Water Scarcity and Stella Artois

Although access to clean drinking water isn’t of concern for most of the developed world, there are currently 2.1 billion people (or just over a quarter of the world’s population) that lack access to safely managed drinking water services. Of these 2.1 billion people, 844 million do not have access to any basic drinking water service (World Bank). What results from this are hundreds of thousands of deaths every year that could’ve been easily prevented through the successful efficient allocation of this basic resource. Not only this, but not having easily obtainable clean water negatively impacts key features of developing countries including agriculture, manufacturing, and job creation.

LOS ANGELES, CA – DECEMBER 14: Actor Matt Damon on set on December 14, 2016 in Los Angeles, California. (Photo by Christopher Polk/Getty Images)

As a result, the lack of a consistent clean water supply is greatly impacting developing countries’ abilities to facilitate economic growth. Besides directly effecting the health of both a nation’s citizens and industries that rely on clean water, this resource’s scarcity can lead to much more detrimental and long-lasting effects on a developing nation. Education, for instance, has been positively associated with access to clean water as many families without easy access to clean water are forced to send their children on multi-hour journeys everyday just to find the valuable resource. What this then results in is a dramatic decrease in the population of children actively receiving education in these water-scarce areas. It is for this reason that many socially-conscious companies, like Stella Artois, are actively attempting to aid the developing nations in which this issue is prevalent.

In Sunday’s Super Bowl, viewers witnessed a series of commercials dedicated to convincing audiences that a given company is ‘doing good.’ One such commercial, and effort, in particular connected to the issue of clean water in developing countries. Stella Artois and their commercial spokesperson Matt Damon announced a new program in which Stella Artois will donate money to clean water causes because, in Damon’s own words, “millions of people in the developing world walk up to 6 hours per day for water.” Stella Artois, now, is offering the opportunity to help provide sanitary water for such people. The company claims that by buying a limited edition Stella Artois Chalice, supporters can provide “5 years of clean water”.

Further investigating into the program shows that what Stella Artois really is doing is taking the cost of the chalice and spreading it out. They offer three different chalice options: The Mexico Chalice, the India Chalice, and the Philippines Chalice. Each glass comes with a price tag of $13, and of that $13, $3.13 are donated to Water.org, where the real positive change is made. Damon, a founder of Water.org along with friend Gary White, is looking to help these specific countries via this initiative. The company boasts amazing success, particularly via their New Ventures Fund, which claims that, given donations and current expansion and innovations, 7.4 million people will gain access to clean water by 2024.

Of course, Stella Artois and Water.org made a substantial investment in gaining Super Bowl commercial space. That benefits of that investment for developing countries, however, will likely far outweigh the financial costs of its production.

  • What other initiatives are there similar to this one to help developing countries?
  • Are companies responsible for helping with issues such as this one? Or, are they manipulating consumers via deliberately associating their brand image with social responsibility?
  • Can you think of times when initiatives like this have failed? When they have succeeded?

Sources:

water.org, “New Ventures – Innovative Funding For Water & Sanitation.”. Accessed 5 Feb. 2018.

Stella Artois. Water. Accessed 5 Feb. 2018.

World Bank, Water. Accessed 5 Feb. 2018.

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Nordic Countries Lead the Way in Assisting Developing Nations

Jake Cash and Grey Reames

According to a new report from the Center for Global Development, the Nordic Countries Denmark, Sweden, and Finland top this year’s Commitment to Development Index, which is an annual ranking of the wealthiest countries in the world and how well they are helping those in developing countries through their policies. The index takes seven measures into consideration, and these are aid, finance, technology, trade, environment, security, and migration. Along with these measures, they make adjustments based on the size of the country’s economy, measured through GDP.

Flags of Nordic Countries, retrieved from wikimedia.org

The top country for aid and security was Denmark, which spends 0.75 percent of its national income towards aid efforts. Norway and Luxembourg spend a larger share of their national income towards aid, but Denmark is ranked higher in the index because their spending, all things considered, is more effective. In terms of finance, Finland, Denmark, and Norway are the top three countries according to the index, meaning that they have the best government policies to promote transparency and direct investment into developing countries. According to the report, direct investment is the best way to help a developing nation’s infrastructure, transportation, and energy.

While the Nordic Countries rise to the occasion, the United States seems to be falling behind in the Commitment to Development Index. The US is ranked 23rd out of 27 overall, and within the metric for environmental help the US is 24th out of 27. These rankings are expected to keep dropping as well following the United States’ withdrawal from the Paris Climate Agreement. Not that the United States is doing nothing, in fact the US donates more in absolute terms than any other country, but the donations only come out to 0.18 percent of its national income. This puts the US in 22nd out of the 27 countries in the index when measuring the ratio of donations to income. Even though only a select few countries have managed to meet the 1970 UN goal of 0.7 percent of national income going towards donations, the United States falls terribly short of this metric.

The future doesn’t look bright for the United States’ future in these rankings either. Just earlier this year, President Trump signed an executive order banning Washington from helping pay women in developing countries for birth control, abortion, and family planning education. Quickly following this decision, The Netherlands created an international fund to help offset the impending withdrawal of US funding. These backwards steps by the United States will likely drag the US even further down in the index, and the response from The Netherlands will undoubtedly keep them high in the rankings.

This Index is not 100 percent accurate in its rankings, but it does a fairly good job of showing what certain countries are excelling at and what certain countries could improve upon. Clearly, the Nordic countries are a pretty good example of how to move forward in terms of aid and development. If the United States would follow in their wake, it would very likely mean great improvement for developing countries considering the absolute size of the US economy. The Nordic countries can only do so much with their limited resources, but the example they’re setting for the rest of the world can help far more in the coming years.

  • How should the United States move forward?
  • Is it possible for the United States to do as well as the Nordic Countries in these metrics given the extreme size difference?
  • Is the UN target of 0.7 percent of GDP going towards aid a realistic target? How could this target be improved?

Source: Nordic Countries Most Committed to Development – Gaby Galvin, USNews

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Cape Town’s Water Crisis

Chandless and Piantoni

In July 2010 the United Nations General Assembly recognized water and sanitation as a human right. Without clean water it is impossible to achieve the Sustainable Development Goal of Health or to be able to break the cycle of poverty. This has been the case for Sub-Saharan Africa for a long time. The United Nations estimated that Sub-Saharan Africa wastes 40 billion hours per year collecting water.

South Africa is now in the spotlight, following Cape Town’s announcement that it will be the world’s first major city to run out of water. Water is expected to reach critical level on April 12, ominously named “Day Zero.” On this day, authorities will shut off all communal taps, forcing people to go to official water points, that will be guarded by security forces, to receive a maximum of 25 liters (6.6 gallons) of water per day. To put this in perspective, Americans on average use between 80 and 100 gallons every day. Hospitals and the most popular tourist areas will be excluded from the water shut-off, and special measures will be taken to ensure that schools have the water they need.

Image: Cape Town Drought

The South African government has issued official recommendations for Cape Town citizens in preparation for “Day 0,” but has also begun work on projects they hope will allow the city to avoid ever reaching that day. Of the seven projects that are underway, six of them are behind schedule, and not a single one is more than 60% complete.  If this continues, not a single one of the much needed projects will be completed when the water is shut off.  South African business men are planning to capitalize on the water shortage by shipping in water from around the country for a high price. If the South African government does not find a way to improve access to water, the current situation in Cape Town may be just a taste of what is to come over the next decade.

How did this happen? Enormous population growth in the last ~20 years, and a terribly long drought that climate experts say “only happens once in a millenium”. Rain in the last three years have been extremely scarce and not enough for the limited number of dams in the country to supply potable water. Additionally, government investment in water supply has been decreasing significantly since the 1980s:

graph of south africa's water investment

Officials announced on February 1st of this year that residents could use a maximum of 13.2 gallons of drinking water per day, in hopes to push “Day Zero” as further as possible and hope rain would increase in the meantime. However, over 60% of residents have not complied with the restrictions, and it is very hard to keep track of the water usage. This is an example of the “Tragedy of the Commons”, where residents act independently and do not care about the common good.

  • How can the world community help South Africa, as well as other parts of Sub-Saharan Africa?
  • What lessons can be learned so that this does not happen in the future?
  • What mistakes did the South African government make that led to the current state of crisis?

Sources: Time, NBC News, The Water Project, and BBC News / Africa.

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China’s Investment in Africa

In the 1970s, China began to open her previously steel plated borders to the world and all of its influences and interests. This historic move shifted the trajectory of the country for the better, transitioning one of the poorest, least industrialized countries into one of the major world political and economic powers. Foreign industries were attracted to China’s cheap and enormous pool of labor, governmental investment, and their strong centralized government that could push and effectively complete initiatives that a more dispersed market economy or smaller government could not. As China has successfully ridden on 5% or more GDP growth since the market reform, the economy is now changing to be more similar to the economies that once outsourced jobs to their borders, the Asian giant is now wishing to do the same.

As a result, Africa is now seeing an enormous influx of direct foreign investment, spearheaded by the Chinese. As Journalist and expert Howard French describes their opportunism, “Sensing that Africa had been cast aside by the west in the wake of the cold war, Beijing saw the continent as a perfect proving ground for some Chinese companies to cut their teeth into international business.” As of now, a common estimate is one million or so migrants have relocated to a variety of African countries to take advantage of the continent’s opportunity. China has increased their trade with the continent more than twenty-fold since the turn of the century now with an estimated $200 billion in 2012. The bulk of investment today is in a $1 trillion project known as the Belt and Road that is attempting to reinvent the famous trade route, the Silk Road. This initiative that will include 65 countries, over half the world’s population, and would connect China, the Middle East, Africa, and some of Europe through extensive maritime, air, and railway trade routes.

Despite decades of slow growth, wars, exploitation and poor governance, many African nations are beginning to grow and prosper. According to the International Monetary Fund, of the twenty countries projected to grow the fastest between 2013 and 2017, ten are located in sub-Saharan Africa. Much of this growth can be attributed to Chinese investment.

daveporter blog

 

However, this may not turn out to be all good for the unindustrialized nations of Africa. There are many potential consequences of this new phenomena. These possibilities include foreign reliance, pollution, abrupt disinvestment, massive public and private debt, and poor working conditions. This uncertainty but potential for continued African growth and the eventual industrialization of Africa could lead to much of the same for the continent or a boundless future for years to come.

Of course there are several important questions to determine what will happen. What are China’s intentions? Are they purely economic or are there underlying geopolitical motivations here? And how will that affect the lives and economies of Africa countries?

And perhaps the most important question, will this be good for Africa? Can Africa finally climb out of its trap of poverty? Or is this only another form of colonialism and exploitation?

Sources:

French, Howard W. China’s Second Continent How a Million Migrants Are Building a New Empire in Africa. Vintage Books, 2015.

World Bank Industrial Clusters

Huffington Post – China in Africa and Washington Post China in Africa.

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Looking to the Future: An Economic Plan for the New South African Regime

As South Africa turns to a new elected leader in Cyril Ramaphosa, many question the direction he will lead the country economically. Following the economic downturn in 2008-2009, the economy of South Africa has more or less grinded to a halt. The unemployment rate has reached an alarming 27.7%, while GDP growth stands at a mere .7%. Among these trends, public debt is rising, real household income per capita has flatlined, inequality remains extremely prevalent, and social discontent is at large.

These recent negative economic actualities have caused many influential people to formulate different opinions on the steps that need to be taken. Some hold the feeling that economic leadership needs to lock down the economy in order to facilitate growth. This includes fiscal consolidation plans, reduction/expulsion of union power, and a deregulation of the markets. Other South African economists and scholars believe the solution lies in the exact opposite approach, calling for state-led industrialization, free tertiary/university education, and a more equal redistribution of land. In recent history, these questions regarding reform have struggled to reach an answer due to the lack of strong leadership and stakeholder involvement. The citizens of South Africa now turn to the new elected leadership and President Ramaphosa for a strong plan forward in hopes of sustained, healthy economic growth and development.

The institutional reforms are heavily debated and necessary, but other reforms are more clear. For instance, urbanization and investment in cities is something that would greatly improve economic productivity and quality of life. Many residents live in “informal settlements” which limits work opportunities because of location. The current cities suffer from racial divides and are not good options for living. While the universities and financial institutions are there, the development needs to be more inclusive. Investment into cities, urban areas, and developing a good blueprint for living and working would allow more people the opportunity for work and enhanced quality of life. This would result in a more productive economy and growth of GDP.

There are a couple more steps that can be taken in order to improve the livelihood of South african residents. The development and facilitation of agricultural lands would not only create more jobs, but also increase the food security in the nation. Along with facilitating agriculture, the energy sector of the country is currently monopolized by state-owned industries and prices are very high. If private ownership can compete in that market it would allow prices to drop for the entire nation.

Which approach would most improve South Africa’s economic development issues? Can President Ramaphosa rally the country behind him and prove his leadership skills? Would the investment in cities be the most beneficial investment for South Africa right now?

Sources: Andrew Donaldson, Project Syndicate

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The Catalonian Reconquista

Catalonia has long been culturally distinct from Spain, with its own Catalan dialect preferred to Spanish. When the nations of Aragon and Castille merged in 1492, Catalonia still had a measure of autonomy, yet has been part of Spain ever since. Recent economic turmoil following the 2008 crisis spurred Catalonians to separate from Spain.

Catalonia is the most industrious part of Spain, and has long been sending “nearly 8 percent of its income ‘to the Center’ (Madrid),” which has pushed many Catalonians to try and break away from Spain, which seems to be in a state of economic decline. Catalonia’s fiscal deficit is currently 10-16 billion euros in tax revenue, which could disappear if they didn’t have to pay that to Madrid. What’s more, the Catalan independence movement calls for more toll roads and less taxation on the whole, which could incentivize industries and educated workers to immigrate and seek opportunity in Catalonia. 

Last year, Catalonia contributed 19% of Spain’s total GDP, while it is only 16% of the population. Further, Catalonia sends more (in taxes) to Madrid than they receive in public spending, which has begun to negatively impact the region’s infrastructure. In fact, the regional government suggests that Catalonia was “shortchanged by somewhere in the range of 11 to 15 billion euros.” For this reason, many Catalans believe they contribute more to Spain than they get back.

At the start of this fiasco in 2014, Catalonia’s economic prospects compared to Spain were stellar. Now, however, companies are pulling out likely due to instability and uncertainty about the Catalonian independence movement. Many are relocating to Madrid.

A highly industrialized land, the nominal GDP of Catalonia in 2014 was €200 billion (the highest in Spain until it was surpassed by Madrid region in October 2017) and the per capita GDP was €27,000 ($30,000), behind Madrid (€31,000), the Basque Country (€30,000), and Navarre (€28,000) In that year, the GDP growth was 1.4%. In recent years there has been a negative net relocation rate of companies based in Catalonia moving to other autonomous communities of Spain. In 2014, for example, Catalonia lost 987 companies to other parts of Spain (mainly Madrid), gaining 602 new ones from the rest of the country.”

  • What economic and political impacts would Catalonian independence have on the EU? Spain? The Mediterranean? Will it give momentum to other national self-determinism movements like Scotland?
  • Spain Unemployment rate: 17.1%, as opposed to Catalonia’s 13%
  • If Catalonia seceded, economists estimate that Spain’s GDP would fall 25-30% and unemployment would double. 

Sources

INE Prensa article, Spanish macro data site and CNN story

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Change in Gender Wage Gaps: China vs India

Since the 1990s, China and India have experienced huge social and economic transformation, resulting in two powerful and unique economies. Through this transformation, there has been a dramatic change in wage gaps within the two economies as the labor market develops. As the labor market changes, new skills and education becomes necessary for the workers; different genders and demographics begin to develop different skills as they search for employment in their changing economies. For such large underdeveloped economies, rapid change often means low skilled, and uneducated demographics can face great hardship and loss of employment as industries change and labor market demand develops.

Although India and China have developed over a similar time frame and both share large populations, those populations are very different, and the countries, starting from very different situations, developed very differently from each other, leaving lasting consequences and questions as this rapid growth continues.

The following graphs, panel A and b (Jong-Wha 318), present and depict the similarities and differences in China and India’s development and the consequences and effects on women’s Labor Force Participation Rate (LFPR) and educational  attainment. China started from a position of relatively high equality for an underdeveloped nation with women participating at almost 85% and maintaining a relatively high level of education in 1988. As china’s economy develops, women’s LFPR falls greatly, and educational attainment of those working increases.

India’s economy and labor market develops differently than China. India starts at one of the lowest women’s LFPR in the world, under 20%, and we see slight growth in the early 2000’s but a relatively stagnant rate. Interestingly, education expands similarly to China, with illiteracy rates for urban female workers at about half of what it was in the 1980’s. Not pictured on these graphs is the actual wage rate in China and India. The average wage for females in China decreased from about 85% in 1988 to about 72% of the average male wage in 2009. However, in India, the average real wage for females increased from 68% in 1988 to about 82% of the average male wage in 2010 (Jong-Wha 316).

These significant differences in development reveal how culture and economies and react and change with or sometimes against each other. China and India’s developing economies both similarly place higher value on education; differences then arise in how the labor market can react to knew demands for more skill and education. Women in India seems to be able to meet this demand and pursue further educational attainment and receive higher wages, where as Chinese women seem to be facing more obstacles in meeting new labor market demands and have in turn been leaving the labor market or accepting lower pay. These developments will continue to become more significant as these economies grow and expand. India seems to be trending towards higher educational attainment and a smaller pay gap, but their culture of low female LFPR seems to be strong. China is trending in a more negative direction, with educational attainment becoming more significant, and obstacles to female pay equity and equality of employment seem to be growing as more and more women leave the labor force.

Source:

 

Jong-Wha LEE, Dainn Wie, Wage Structure and Gender Earnings Differentials in China and India, World Development, Volume 97, 2017, 313-329
https://doi.org/10.1016/j.worlddev.2017.04.016.

You can enter the “DOI” in the paper citation into Zotero and it will automatically locate the citation. Many journals now include it on the first page of an article, which makes filling up your bibliography much easier. For books, entering the ISBN likewise lets Zotero automatically enter the relevant information. (The Prof)

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Jamaica and the IMF

Jamaica has never fully recovered from the 2nd oil crisis and other pieces of bad luck in the late 1970s. It is now in it’s 4th year of the latest IMF-led restructuring program. A December mission offered an optimistic prognosis, noting unemployment is at an 8-year low. The most recent full Article IV review (the IMF does one for all member countries) is from June 2016. It includes a wealth of information. Here you can see recent macroeconomic importance, and a summary of what (in the short term) drives the economy. But there’s other analysis. A recent working paper looks at the impact of migration, the loss of human capital and the benefit of remittances. But there’s also crime, another paper. Both migration and crime, of course, reflect interactions with the US, as that’s where most people go, and that’s where the drugs go.

Is Jamaica representative of the Caribbean? What of small countries with similar ties to Europe, such as Tunisia or Morocco or Serbia? We also have Mexico, which is qualitatively different in scope and the range and complexity of global links. In Europe, there’s Turkey. How important are remittances? Brain drain?
Trade ties? Interactions, social and political, that may interfere with economic development?

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Diversifying Nigeria’s Oil Dependent Economy

In a country where oil exports make up more than 70% of the government’s income, diversifying the economy is vital. The oil market has been volatile in recent times and Nigeria has felt the impact.

A young woman at a market stall which sells yams

According to the Nigerian Minister of Agriculture and Rural Development, Audu Agbeh, yams may be the answer. Nigeria currently produces 60% of the world’s yams. The issue is in exporting these yams. Nigeria is unable to get these yams to market and is therefore missing out on an economic opportunity. As a result, the country recently launched an aggressive yam export initiative.

Mainly privately sponsored, the initiative aims to improve infrastructure to allow the export of yams to international markets and provide jobs for young people in the country. The export infrastructure, from roads to ports, is so poor that around 30% of the country’s yams rot and lose all economic value. The country hopes to build the transport and storage structure necessary to make over $6B per year in the market.

One knock on this plan is the missing opportunity of processing the yams domestically instead of exporting them raw. Agbeh’s response to this is that the country lacks the infrastructure to even export them raw so clearly there is no funding or infrastructure to process them. Hopefully with expansion of electricity and stabilized interest rates this will become possible following the success of exporting the raw crops.

Cole and Chris

Source: http://www.bbc.com/news/world-africa-42197762

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South Africa’s Demographic Direction

South Africa is experiencing a decline in fertility rates, resulting in a lower ratio of working age population to consumers. South Africa will now be in a position to take advantage of the first demographic dividend, in which the working population will constitute a higher share of the overall population. However, for the demographic dividend to really pay off, the working-age population needs to have strong employment and income prospects.

This is where South Africa runs into trouble. Unemployment among 15-34 year-olds is 46%, compared to 21% for the 35-65 year old population. Additionally, the young population in South Africa earns less than the comparable young in South America and Southeast Asia. Such poor earning and employment prospects are problematic because it limits the positive effects of a demographic dividend–even if the working population is high, savings, capital accumulation, and growth will not happen as rapidly. Or put another way, it reduces the amount of time that income outpaces consumption. This is especially true in South Africa because the young constitute such a high portion of the populace.

South Africa’s youth employment problem also has implications for the second demographic dividend. While workers should save more due to a relatively long period of retirement in the future, this is not the case. Thus, as the wealth of South African individuals decreases, so do the resources for the future. These resources could have been devoted to areas like education and health, leading to improvements for the future generation.

This is a serious problem. This generation must correct its employment issues if it desires a sustained and sustainable economy for the future. Hence, what are some approaches the country could take?

To expand this discussion, what have you all found on the development of the demographic dividends in your chosen country?

Image result for south africa rugby
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