by Alex Evans | Mar 12, 2008 | Climate and resource scarcity, Economics and development
As if to prove the point I made back in January about Ban being the ‘scarcity SG’, given his interest in climate change and water scarcity, here’s a piece of his on food prices from the Washington Post today. What he thinks needs to be done:
First, we must meet urgent humanitarian needs. This year, the World Food Program plans to feed 73 million people globally, including as many as 3 million people each day in Darfur. To do so, the program requires an additional $500 million simply to cover the rise in food costs. (Note: 80 percent of the agency’s purchases are made in the developing world.)
Second, we must strengthen U.N. programs to help developing countries deal with hunger. This must include support for safety-net programs to provide social protection, in the face of urgent need, while working on longer-term solutions. We also need to develop early-warning systems to reduce the impact of disasters. School meals — at a cost of less than 25 cents a day — can be a particularly powerful tool.
Third, we must deal with the increasing consequences of weather-related shocks to local agriculture, as well as the long-term consequences of climate change — for example, by building drought and flood defense systems that can help food-insecure communities cope and adapt.
Last, we must boost agricultural production. World Bank President Robert Zoellick has rightly noted that there is no reason Africa can’t experience a “green revolution” of the sort that transformed Southeast Asia in previous decades. U.N. agencies such as the Food and Agriculture Organization and the International Fund for Agricultural Development are working with the African Union and others to do just this, introducing vital science and technologies that offer permanent solutions for hunger.
by Alex Evans | Mar 12, 2008 | Climate and resource scarcity, Economics and development, Global system
That’s the headline conclusion of an IPS analysis piece by John Vandaele. Average GDP growth in developing countries today is 7 per cent, compared to 3 per cent for developed countries; and even per capita income grew faster in South than North between 2003 and 2007 (old news in East and South Asia, but a big shift in Latin America and Asia). And whereas in 1980 developed country GDP was 23 times higher than in developing countries, it was 18 times higher in 2007. Vandaele comments:
East and South Asia are almost exclusively responsible for this. For Africa, Latin America and the so-called transition economies (former communist countries), the relative gap is much wider today then in 1980. Nevertheless the last five years show a generalised improvement in the South. More and more, South-South relations play a role in the world’s economy. India and China thrive because of their industrial and services success, but their boom drives up commodity prices, and so benefits even quite weak economies in Africa and Latin America. South-South interaction makes globalisation a tide that lifts almost all boats.
But, he goes on, “inside most countries, income inequality is on the rise” – faster in developing than developed countries, and fastest of all in China.
Between 2001 and 2003 the Chinese economy grew 10 percent each year, but the 10 percent bottom earners lost 2.5 percent in income, according to the World Bank. Official figures show that the difference between the top 20 percent and the bottom 20 percent grew 40 percent over the last three years.
(more…)
by Jules Evans | Mar 11, 2008 | Global system
Dark times in western markets. The financial press at the moment reads like a particularly gloomy prophesy from the Middle Ages. This from Euroweek:
Undreamt of volatility in dollar swap spreads…Debt professionals watched in disbelief as dollar swap spreads shot out to their widest level in years. ‘Now the world is definitely coming to an end, right? It’s been nuts, just nuts’, said a stunned swaps dealer on Thursday in New York.
The surge in levels was so savage that some onlookers suggested it presaged the failure of a major US financial institution…Citigroup has taken a terrible beating through subprime, and its failure, or that of a big bank like it, is whispered as a possibility in the corridors of Wall Street.
The market was also upset by the news from Ambac, the troubled monoline bond insurer. It’s not getting a bailout from the banks after all, but intends to raise $1.5 bn of new capital in the stock market. If Ambac is downgraded, over $1 trillion of securities it has insured face a rating downgrade as well, which could spark a vast bond firesale and consequent losses for banks holding that paper.
Mortgage bonds are screwed too, as are hedge funds who own lots of mortgage bonds, including the Carlyle Group’s hedge fund, Carlyle Capital, which owned several billion dollars’ worth of mortgage bonds, and which now appears to be heading for default. And who is the biggest investor in Carlyle Capital? Citigroup.
Meanwhile, in other markets, things are looking fantastic. The IPO of China Railways managed to attract $68 billion in Chinese retail orders. $68 billion! The Middle East is also completely flush with cash. Russia is embarking on a $1 trillion infrastructure renovation programme.
And these investors are now buying up Wall Street bit by bit – Credit Suisse has sold a big stake in itself to Qatar’s sovereign wealth fund, while Citigroup is being propped up by other big Middle East investors at the moment.
This may not be enough to save it though. Even they think it might go down without US government support. This from Dow Jones last week:
Mideast sovereign wealth funds may fail to save troubled U.S. banking giant Citigroup unless more cash is pumped into the lender, the head of a $13 billion Dubai-owned investment firm said Tuesday.
Sameer Al Ansari, Chief Executive of Dubai International Capital told delegates at a private equity conference that it will take more than the combined efforts of the Abu Dhabi Investment Authority, the Kuwait Investment Authority and Saudi investor Prince Alwaleed bin Talal to save the bank.
“It’s going to take more than that to rescue Citi,” Ansari said. He added that more write downs are expected and that Gulf investors would be required to bolster Citi.
We’re seeing a major shift in the balance of power. Just 15 years ago, western financial institutions like the IMF, the US Treasury and Citigroup called the shots in emerging markets, and emerging market countries had to go to them on their best behaviour, like Oliver Twist saying ‘please sir, could I have some more!’.
Now, as one banker from the beleagured UBS told me today, ‘these developing countries don’t need us anymore’. No, I replied. They don’t need you…they own you.
by Alex Evans | Mar 7, 2008 | Global system
Lots of worries about a very bumpy day ahead on the US markets. Nouriel Roubini reckons that the US is already on steps 10-12 of his 12-step financial meltdown sequence. As the FT’s Gillian Tett puts it,
The western financial system is caught in a trap. On the one hand, there is an urgent need for clearing prices to be established for impaired assets to restore confidence; on the other hand, if this is done in a mark-to-market world, there is a risk that some banks will run out of capital. Policymakers are in the unenviable position of knowing almost any step they take risks denting sentiment further.
Meanwhile, FT investment editor John Authers’s broadcast on FT.com yesterday is not exactly cheery either:
Welcome from New York, where a lot of people are very scared … On face value, what the markets are telling us is that the US is headed for absolute disaster.
Commodities are continuing to go bananas as the dollar weaken. While the greenback is at a record low against the euro, crude is close to $106 a barrel (an all time high, needless to say), and gold still sticking near its record high of $991.90 a troy ounce. But the thing to watch this morning is the US monthly employment data, due in about one hour’s time (1.30pm GMT); Roubini reckons it will contain some very unpleasant surprises…
Update: yep, it’s a lot worse than expected: the biggest monthly decline in jobs for almost five years (63,000 non-agriculural jobs lost last month, compared to market expectations of a rise of between 25,000 and 40,000). Now let’s see how that goes down on an already very jittery stock market – which opens in NY in about half an hour.
by Alex Evans | Mar 5, 2008 | Africa, Climate and resource scarcity, Economics and development
“If you see people throwing stones, it means if they had guns, they would have been shooting”, observes Frederick, an economics grad who drives a motorcycle taxi in Douala, Cameroon.
The FT’s Matthew Green explains:
Only a few crumbs were left on the counter at the Boulangerie du Rail delicatessen in Douala after looters swept the shelves of cake, croissants and champagne… “People are hungry, they have nothing to eat,” said Felix Djoyo, the manager, who had locked himself behind a metal door while shanty dwellers ransacked his bottles of Bordeaux.
The crisis in Cameroon might have generated few headlines abroad, but the violence shows how soaring oil and food prices on global markets are threatening the patronage systems propping up some of Africa’s longest-serving leaders. Protests linked to surging inflation have broken out in Guinea and Burkina Faso in recent months, where presidents have ruled for more than two decades. Niger, Ghana and Senegal have also seen demonstrations …
The government has agreed to a small reduction in fuel prices to placate protesters, saying it cannot afford the kinds of subsidies needed to shield the economy from global market forces. But many residents blame Mr Biya for the hardship, saying years of venal rule have skewed the economy to favour a tiny elite.
So, another point to add to the growing list of what rising food and energy prices mean for Africa: patronage systems come under increasing stress in conditions of scarcity. Look at Kenya. People at the tops of agencies are acutely aware of the problem – DFID’s Douglas Alexander and the World Bank’s Bob Zoellick both returned from Davos fired up about the political impacts of scarcity issues, for instance. Some people in country offices get it, too.
But the underlying problem is still that many donor agencies’ culture is all about disbursing cash – rather than having a really sophisticated analysis of endogenous drivers of change and a theory of influence to go with it. Neither the old problem of patronage nor the newer problem of scarcity issues is really that well understood in donor agency cultures. We’d better hope they get up to speed pretty fast…
