell us” to his friends) in Yemen, July 1997

Long hair seemed to fit better in Africa, where people — locals and visitors — tried many looks. Long-term travelers like me (over two years in at that point) often carried a “look” due to saving money, carrying a few changes of clothes, and embracing no social norm. Our “culture” was whatever we focussed on.

I also thought long hair changed the way how people saw me and helped  them relax — “where you going, hippie?” types excepted.  Short hair says “responsible” or “stressed;” really short hair says “military/CIA,” so that’s a bad sign, right?

I wasn’t totally wrong, but long hair is a pain, and — after yet another day of trying to look through my mop (while driving around the US, on a “trip-inside-the-trip” visit to the US in 1998), I cut it short.

And then we (I was with a girlfriend now) went back “out there,” on the way to Asia, where I started to cut shave my hair, which was handy for staying cooler, cleaner, and fitting in with the locals, like this guy:

Mar 1999: This Burmese monk shaved my head (“$1, USA only”).

I kept the short hair for the rest of the trip and until I started graduate school in 2002. Then, I decided to “start the clock” for the duration of my PhD studies, so I didn’t cut my hair for 6 years and then a few years after. Ok, I did trim the ends that split due to my swimming. (I was using heaps of conditioner, but chlorine is nasty.)

2007: Me and my “long lost” half brother Gary.

In 2009, I went short with a “fancy” (=$90) haircut in San Francisco. While living in the Netherlands, I adopted the national gel-habit for a few years, but then went to “shorter doesn’t need gel,” where I’ve been ever since.

I like my short hair for its low maintenance and tidyness. I’m not sure if it scares people (CIA!), but long hair also isn’t a “peace weapon” so I’ll just stick with the smile.

My one-handed conclusion is chose your hair to suit your mood but don’t assume your hair will change the way people see you.

Interesting stuff

  1. Listen: What Is the Future of College — and Does It Have Room for Men?
  2. Read: Fraud and computer misuse made up 60% of all estimated crimes in 2021 in the UK. (The police are not prepared.)
  3. Listen: Coaching people from financial panic to stability
  4. Listen: Anne Clarke Wolff on the Wages of Sexism (on Wall Street)
  5. Read: Spencer Harris (a guest on Jive talking) has written a really good blog post explaining how blockchain/encryption can help improve water management (by allowing a piece of “private information” to be shown publicly).
  6. Food insecurity is on the rise, and it’s so important (=hungry migrants, wars, etc.) that I am leaving the rest of this post to this article from The Economist:

A world grain shortage puts tens of millions at risk

War, extreme weather and export controls are all contributing

May 19th 2022

In 2001 olena nazarenko’s father started farming in Lukashivka, a small village about 100km north of Kyiv, with three cows and a horse called Rosa (”Dew” in Ukrainian). In 2020 Mrs Nazarenko and her husband Andriy inherited the 400-hectare (1,000-acre) farm, now named Rosa after that founding horse. Early this year they took out a substantial loan to cover fertiliser for the coming spring-wheat crop.

On March 9th, well before they had planted any, Russian troops occupied the village and the couple fled. On March 31st, when the invaders had turned tail, they returned. It was a harsh homecoming. The main farm building was shelled out. Three tractors had been vandalised and their diesel drained. Of their 117 cows, 42 were dead and the rest were roaming fields littered with debris, mines, mortar shells, unexploded cluster bombs and burnt-out trucks. Fifty tonnes of wheat, sunflower seed and rye had been destroyed, costing them tens of thousands of dollars. “We have no money left,” says Mrs Nazarenko. “We have nothing to pay salaries and are struggling to pay interest on the loan.”

Lukashivka and the villages around it have seen thousands of tonnes of grain destroyed or left to rot; much the same is true throughout the country’s war zones. Russian forces have targeted grain elevators and fertiliser plants, leaving the infrastructure in pieces. The share of last year’s grain harvest still in the country—about 25m tonnes of grain, a lot of it maize (corn)—is stuck there, because Odessa’s ports, through which 98% of the grain exports normally pass, are blockaded. Getting the grain to alternative ports in Romania, Bulgaria and the Baltics is hard. “Before the war Ukraine exported about 5m tonnes of grain a month,” says Mykola Solskiy, the minister for agriculture. “Last month we managed to get 1.1m tonnes out.”

Vikas Kumar Singh, a farmer in Dharauli, a village in Uttar Pradesh about 700km south-east of Delhi, has no unexploded ordnance to worry about. But his March, too, was troubled. “It got too hot too early,” he explains, picking up a handful of recently harvested wheat from a pile in his shed with a dejected look on his face. “See, the grains are thinner than they’re supposed to be.” After being battered by severe winds and hail in February, the Chandauli district in which Dharauli sits suffered intense and unseasonable heat, shrivelling the ears of wheat when they should have been burgeoning. The same happened across most of the country. “Things are much worse in Maharashtra,” says Awadh Bihari Singh, who farms nearby.

Mr Vikas Singh reckons that his yield is down by about a quarter compared with last year’s. The district as a whole has harvested around a fifth less wheat than in a normal year, reckons Mr Awadh Singh. Before the heatwave, when a bumper harvest had seemed on the cards, the government had looked forward to the rupee being strengthened by grain exports. When expectations of the harvest’s size tumbled it flip-flopped. Accelerating exports encouraged by high prices abroad raised worries of a shortage at home.

On May 13th, the Indian government imposed an export ban on wheat, though it says it will make exceptions for specific countries in need; on May 15th a 500,000-tonne deal with Egypt was reported. There are currently 26 countries implementing severe restrictions on food exports. In most cases they are outright bans. The various measures cover 15% of the calories traded worldwide.

It takes a world to feed a world, and the way the world does it is through trade. By some estimates four-fifths of the global population live in countries which are net importers of food. More than 20% of the world’s calories, and more than 18% of its grain, crosses at least one border on the journey from plough to plate.

At the beginning of 2022 the world-spanning system which makes this possible was already in a ropey state. The number of people with access to food so poor that their lives or livelihoods were at immediate risk had risen from 108m to 193m over the past five years, according to the un’s World Food Programme (wfp). A lot of that near-doubling of “acute food insecurity” was due to the covid-19 pandemic, which reduced incomes and disrupted both farm work and supply chains; a good bit more was down to rising prices of energy and shipping as the effects of the pandemic wore off. Things were made worse by swine flu in China and a series of bad harvests in exporting countries, some of which were due to La Niña conditions that began in the middle of 2020. La Niña is a recurrent pattern of currents and wind patterns in and over the equatorial Pacific which has worldwide effects, just as its also-troublesome counterpart El Niño does.

Global grain stocks were, admittedly, quite high. But they were mostly in the hands of well-off importing nations, not those of exporters keen to sell them or poor importers likely to need them. “If we do not address the situation immediately,” David Beasley, who runs the wfp, told the Munich Security Conference in February, “over the next nine months we will see famine, we will see destabilisation of nations and we will see mass migration.”

Just six days after he spoke those words Russia rammed a rifle barrel into the already creaking machinery. In 2021 Russia and Ukraine were the world’s first and fifth biggest exporters of wheat, shipping 39m tonnes and 17m tonnes respectively—28% of the world market. They also grow a lot of grain used to feed animals, such as maize and barley, and are the number one (Ukraine) and number two (Russia) producers of sunflower seeds, which means they have 11.5% of the vegetable-oil market. All told, they provide almost an eighth of the calories traded worldwide.

Ukrainian food exports were promptly throttled by the war; Russian ones were dented by the indirect effects of sanctions. Grain prices shot up. Having fallen back a little as the shock wore off, they are now on the rise again. On May 16th, the first day of trading after India imposed its restrictions, wheat prices in Chicago, the global benchmark, rose by 6%; on May 18th they were 39% higher than they were when Russia launched its invasion.

America’s department of agriculture (usda) reckons that war and bad weather mean global wheat production is likely to fall for the first time in four years, which is bad. What is worse is that wheat is not really traded globally. Buyers often have long-standing bilateral relationships with exporters and set channels of trade which make switching suppliers hard. According to the un’s Food and Agriculture Organisation (fao) nearly 50 countries depend on either Russia or Ukraine, or both, for more than 30% of their wheat imports; for 26 of them the figure is over 50%.

That it should come to this

East Asian countries which import a lot of Black Sea wheat, such as Indonesia, can fairly easily switch to rice. For most other big importers cutting off wheat would involve drastic changes in diet. Many countries in the Persian Gulf and north Africa eat at least twice as much bread per person as gluten-loving Americans. Some grain can be diverted from other markets, at the right price, and European farming interests say that governments are coming to them actively seeking deals: “Everything is on the table”, says a big French producer.

Still, shortfalls seem certain. The wfp, on which more than 115m people depend, and last year got 50% of its wheat from Ukraine, says the crisis could drive 47m more people into acute food insecurity.

The war is also having effects on the things farmers need to grow food in the first place—and thus on how much they will plant in the seasons to come. Farms run on fuel. With Russia the world’s biggest natural-gas exporter and its second-biggest oil exporter, fuel prices have risen. Farms also need fertiliser. Of the three main types of industrial fertiliser Russia is the biggest exporter in one market (nitrogen-based fertilisers, the only expensive ingredient of which is natural gas), the second biggest in another (potash, which provides potassium) and the third in the third (phosphates). Pesticides and herbicides, often produced from hydrocarbons, have also gone up in price.

There is a lengthening shadow over another of the farmers’ prerequisites, too—one which predates the war and will outlast it. Good harvests need good, or at least moderate, weather. They are not well served by extremes. But climate change means extremes are increasingly what they get. Analysis by Britain’s Met Office shows that global warming has made an extreme Indian heatwave like this year’s 100 times more likely.

And global markets mean the effects of these extremes can add up in a way that goes beyond the globally correlated patterns of disruption brought on by the see-sawing of La Niña and El Niño. The deluge which forced Chinese farmers to delay planting winter wheat last year, thus reducing this year’s expected harvest, and India’s subsequent stem-shrivelling heat may not have any direct connection. But when the probability of extremes goes up worldwide, so too does the probability of multiple regions suffering from one sort of extreme or another at the same time, or in the same time frame.

And time frames matter. Although many commodities can be produced year round, crops depend on the seasons. Miss the window for certain crucial steps, such as planting, fertilising or harvesting, and much of a year’s work can be lost in a matter of weeks.

This is the worry when it comes to Ukraine’s winter wheat. Sown last year, it will be ready for harvest come June. Mr Solskiy expects this year’s harvest to be 20-30% smaller than expected. Roughly half the winter-wheat fields are in the part-occupied, part-fought-over south-east. Many fields are scattered with explosives. Infrastructure has been destroyed. Water, power and fuel are sure to be in short supply.

Yields in the fields which do get harvested will be down by 10%, according to the fao: fertiliser applications have been missed; pests and diseases have run amok. And as long as Odessa is blockaded, the harvest will have no route to market. Nor can it be stored away. The blockade means that the country’s silos are still more than half full with last year’s crop. Unless exports through the Black Sea start again millions of tonnes could simply rot.

Things rank and gross in nature

The crops now nodding their heads in Russian fields should fare better. International sanctions do not target food exports directly, and though they make the trade more difficult, ways through and around the problems they create can be contrived. Though exports have dropped by a few million tonnes, Russia has managed to sell more grain since the war began than experts expected, with Egypt, Iran, Syria and Turkey the main buyers. When this summer’s harvest is brought home most of it will get to market. But that will not set right the shortfall in Ukraine.

Nor is the rest of the world well placed to make good the lack. China has warned that last year’s floods mean its winter-wheat crop could be “the worst in history”. Much of America’s grain belt is undergoing a drought as bad as the one which it saw in 2012-13. Around 40% of the wheat growing in America’s parched plains was recently deemed in poor or very poor condition (15-20% is average). On May 12th the usda predicted that the country’s production of hard red winter wheat, the main kind grown in the plains, would fall by 21% compared with 2021. Europe is getting too little rain at a point in the season when wheat is most vulnerable to dryness. A little late rain may be enough to revive the crops. But it seems certain that production will come up alarmingly short this year.

There are still stocks in exporting countries that could make up some of the difference. Nick Schaefer, who works at a grain elevator in Rugby, North Dakota, says he sees 40 to 50 trucks a day dropping off grain to be loaded onto trains heading west. And he knows there’s more where that came from. “It seems like whenever they sold, [the price] keeps going higher. So definitely, what they’ve got left in the bin, they’re probably going to hold on, just to see what happens.”

Normally the farmers would have an incentive to run down stocks before the harvest, when prices typically drop. But this year that looks unlikely to hold. Futures markets expect wheat and maize prices to stay at today’s extortionate levels until mid-2023. Mr Solskiy says that it will be when the harvest fails to change things that the world will start to feel the true impact of the crisis.

“There is no room for any weather issue in the northern hemisphere this season,” says an executive at one of the world’s largest traders. While Ukraine’s output remains inaccessible, “every single tonne in the market will be needed,” says Michael Magdovitz of Rabobank, a Dutch lender. That tight coupling of supply and demand means that prices will be very volatile, too, moving on the slightest bit of news; further shocks could send them much higher.

What of harvests after that of this year’s winter wheat? In Ukraine and elsewhere a smaller wheat crop is also planted in the spring, along with other things. For Mr Nazarenko this meant first uprooting the aftermath of war. With a number of employees, friends and relatives he walked the fields, removing spent shell cases and some unexploded shells, marking unexploded mines, pulling a “Smerch” rocket from the mud in which it was entombed with a tractor. “It was scary, but we did not have a choice,” he says.

In the end, he managed to sow most of his fields, barring the one still taken up by burnt-out Russian trucks. That puts him ahead of many. Some lack seeds. Some must plant at night to avoid air raids. Some are planting potatoes for home consumption rather than grain for export. A recent survey by Ukraine’s agriculture ministry suggests 30-50% of the country’s spring-wheat fields could end up not being planted. Yields may also suffer. Fertiliser is not yet scarce but some may well be repurposed to make explosives; ammonium nitrate serves well in both offices. Diesel is twice the price it was before the war, and it is hard to get hold of even if you can pay. Pesticides look set to be scarce.

Grown by what it fed on

Russian farmers do not face the problems of bombing, but they too will be short of inputs. The country’s large farms, which specialise in supplying global markets with grain, require a lot of them. Last year Russia imported $870m-worth of pesticides and $410m-worth of seeds—mostly from the eu. Elusive bank financing, payment headaches and a lack of willing shippers are making such purchases much more difficult. Most big Western seed and chemicals companies have pulled out of Russia, or are in the process of doing so (Chinese ones have stayed). Some may return after the war ends, but some may stay away.

Fertiliser will not be in short supply for the Russians. But it will be in most other places. In 2021, 25 countries got more than 30% of their fertilisers from Russia. In Europe energy-security concerns are restricting the use of natural gas to make nitrogen-based fertiliser, so the continent will need to import more, adding extra demand to a market where the natural-gas price has already increased most manufacturers’ costs. Nigeria and Qatar, flush with natural gas, are opening new nitrogen plants; there also seems to be some room for increasing Canada’s potash production. But prices will stay high.

More costly energy and fertilisers drive up prices across all sorts of agriculture. The farmers in Chandauli say high prices for fertiliser, diesel and labour have pushed their costs up by 20-25% so far this year. And wheat prices have effects across the market, too. If the cost of a commodity goes up, consumers look for alternatives. That is why food-price inflation is being seen in commodities that are not directly affected by the war, says Seth Meyer, the usda’s chief economist. Indicators of price volatility compiled by the International Food Policy Research Institute in Washington, dc, are flashing bright red for all major grains—including, for the past couple of months, rice, for which there are currently no supply concerns.

Flat and unprofitable

This all serves to blunt a seemingly natural response to high grain prices: for farmers to grow more grain. When input prices go up more than the grain prices, farmers’ margins fall. Josef Schmidhuber of the fao reckons the price of cereals, and food more generally, as perceived by farmers—that is, taking into account the costs of inputs—reached a peak in March 2021. Since then they have fallen by 27%.

(220430) — JAMMU, April 30, 2022 (Xinhua) — Farmers harvest wheat on the outskirts of Jammu, the winter capital of India-controlled Kashmir, April 30, 2022. Recent heat wave have impacted on the yield of India’s wheat. (Str/Xinhua)
Rather than rushing to plant more grain because the sale price looks high, farmers are looking at switching to crops with lower input costs. In March a usda survey found many American growers intending to move from maize to soyabeans this season. Grain prices may yet climb higher, tempting farmers back in. But they are also likely to remain highly volatile, depriving growers of the certainty they need to plan a big expansion one year in advance.

If it is hard to increase supply, what about decreasing demand? In theory there are low-hanging fruit where crops are used to feed cars or cattle rather than people. Gro Intelligence, a data firm, calculates that the calories diverted by current biofuel production and new commitments could soon be equivalent to the yearly needs of 1.9bn people. Biofuel production has increased markedly in America, Brazil and Europe as the oil price has risen; expensive crude makes the sector more profitable. Repealing biofuel mandates could lessen the damage.

The amount of food eaten by animals is even more vast. Last year China imported a record 28m tonnes of maize—more than what Ukraine normally exports in a year—to feed its immense hog herd. About 40% of the wheat grown in the eu is eaten by cows. About a third of America’s maize is devoured by cattle. If the amount of such feed is reduced, though—or if, by using substitutes such as grass, maize stalks and silage, its energy content is lowered—the animals grow less, or more slowly, or both. That drives up the price of the end product. In the food-price crisis of 2007-08 changes to animal feed, together with culls and production cut-backs, caused meat and dairy prices to rocket.

No countries are immune to the effects of this crisis. Lamentably, people go hungry even in the richest economies. The countries hit worst, though, are poor ones, because poor people spend a greater share of their income on food. In most emerging markets food consumes something like a quarter of household budgets, as opposed to less than a fifth in advanced economies. In sub-Saharan Africa the figure is 40%. And grain makes up a larger part of those budgets than it does in richer places.

Many of these economies were in poor shape well before the food crisis hit. Across sub-Saharan Africa, output remains substantially below the level that they would have reached had pre-pandemic trends continued. The debt burdens of more than half of the region’s low-income economies are either judged to be unsustainable or may soon become so, according to the imf. Governments in such straits are poorly placed to help their citizens weather a food-price shock.

Reactions to higher food prices in rich countries are making things even harder. Food prices account for about 1.3 percentage points of America’s 8.3% inflation rate, and about 1.0 percentage points of the euro area’s 7.4% rate. They are thus one of the factors driving more aggressive monetary policies. The higher rich-world interest rates which ensue drag down currencies and tighten financial conditions in emerging economies. Falling currencies make food imports costlier still.

To bolster their currencies such countries need either to increase interest rates, to intervene with their often scant hard-currency reserves, or to do a bit of both. All the options come with costs that can exacerbate food insecurity. Putting up interest rates, as many have done over the past year, has in most cases merely slowed the pace of depreciation and has driven up the cost of credit—which hurts farmers, especially when inputs are expensive. Using up currency reserves, on the other hand, means they cannot be used to buy food. Choosing not to subsidise food and not to prop up the currency may preserve reserves, but it greatly increases the risks of social unrest.

It is possible to have the currency slide and to lose reserves at the same time. Egypt chose to allow the Egyptian pound to depreciate by 14% in March rather than run down its reserves to prop the currency up. Even so, it saw its hard-currency reserves drop by about 10%, to $37bn, from February to March, in part because, as the depreciating pound made it harder for people to buy food, the state was buying more for them. Turkey, too, has experienced both a drop in its reserves and in the value of its currency since the beginning of the year. Its inflation rate has surged to nearly 70%. Iran has experienced demonstrations of public anger since reducing grain subsidies. Trouble seems certain to spread.

The World Bank sees the war’s effects on trade and welfare as representing a reduction in global real income of about 0.74%, or $600bn. In low-income economies the figure rises to 1.0%—which given their low incomes represents only about $5bn. That sounds rather small. But the concentration of those losses in places wracked by hunger looks set to bring with it spectacularly disproportionate social, political and human damage.

Interesting stuff

  1. Read: Privacy experts warn data from period-tracking apps may soon be used against you
  2. Listen: A discussion with Eugene Linden, whose Fire and Flood: A People’s History of Climate Change from 1979 to the Present, lays out how successive US governments managed to delay action on climate change
  3. Read: People Are Dating All Wrong, According to Data Science
  4. Read: “Yes, counterfeiting is illegal, but the penalties are much lower than for drug-trafficking and other organised crime. It’s betting on a winning horse after the race has been run. The more brands spend on promotion, and the less, proportionally, on the physical product, the bigger the window of opportunity they leave open for counterfeiters.”
  5. Read: An excellent article on the vulnerabilities of (and intractable battles over) the Sacramento Delta. Here’s my 2009 paper on how to resolve them.
  6. Read: To understand why early cities thrived, look not to the temples of kings but to their subjects’ bustling neighbourhoods
  7. Listen: US women’s soccer gets equal pay. That’s almost as inspiring as this advertisement (yes, I’m promoting an advertisement) about their victories.
  8. Watch: Plastic Recycling is an Actual Scam (it was never meant to work)
  9. Listen: How to Make Democracy Work for Everyone, with Yascha Mounk
  10. Watch this (amazing!)

Drought in the Netherlands

Drought is relative. “Nobody ever says the Sahara is in drought” captures the difference between a permanently dry place and a wet place that’s receiving less rain than normal, like the Netherlands right now [EN article; NL article]. The figure below [source] shows the LACK of rain (so “more is worse”) in the Netherlands so far this year (black line), which is currently as bad as the 1976 record drought.

What are the consequences of drought? Besides the obvious ones (farmers cannot irrigate as much; ecosystems suffering), there are some “Dutch” consequences such as dikes drying out (leading to cracks, leaks and maybe failures), housing foundations rotting (as water levels drop, rot sets in), and more pollution on the streets and air (rain’s “cleaning” function on hold).

Long ago, I joked that I was “bringing California weather with me” (due to climate chaos) when I moved to the Netherlands. So far, my “plan” is working. Now I worry about wildfires.

My one-handed conclusion is that “wet” places suffer with less rain — and many will.

CR’s commodification of nature

Leander writes*

Costa Rica (CR) has long been celebrated as a trailblazer of sustainable development and successful ecosystem conservation. Their pioneering implementation of a national program for the payment for ecosystem services (PES) has received a lot of international attention. CR managed to reverse the deforestation that cost it up to half of it its original forest cover by 1987. As of 2020, its forest cover reached 60% with the PES program being said to play an essential role. Yet, the impact of the PES program on environmental conservation and economic development is not exactly clear.

In the second half of the 20th century, CR had some of the world’s highest deforestation rates, declining from 75% cover in the 1940s to 25% cover by 1995. CR introduced its PES program in 1997, called “Pago por Servicios Ambientales” (PSA). A PES program effectively is the economic evaluation of environmental or ecosystem services, such as carbon sequestration, and is a system of payment incentivizing landowners to conserve the existing biodiversity on their land instead of allowing other uses. The national government expanded the PSA as its popularity  increased, introducing payments for agroforestry to increase incomes of farmers, for example. More than 18,000 families benefitted from the PSA between 1997 and 2019.

However, while it seems like the PSA not only provided a steady income to thousands of families, but was the driving force behind CR’s reforestation success, evaluations of the programs impact do not show such clear results. So far there is no clear consensus on the impact of the PSA; some research shows no clear effect on forest conservation. Instead, other conservation policies, such as the ban on deforestation, are said to play a bigger role in CR’s progress.

Moreover, the PSA has been accused of suffering from unequal access to payments for environmental conservation. The program has been found to generally benefit large landowners and to exclude the rural poor from participation as a result of historical agrarian settlement patterns and the inability of the state to recognize certain property claims.

The PSA program has weaknesses and its impact on employment and economic development are unclear, but it has potential. If the authorities stay flexible and adaptive to changing circumstances and weaknesses are continuously corrected, then the PSA program can improve its efficiency and equity substantially. Upcoming expansions and improvements of the program, such as the Mixed Systems scheme aiming at small landowners and farmers give hope that the PSA might correct weaknesses such as the unequal access to the program’s benefits.

Bottom Line: Costa Rica’s Payment for Ecosystem Services program can boost environmental conservation and economic development if its weaknesses (such as unequal access) are addressed and the program can adapt to changing circumstances.

* Please help my Economic Growth & Development students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice :).

Interesting stuff

  1. The only good thing about Facebook” is… [narrow interest] groups? Maybe someone should tell them about usenet (now Google groups) or reddit? If you want to meet strangers with the same interests but don’t need to see your “friends,” then just use a groups-centric website (business opportunity)?
  2. Listen: Michael Lewis on public distrust and the biases of judges
  3. Read: An example of the “consumer-industrial complex” at work
  4. Read: Is “Historic Preservation” merely for protecting rich whites?
  5. Listen: Chris Blattman on war and where Ukraine may be going
  6. Read: Why don’t Americans understand climate change? Maybe because schools don’t really teach “earth science”?
  7. Listen: This podcast is so deeply interesting, as a reflection on different visions for the future. The “young person” on the panel (Hogan) is one of the smartest I’ve heard…

Labour and migration in Malaysia

Ashley writes*

On April 1st 2022, a Memorandum of Understanding was signed between the President of Indonesia, Joko Widodo, and the Prime Minister of Malaysia, Ismail Sabri Yaakob, committing to improving the safety and protection of Indonesian migrant workers in Malaysia. This agreement came about after several reports and complaints were filed on the abuse of migrant workers. At the same time, Malaysia is experiencing a shortage in foreign labour due to government measures to protect locals during the Covid-19 pandemic.

How can we make sense of the contradictions facing migrant workers in Malaysia? How do Malaysia’s migration policies affect labor?

It is estimated that there are two million legal migrant workers and two million undocumented migrant workers in Malaysia, most of them coming from Bangladesh and Indonesia. In total, they account for 15% of workers — a similar share to Indians who are the third largest ethnic group in Malaysia.

This is hardly surprising, given that migrant workers have always been an integral part of Malaysia’s economic development model, especially during its transition from lower to upper-middle income. During the colonial era, Chinese immigrants worked in the tin-mining industry, while indentured Indians from British India worked in agriculture and transport. These early migrant workers contributed directly to the development of industries, infrastructure and as a result, the economy of Malaya, and later assimilated themselves to become Malaysians.

Malaysia’s businesses are still heavily reliant on cheap migrant workers.

Migrant workers are subjected to abuse, discrimination, poor living conditions and other human rights violations. Many are forced to work off their debts resulting from trafficking, face risk of sudden termination, arrest or detention. Since they are also assimilating, it is important to help migrants integrate in harmony with the local population.

Bottom Line: In Malaysia, migrant workers are vital for economic development but their treatment is detrimental for social development. My research seeks to investigate active labour migration policies as a way of understanding this co-existing relationship between economic and social development in Malaysia.  

* Please help my Economic Growth & Development students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice :).

Why do Turkish brides want dollars?

Mimoza writes*

The tradition at Turkish weddings is to pin gold on the bride, in lieu of getting the newlyweds a present, as a way to help them start off their married life in prosperity. However, now due to the high inflation, couples prefer dollars to gold coins.

Turkey has been facing a financial crisis: the Turkish lira has fallen from 3.50 to the US dollar (May 2017) to 18 per dollar (Dec 2021), and inflation reached 68% in April, where it is expected to stay for some time. The COVID-19 pandemic has directly harmed income and employment by reducing travel to a country that relies on tourism for 4% of its GDP and almost 10% of employment.

The COVID pandemic has only been an issue for 18-24 months. President Reccep Tayyip Erdoğan’s counter-productive economic policies are older. His influence of the Central Bank overheated the Turkish economy. Excess growth and artificially low interest rates have spurred inflation and strained supplies of the lira: “Sometimes we cannot find money,” said a 29-year-old bike courier in Istanbul to the New York Times.

Traditional economic theory posits that a weak currency will stimulate foreign investment and exports, thereby producing economic growth. The case of Turkey, however, lines up with structuralist economic theory: inflation and devaluation have increased production costs and constrained economic growth. Turkey, for example, depends on imports of automobile parts and medicine so the devalued currency has raised costs and reduced exports and income.

Devaluation has not only reduced purchasing power for citizens but economic growth. Combined with a multitude of other deviations from orthodox economic policy (i.e., overuse of external financing, not regulating the exchange rate, etc.), the Turkish financial crisis harms the economy and increased political unrest.

Turkish brides must be hoping for enough dollars to keep the lights on.

Bottom line: The Turkish Central Bank needs to employ traditional economic remedies to their financial crisis, i.e., increasing interest rates to decrease liquidity and spending and support the lira. On a longer time horizon, Turkey needs to free its central bank from political interference, if it wants fiscal stability and economic prosperity.

* Please help my Economic Growth & Development students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice :).

50 years on: Rentier state theory

Hannah K writes*

Like many developing states, Gulf countries like Qatar, Saudi Arabia, and the United Arab Emirates (UAE) have largely resource-dependent economies. However, in contrast to other states, these countries have apparently managed to escape the negative effects of the resource curse (Hollo, 2013).

This blog post aims to provide some basic background information about Rentier State Theory (RST), which is crucial for understanding the Gulf state’s development trajectories. In short, the rentier state is a state that relies on “rents” or income from foreign individuals, governments or corporations in order to sustain its economy (Beblawi, 1987). Resource-rich nations often fall into this category as foreign companies are heavily involved in resource-extraction and export. In the second half of the twentieth century, three key academics reimagined the workings of the rentier state in the context of the Arab world: Hazem Beblawi, Giacomo, and Hossein Mahdavy. All of them predicted that, in the long run, the oil states would succumb to the pitfalls of the rentier state both politically and economically, since rentier states discourage productivity when they “buy” loyalty from citizens (Schliep, 2017).

To critically assess the role of RST in the development of the Gulf States, it is necessary to understand the theory’s main arguments. According to the literature, rentier states cannot diversify their economies. They remain reliant on oil and gas revenues to maintain political stability, and labour market imbalances further pose a big challenge to shift the economy away from natural resources (POMEPS, 2019). Labour market imbalances are exacerbated as societies become prone to a “rentier mentality,” which discourages citizens from taking an active role in political and economic life (Beblawi, 1987). Rentier states that are unable to develop or grow collapse into economic stagnation and political stability because they cannot appease their population (Schliep, 2017).

Now, almost fifty years later, how do the predictions hold up? Arguably, there are some missing elements of RST. The Gulf countries have seen sustained economic growth, but also unprecedented investment in key economic sectors for sustainable development. Somehow, they appear to have escaped the resource curse. Dubai is a prime example, as it has shifted the focus of the economy from rapidly depleting oil and gas exports to becoming a hub for international business, indicating an ability to diversify the economy (Hollo, 2013). These results seem to undermine the idea that political stability is rooted in buying loyalty.

Bottom line: Rentier State Theory simply falls short in explaining the current development trajectories of the Gulf States. There is clearly a more complex system in place that encourages long-term investment into the economy.

* Please help my Economic Growth & Development students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice :).

Unequal energy access in Ethiopia

Jacob writes*

Energy is an integral part of development, anywhere in the world. Research shows, that access to productive energy is crucial for economic growth, but also for education, health, and environmental protection. However, in many countries there are huge inequalities when it comes to access to sustainable and productive energy. In Ethiopia, among the rural population only 51% had access to energy, whereas for urban dwellers it is 93%. Strengthening and intensifying agriculture, the main source of revenue in the periphery, is however crucial for economies and demands an increase of productivity through energy access.

This is the goal of Energizing Development (EnDev), a developmental initiative driven mainly by the Dutch and German developmental agencies. Through market-based measures, it aims to increase both rural supply and demand in energy. In the project “Sustainable Energy for Smallholder Farmers (SEFFA)”, it tries to combat rural poverty and rural-urban energy inequality. Strengthening the private sector to supply better and cheaper products, as well as increasing the capability of customers to pay for installing solar power mini-grids, are on top of the agenda. This is in addition to the social mission EnDev undertakes, which includes empowering women and youth entrepreneurs.

Sounds great, right? However, some aspects of the project are not entirely clear. One of the main aspects of SEFFA is the provision of energy systems through private sector empowerment. But it is opaque how the state is involved in the actual delivery of the project in Ethiopia. Leaving the state on the side, and not increasing its capacity to run similar projects in the future, is dangerous and can in the worst cases even increase inequality in the long run. Additionally, there is low awareness among the rural population about ongoing energy access programs. Other research has shown that empowering marginalized groups among the rural population, most notably women, is crucial for the development of the agricultural sector in rural areas. Increasing their stake in a participatory program is therefore crucial. EnDev’s “target” of having 25% of project beneficiaries being women, does not necessarily ensure active participation, nor does it include accountability mechanisms. As Ethiopia’s economic output has more than tripled in recent decades, it becomes crucial to ensure the equitable provision of services, not only for the duration of ongoing projects but in the form of permanent systemic improvements.

Bottom line: The provision of energy access, which is crucial to development, is unequally distributed in many regions of the world. To combat this inequality and be responsive to social challenges, such as gender inequality, on the long term developmental agencies are required to bring in the state and strengthen capabilities, while identifying the most effective solutions.

* Please help my Economic Growth & Development students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice :).