Tackling Corruption

How will we ever overcome the problem of corruption, if even when it s blatantly apparent it creates no deterrence?  No surprise that in this article by FT that Cobalt will be going ahead with their oil venture in Angola "despite revelations that three of the country's most powerful officials have held concealed interests in the project."

Read the article!!

At least it's more gloom than doom

The latest GDP figures for the UK have been released and show that the economy has declined 0.2% from last quarter which means that we are now in another recession - not much of a surprise really. But at least it isn't worse. At least the decline is less than previously.

I've been more aware of the state of the economy. Getting married last year meant that I had to take on new responsibilities. Having previously lived by myself for a short while I had some idea about the cost of living, but was in for a shock when I came to realise that in reality a relatively good salary didn't go as far.

The price of food has been the most shocking thing. On average we must spend around 40% of our income on food - and most of the things we buy is the value range. (Actually it's 10% I just checked but it feels more like 40% and its how it feels that counts). We don't drink and eat little meat - because it's so expensive. I've tried being thrifty, using offal and making more homemade cakes and biscuits, but it still bites.

There are many others who are in a worse still position, hence why initiatives like the food bank have become so popular. Even our church have set up Store City which supports residents of the Borough of Barking and Dagenham.

As I see it, it will take another 6 months or so for the economy to start making positive gains - if it continues on the same trajectory. That is just based on pure instinct - but as we know, anything could happen.

Education improves from terrible to just bad.

Source: The Economist.

Keeping within the same theme of education, I have just come across another article in the Economist from 2010, about improving education in Brazil from terrible to bad. Here is an extract:

IN 2000 the OECD, a group of mostly rich countries, decided to find out how much children were learning at school. At the time, only half of Brazilian children finished primary education. Three out of four adults were functionally illiterate and more than one in ten totally so. And yet few Brazilians seemed to care. Rich parents used private schools; poor ones knew too little to understand how badly their children were being taught at the public ones. The president at the time, Fernando Henrique Cardoso, saw a chance to break their complacency. Though Brazil is not a member of the OECD he entered it in the Programme for International Student Assessment (PISA). Brazil came last.

Across Latin America there is far more awareness than a decade ago that poor education is holding the region back.  A decade on, it is clear that the shock was salutary. On December 7th the fourth PISA study was published, and Brazil showed solid gains in all three subjects tested: reading, mathematics and science (see chart 1). The test now involves 65 countries or parts of them. Brazil came 53rd in reading and science. The OECD is sufficiently impressed that it has selected Brazil as a case study of “Encouraging lessons from a large federal system”.

For the full article click here.

Private Schooling for the Poor?

Source: The Economist.

We all can appreciate the value of education. Not necessarily for the subjects learned or even for the knowledge gained, but more so for the signals that it sends to the world; That you are capable and have the ability to succeed in a given task. 

In many developing countries / LDCs the opportunity and privilege of an education is not often available. 

But there are an increasing number of private fee paying schools appearing. Parents are opting out of sending their children to the free schools and making higher and higher sacrifices in order to secure a place for their child in the local Eton. So why is that? 

The Economist offers some suggestions in their article Rich Pickings. Obtaining education, any type of education is no longer enough. Parents require more, they are looking for quality. With an increasing number of highly educated individuals (further and higher education), it is no longer enough to say you have your A-levels, degree or even a Masters. The world requires more and recruiters request more. They want to know what type of education you have, where you obtained it. Education purely as signalling phenomena has less pull. 

And in developing countries, parents know this. Even in some of the poorest regions they will sacrifice their needs to secure a place for their child. According to the Economist, it is not the fancy surroundings that they are after; in fact many of the oversubscribed schools in some parts of India and Kenya are in the smallest darkest rooms in some remote regions.

There are some valuable lessons to be learned here. In securing development it is no longer acceptable to just provide schools. Without adequate resources, investment in teaching (many schools have poor teacher with low rates of literacy) or focus on how skills can be practically utilised in the global market, little progress will be made.

Commercial Goodwill

An increasing number of global brands are investing in micro-finance and subsistence farming projects in Africa. I'm slightly sceptical about motivation, but I guess every little helps.

Here is the campaign from pureDKNY:

MAC also seem to be in the game. All proceeds from the sale of the new lipstick and lip conditioner by Nicki Minaj will go towards (and I quote):

 "HELPING WOMEN, MEN AND KIDS EVERYWHERE AFFECTED BY HIV AND AIDS". 

Is it just me, or does that sound rather ambiguous? I wonder just how much they will raise and just how they intend on utilising those funds. Again, call me a sceptic. 

Focus Topic: Trade in Used Clothing

Source

How would you feel if you had to get your clothes from the flea market? How about if that was your only practical choice because of income constraints or because of distance? And what if you had to purchase underwear from there too?

I came across a short article in the Stylist a couple of weeks ago in their “elsewhere” section in which they briefly discussed this subject. The article spoke about women (and men) potentially putting themselves at risk by purchasing and using used underwear. For this very reason the Zimbabwean government has just brought in a new law that prevents such sales due to health and safety concerns, following in the footsteps of Ghana who implemented such measures in 1994.

As a woman, it is a chore sometimes to go out and buy underwear. I tend to go to my good old favourite, M&S. It’s been tried and tested, I know their range, I know it will fit and I know that I won’t need to spend valuable time trying on – that is just pure hassle. But even then, there are sometimes I go into the store, during sale periods of course, and I don’t find my size. Now just imagine what some women in developing countries must be facing! In amongst the piles and piles of clothes, they must rummage for something suitable. I’m sure not much thought goes into whether they should get the matching pair or not.

I am uncertain if I fully agree with the ban. I understand the welfare reasons behind it, but it will have different impacts on the different groups in society. The individual traders who once made a living from this source must now find alternative means and women who genuinely do not have the means to purchase new wear will now be left worse off. In addition I agree with this line of argument:

As rational agents, we aim to maximise our consumption based on our budget constraints. Therefore if second hand clothes come in at cheaper than their local substitutes, demand will respond accordingly (Source: Unknown).

Source

The international market for second hand clothes is large. Some estimates show it to be worth more than $1 billion a year making up 0.5% of the total value of trade textiles. This industry’s success has correlated with the decline of the once prosperous sub-Saharan African textiles industry. The rise of the second hand market has not been the main cause of this decline, there were other contributing factors including major structural policy changes, the introduction of the Multi Fibre Agreements (MFA) and increased liberalisation of the market which brought competition from Asia.   

Nevertheless, second hand clothes will for the time being at least remain on the scene in sub-Saharan markets. In some instances residents have shown a preference for second hand clothes because they are of better quality (perceived or otherwise) and cheaper than the imports received from China. The decline of the textile industry means that at present only about 5% of cotton produced on the continent is transformed into a form of textile. The rest is exported.

Sources:

Guardian - Oxfam Clothing

Baden and Barber (2005), The Impact of Second Hand Clothing on Developing Countries, Oxfam

Focus Topic: Artisanal Mining

Source

More than 50 countries in the world are classified as “resource rich” by the IMF and yet 1.5 million people in these countries live on less than $2 a day. Although there are many financial benefits to be gained from the extractive industries, in most cases these gains have not filtered down to the average citizen, the people that need it most. Africa as a whole and the countries within it, are particularly susceptible to the “resource curse”.

There are two sides to the extractive industry: 1) the industrial side operated by large multinationals and machinery and 2) the artisanal or small-scale miner. In the first instance, despite the fact that the large industrialised companies operate most of the sector and own most of the land, reports have shown that in some instances they employ few nationals.

For many countries, artisanal mining (ASM) is of great significance. In Sub-Saharan Africa, ASM directly employs over 10 million people (Global Briefing Magazine). Many studies have shown that ASM has an important role to play in poverty alleviation especially because of the number of people it employs (Reports include “Global Report on Artisanal and Small-Scale Mining” from the International Institute for Environment and Development). However, it tends to not have such a good reputation because of the environmental costs and poor health and safety standards. With limited enforcement of environmental regulations and inadequate protected access to land, the priority for subsistence miners is to make ends meet rather than protect the environment.  The challenge therefore for many governments and agencies alike is how to secure the benefits for poverty reduction.

Artisanal Mining Operations in Africa,May 2010 

(table available from http://www.afribiz.info/content/artisanal-mining-operations-in-africa) .

Country	Location/Name	Owner/Operator
Angola	Luali River Area	Gold
Burundi	Murehe	Tin
Burundi	Murehe	Tungsten
Cameroon	Various Locations	Diamond
Cameroon	Various Locations	Gold
Central African Republic	Bandas Greenstone Belt	Gold
Central African Republic	Bangana Area	Diamond
Central African Republic	Bogoin-Boali Greenstone Belt	Gold
Central African Republic	Bria Area	Diamond
Central African Republic	Carnot Area	Diamond
Central African Republic	Kotto Area	Diamond
Central African Republic	Quadda Area	Diamond
Chad	Mayo Dala Department	Gold
Congo РBrazzaville	Kell̩, Covette-Ouest Department	Diamond
Congo – Brazzaville	Likouala Department	Diamond
Congo – Brazzaville	Yangadou, Sangha Department	Diamond
Congo – Kinshasa	Kasaï Occidental Provinces, in Bandundu Province, at Bafwansende and Kisangani in Haut-Congo Province, at Lubutu in Maniema Province, at Kota-Koli, Yakoma, and Gbadolite in Equateur Province), in Nord Kivu Province, and at Luozi in Bas-Congo Province	Diamond
Equatorial Guinea	Aconibe, Coro, and Mongomo	Gold
Ghana	Birim Valley	Diamond
Madagascar	Mananjary	Emerald
Madagascar	Andilamena and Vatomandry	Ruby
Madagascar	Ilakaka and Sakara	Sapphire
Morocco	Errachidia, Figuig, and Ouarzazate	Barite
Niger	Liptako Region	Gold
Nigeria	Dutse Nkura	Tin
Nigeria	Jos Region	Nitrogen, Tantulum
Rwanda	Cyangugu	Sapphire
Rwanda	Nyungwe Forest	Gold
Zambia	Eastern Province	Beryl
Zambia	Iteshi Teshi; Mumbwa	Citrine
Zambia	Kalunga Wbeba, Hofmeyer	Tourmaline
Zambia	Katete	Aquamarine
Zambia	Kitwe	Emerald
Zambia	Siavunga	Garnet
Zimbabwe	Gwanda	Gold
Zimbabwe	Kamativi	Tin

References: 

http://en.wikipedia.org/wiki/Artisanal_mining

http://www.pactworld.org/galleries/default-file/Women%20in%20Artisanal%20Mining%20in%20the%20DRC.pdf

http://pubs.iied.org/pdfs/G00723.pdf

http://www.afribiz.info/content/artisanal-mining-operations-in-africa

Focus Topic: Is it cost effective to recycle?

Source

The final chapter of Landsburg’s “The Armchair Economist” provided me with some food for thought. He discusses if there is a need to protect the environment and if this will bring economic benefits.

Economics is the study of scarce resources and how people respond to incentives. The person with the greatest incentive in general is willing to pay the higher price to gain that resource. That’s why in a perfectly competitive (open market where everyone knows everything that is happening), the allocation of property rights is seen as inefficient/unnecessary. If an individual is given a property right say for example, to pollute but has no need to pollute that individual would rather sell that right to another individual who does pollute and who is willing to pay the price to obtain that right. Therefore, regardless of initial allocation of rights, whether split equally between the two individuals or not, the final outcome will always be the same.

The same can be said of recycling. Taken from a purely economic standpoint, due consideration must be made of both sides (to recycle and not to recycle) without factoring ANY moral judgements.  The side that will come out victorious is that with the greatest merits.

Here I reproduce in part, Landsburg’s argument:

“Economics is the science of competing preferences. Environmentalism goes beyond science when it elevates matters of preference to matters of morality. A proposal to pave a wilderness and put up a parking lot is an occasion for conflict between those who prefer wilderness and those who prefer convenient parking. In the ensuing struggle, each side attempts to impose its preferences by manipulating the political and economic systems. Because one side must win and one side must lose, the battle is hard-fought and sometimes bitter.” (pg 224)

A common argument for protecting the environment is for the benefit of future generations. However, Landsburg argues that “… do we have any reason to think that future generations will prefer inheriting the wilderness to inheriting the profits …?”

We must remember that in a market, there are buyers and sellers. If we stop buying something, the producer will soon go out of business which will lead to all sorts of problems including unemployment and in the case of recycling, possibly a reduction in the amount of forests as the number of trees planted goes down.

Of course we do not live in a perfect market. Among other things the deterioration of the environment could have implications for the potential of future profits .

So what do you think? Should we be recycling more? 

Priced out by the Olympics

Source

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We are quite lucky to be living where we are: Zone 2, on the central line with easy access to National rail, Tube, Dlr or Buses to take us either into central or Essex. East London does definitely have its perks. I’ve only been here for 7 months, and it has grown on me. The people are different here, younger, full of energy, more “cosmopolitan”. That said however, there is a veritable mix of economic status. Take our small gated community for instance. Right on the door step of the Regent’s Canal but with pound and bargin shops just around the corner. Residents range from highly paid professionals to key workers and council tenants. On the other side of the canal you have the very successful professionals… well that’s my assumption because I was informed of the prices of those properties and knew there would be no way the likes of me could afford that.

Anyway, with my rambling over, the purpose of this post is to discuss the rise in the number of tenants that have been pushed out of their rented properties due to price hikes. Landlords are looking to cash in on the Olympics coming to town and increasing rents by up to 4 times. Those that are most vulnerable are those with limited rights and probably no access to council properties. As reported in the Guardian, young professionals are also feeling the push as they have restricted disposable income. I guess owner occupiers on the other side of the canal will be able to benefit if they decide to take extended holidays. With some estate agents offering £1,500 a week for a one bed, I’m wishing that I had bought a flat when I had the chance.

Read the full article on The Guardian website. 

Focus Topic: Migration

Migration into the UK has become a hot topic of the moment mainly because of the low employment rates among UK nationals. Recent data shows that unemployment now stands at 2.6 million, the highest level since 1994 (Source: BBC). Unemployment seems to be particularly troublesome between the ages of 18 and 24. Mayor Boris Johnson has added to the debate by claiming that the youth find themselves in this predicament because they lack the energy, drive and determination that so many of the migrants have. But is it really that simple? Is it just a case of cultural differences and expectations that prevent UK nationals seeking employment?

I must admit that to a certain degree there is a case to be heard here. The different characteristics of migrants and UK nationals do play a role in how they respond to current job opportunities.  Several studies have confirmed this. Migrants have been noted to be more flexible and entrepreneurial, factors which can go a long way in locking down a job. More importantly however, studies also highlight that migrants tend to have a higher level of education, which would explain why migrants have higher paying jobs than UK nationals in some sectors.

In general, most research has shown that migration into the UK has little effect overall on UK resident’s wages. Although if separate industries are put under analysis, individuals in the higher paid jobs tend to benefit whilst those at the lower end of the pay spectrum loose out. I guess this is the main reason why there is much concern about “migrants taking jobs away”. In this instance, where competition is stronger, an increase in the labour supply will depress wages for everyone. If this has the effect of reducing the wages below a point where UK nationals are willing to work, then it could increase unemployment. However, there is also evidence that shows this effect is very minimal.

So what does this all mean for UK nationals? Should we all try and find a new lease of life, become more self-confident and flexible? Even if that was the case, there are still no guarantees that we would get the job. A recent article published in the Evening Standard (23/01/2012) entitled “Why can’t a Brit get a Job at Pret?” (available here)  describes how a  British brand only has 19% of its staff as British. The Evening Standard follows the application of 4 British young workers as they try and get a job within the chain. But they all fall at the first hurdle and none are invited for interview. Joshi Hermann, the writer of the article, gets the opportunity to work in one of the stores and explains quite interestingly that an applicant’s final fate rests in the hands of the current staff. Pret calls this a democratic process. Now, if the majority of staff members are from one region, wouldn’t they tend to side with someone that they have some type of cultural affinity with? Even if it is unspoken.

Without concrete figures, this is all speculation.

For further information see articles by Glover et. al, Dustmann and the UK Border Agency. 

The First African Designed I-Pad Rival goes on sale!

Technology is moving leaps and bounds in the African continent. Over the last decade, Internet has become widely available to the masses, mainly through mobiles. And these portable devices are being used for much more than just making calls or checking emails. Across the continent, individuals now have access to banks through their mobile devices, farmers can check crop prices and health/community workers have access to patients reports (source). 

So I guess it is not much of a surprise that a rival to the I-Pad has been designed in Africa too. Personally, I think that it is just a shame that we haven't yet reached the stage that they can be produced there too. Read the full article here.

Does a tree really fall if no one hears it?

Everyday millions of people are suffering around the world. But we remain oblivious to their daily strives and struggles as we sit comfortably in our homes with little worry about food and our future. I understand that in current times, purses and budgets are being stretched and things are definitely changing, but in comparison to the likes of natural disasters and famines, we have little to worry about.

Unless we see or read media reports about these activities we are none-the-wiser. Increasingly, more and more of NGO’s and other international organisations budgets are consecrated to the development of their media and communications services. There is now a general consensus that to gain funding, such organisations must secure television and newspaper coverage. As the title of the this article states, if you are not around when something happens, how can you be sure that it is taking place? If no one knows what is happening, how can they be inspired to do anything about it?

This is a damning conclusion because by default it puts a price on the situation and individual suffering. Resources can only stretch so far, therefore the terrible decision must be made as to which famine is greater than another. A recent paper by Glenda Cooper published in the 2011 fourth quarter version of Global magazine succinctly summarises the challenges that agencies face, the disparities between funding received and the potential consequences that they may have. 

To put some figures to this, Glenda Cooper reports that following the 2004 Indian Ocean tsunami, the Red Cross received an estimated $1,241 per survivor. In the three days following the 2010 Chilean earthquake Oxfam America raised just $3,499 compared to $2.9 million received for the earthquake in Haiti.

The full article is available from here 

Ref: Global – “Profit and Loss: Holding Extractiveindustries to account”, fourth quarter 2011

Will confidence get us better jobs?

One of the biggest problems that organisations have is finding the right people to do the job. With so many applicants claiming that they have the skills and experience necessary to successfully undertake a given role, how does the organisation know who is telling the truth?

One method that is used, besides the rigorous application processes and assessments now in place, is that of payment based incentives, quite common in the financial sector. Such payment structures tend to link salaries to performance. The theory behind this states that a person is only likely to take on risk to the level at which they perceive it will pay off. That is to say, if you are confident in your abilities, you will have less aversion to taking a salary that is heavily dependent on your performance. By opting for such a salary structure, organisations get information about the candidate and their ability, i.e. that they are more or less likely to achieve results.

In recent times, this approach has met with quite strong opposition because it is believed to be one of the main causes of the financial crisis. Nevertheless, maybe if we showed a bit more confidence in our abilities and are willing to take on non-conventional salaries, we may have a better chance of getting a job.  

In a podcast by Professor Ian Ayres, he refers to Zappos.com where the CEO offers recent recruits $2,000 if they want to leave the organisation.

For further information read The Armchair Economics,Landsburg. 

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