On Swatters

 

Long ago, a wisecrack noted that mosquitos fly amidst applause. This must have been before the invention of the electronic fly swatter. 

One of the small joys of life is to hear that sharp, sparky zap of an elusive, pesky mosquito getting caught in a fly swatter. This is especially true in summers when the critters seem to be spoilt for choices with so much of exposed skin, and somehow manage to find the most inaccessible point to dig in for a quick, bloody meal, and slip away at the slightest hint of a being caught out.

After one particularly successful swatting spree I found myself looking with much awe and admiration at my battery operated fly-swatter. Who came up with this brilliant invention? How much voltage does it take to electrocute an insect? What does it cost to make this simple, effective contraption?

The answers to the first two questions were quite easy to find - I leant from Wiki that the patent for this device is held by Taiwanese inventor named Tsao-i Shih. First manufactured in 1996,  the "electronic insect killing swatter" is essentially a scaled down version of a cattle-prod, a taser or stun-gun. Built inside its handle is an electronic oscillator, a step-up transformer and a voltage multiplier. 

Designed to prevent children from getting hurt, the bat's double layer of nets are electrodes that deliver a voltage of 1000 volts of more.  While this might seem like a of using a cannon to kill a mouse, the point to note is that the voltage output is controlled by a capacitor rating less than 45 nanofarads (nF), with a discharge limit of 45 microcolumbs (µC). 

What does this mean? I have not figured this nF - µC thingie yet. All I know so far is that a farad is the unit of electrical capacitance - the ability of a body to store an electrical charge. One farad is defined as the capacitance across which, when charged with one coulomb, there is a potential difference of one volt. A nanofarad is one billionth (10^9) of a farad. 

To put the voltage output of a fly-swatter in perspective, a stun-gun delivers an output between 20,000 V and 150,000 V ! 

It is also interesting to know that the cost of making this device in India (~INR 300+) is nearly double the cost in China. This is mainly because the cost of making the plastic components of the bat is more than double in India, making bulk imports a more viable option for traders. 

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REFERENCES & LINKS

* How stun-guns work - https://electronics.howstuffworks.com/gadgets/other-gadgets/stun-gun3.htm

* Electronic fly-swatter patent - https://www.freepatentsonline.com/5519963.html

* Teardown - https://tworks.telangana.gov.in/blog/electric-mosquito-racket-teardown

* Wiki - https://en.wikipedia.org/wiki/Fly-killing_device#cite_note-16

Out of Africa - into Europe

This was an eye-opener, and a reminder about how little I know about Africa.

Having studied with a group of Africans I also find it surprising that even as a part of academic discussions at Tsukuba University on this very topic, there were no fiery discussions on the three key events mentioned by Dr. Arikana:

• Berlin conference of 1884-85 for amicable division of Africa into European colonies - a meeting of 14 colonial powers for drawing of arbitrary boundaries, creation of countries that exist today.
• The French government arm twisting its colonies to sign, during 1958-61,  a pact for the Continuation of Colonisation - "The Colonial Debt" 
• 1963 - Addis Ababa conference that lead to the creation of Organisation of African Unity (OAU) by just seven states - Ghana, Guinea, Mali, Egypt, Morocco, Algeria and Tunisia.

Some of the numbers presented are truly cringe-worthy. As a repayment for "civilising" the Africans, for teaching them how to 'eat with fork and spoon', 14 French colonies were were required to deposit 80% (now down to 60%) of their bank reserves with the French Ministry of Finance. This self-serving arrangement enables France to extract no less than USD 500 billion from these 14 countries every year!

Since these 'Francophone' depended almost entirely on their former colonial master for marketing their minerals (first right of refusal), their military hardware, for their printed currencies, and for the education of their elite, the dependencies are almost hardwired. Countries that try to come out of the Colonial Debt are rewarded with coups (no less than 60 so far), assassinations and 'engineered chaos'.

On the 100th anniversary of the Jallianwalla Massacre, it does seem like a miracle that we Indians managed to get independence with just the partition of the subcontinent!

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LINKS & REFERENCES

* https://blogs.mediapart.fr/jecmaus/blog/300114/franceafrique-14-african-countries-forced-france-pay-colonial-tax-benefits-slavery-and-colonization
* The French African Connection - https://www.aljazeera.com/programmes/specialseries/2013/08/201387113131914906.html
* The Berlin Conference of 1884 - https://en.wikipedia.org/wiki/Berlin_Conference

A Nobel for Triole's Economics

An excellent article explaining the work of this year's Nobel Prize winner in Economics - Jean Triole.

Cassidy, John (2014): WHY JEAN TRIOLE WON THE ECONOMICS NOBEL, The New Yorker, 13 October, 2014, URL - http://www.newyorker.com/news/john-cassidy/worthy-economics-nobel-jean-tirole.

After seeing the profs at Tsukuba-U in action, I loved this opening jab on the subject:

"....setting aside the merits or demerits of individual awards, the very existence of the prize has contributed to the pretense that economics can, with the application of enough mathematics, be converted from a messy social science into a hard science along the lines of physics and chemistry."

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MORE LINKS:

Business Standard Editorial (14 Oct'14) -- http://www.business-standard.com/article/opinion/a-nobel-for-incentives-114101301276_1.html
- "PPP contracts [between a bureaucrat and a company] need to be carefully reviewed by independent authorities that can expose hidden rent backloading... PPPs can be expected to entail higher transaction costs." It is worth noting that this paper has been available since June 2007. This insight is something that Indian policymakers are only now accepting after considerable pain - though a clear independent authority is still not even on the anvil.

A Special Zone

View NOIDA - Along the Expressway in a larger map

I visited the Noida Special Economic Zone (NSEZ) yesterday expecting to see something, well, special. 'Disappointed' may be a mild word to describe the experience.

It did not start that way though. When I was stopped by security guards at the main gate for an id proof and the 'Plot number', the special-ness quotient went a few notches higher. Beyond those gates of black polished granite, I imagined a neat, world class industrial park, packed with enterprises that were busy producing and exporting things destined for the global markets.

Inside NSEZ, I just wanted to go to the telephone office (BSNL) to return a dysfunctional modem. So the guards directed me to a less special Gate-II. "Here a Rs.10 pass",  the guards there said, "Roam around as much as you like till midnight!".

Once inside, it did not take long for me to realize that even though there was a lot of area to roam around, there was nothing much to see. Wide and poorly maintained roads, shabby gardens, nondescript buildings and stray dogs lolling about in open garbage heaps. At the BSNL office, the guard was asleep on a wooden bed; a dusty, discarded microwave transmitter lay near the stairwell. Most of the office rooms were empty.

As my luck would have it, the only BSNL employee in the building was right one to take back my modem. He tried his best to dissuade me. "The speeds will improve! I guarantee!". When I insisted on withdrawing the broadband connection, he changed tack and conceded that the government enterprise had been neglecting the 'last mile'. Optic fibers had been laid till the exchanges but due to internal tussles and vested interests there were just not enough staff to service customers in Noida.

Outside the BSNL office, driving around a bit more, I realized that there was an extra-special zone within this 300 acre area, considered to be outside 'customs jurisdiction of India'. All the swanky new buildings were clustered close to the main gate.  Most of these were software companies like TechMahindra, iGate and Mosaic ITES. The service sector was obviously the flavor of the season. All the rest seemed well past their glory years.

The glory years' must have ended with the tax breaks. In India, the Special Economic Zones were first created in the late 1980s and early 1990s with the hope of repeating China's success with SEZs. Noida's NSEZ came up in 1985 and was one of the seven established by the central government. It was also the only one which was both landlocked and the only one located in North India. Companies that invested here were beyond the reach of India's convoluted labor laws and they enjoyed tax-breaks for 15-20 years.

How are the SEZs doing? My superficial view of NSEZ may have quite uninspiring, but, on the whole, they seems to be rocking. In 2004-05 they contributed 10% of India exports. Five year's later, in 2009 this share went up to 20% of total exports. 

Yet, there was no doubt that NSEZ could be managed much more efficiently. If only the government would create an incentive structure to reward professionalism, all the way from the level of the guards and BSNL employees, to the bureaucrats sipping chai in their air-conditioned offices!

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LINKS & REFERENCES

SEZ 

- http://www.nsez.gov.in/nsezwebsite/SezDevloper.aspx

- Google Maps -- https://maps.google.com/maps/ms?msid=202036517216705407893.0004b11f9c0b2060cbba5&msa=0&ll=28.538815,77.398531&spn=0.002757,0.004823

- The Special Economic Zones Act, 2005, was passed by Parliament in May, 2005 which received Presidential assent on the 23rd of June, 2005. After extensive consultations, the SEZ Act, 2005, supported by SEZ Rules, came into effect on 10th February, 2006

- List of operational SEZs -- http://sezindia.nic.in/writereaddata/pdf/ListofoperationalSEZs.pdf

- 172 SEZs under the SEZA 2005: 19 established before this Act; Noida SEZ (2003) is among the seven established by the central govt.

- Noida SEZ came up in 1985, then came Vizag SEZ in 1989. The next set came only ten years' later (Kandla, SEEPZ Mumbai, Kochi and Surat in 2000)

- share of SEZ units / Export Oriented Units (EOUs) in the national exports has gone up from 10 percent in 2004-05 to about 22 percent in 2008-09. 

- Under the scheme, a SEZ Unit can be set up in any of the seven Government SEZs (erstwhile Export Processing Zones) while EOUs can be set up outside SEZ across the country as per territorial jurisdiction of concerned Development Commissioner.

* NSEZ - Noida -- http://www.nsez.gov.in/nsezwebsite/AboutUs.aspx

- NSEZ the only Central Government SEZ in the northern India, headed by the Development Commissioner, was set up in 1985 in Noida Phase-II on a 310 acre plot of land. 

- Government of India has so far invested a sum of Rs. 1177 million on its development. NSEZ provides excellent infrastructure, supportive services and sector specific facilities for the thrust areas of exports like gem and jewellery and electronics software. 

- This is the only land locked SEZ , contrary to other zones which are situated in Port Towns and hence emphasis of type of units to be set up are those with high value and low volume.

- jewellery and software development units -- These two sectors have contributed more than 30 per cent of the export turn over during the year 2008-09.

- jurisdiction of Noida Special Economic Zone is spread over EOUs in nine states namely Jammu & Kashmir, Himachal Pradesh, Punjab, Haryana, Rajasthan, Delhi, Uttar Pradesh, Uttaranchal and Union Territory of Chandigarh.

* Chapter VI: Special Fiscal Provisions for SEZs -- exemption from any duty of customs and excise

> Customs Act, 1962 or the Custom Tariff Act, 1975

> Central Excise Act, 1944 or the Central Excise Tariff Act, 1985 

> service tax under Chapter-V of the Finance Act, 1994

> securities transaction tax leviable under section 98 of the Finance (No. 2) Act, 2004 

> Central Sales Tax Act, 1956 (fos goods other than newspapers!)

> Income-tax Act, 1961 (subject to a few modifications in Sch-II)

- deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorized operations, so as to encourage - 

(a) generation of additional economic activity 

(b) promotion of exports of goods and services; 

(c) promotion of investment from domestic and foreign 

sources; 

(d) creation of employment opportunities; 

(e) development of infrastructure facilities; 

Labor Chowk

View NOIDA - Along the Expressway in a larger mapView NOIDA - Along the Expressway in a larger map

Next to the Police Station in Sector 49 is a major crossing where Dadri Road meets Jain Road. At first sight it looks like traffic crossing like any other in Noida where new, wide roads cut through swathes of farming land, leaving in its wake numbered sectors, construction sites, shops and temporary markets.

Look again, as a I did today morning, and you would find on one street-side hundreds of laborers, waiting to be hired. This is where the crossing gets its name -- "Labor Chowk".

Its a motley crowd on the pavement. Skilled laborers - especially construction workers and painters- position themselves with their equipment in hand: leveling scales, brushes, and shovels; the women sit around in their colorful saris while other unskilled laborers just wait with a sharp eye on the road. The moment a prospective employer is sighted, there is a scramble to be spotted and hired.

The terms of engagement are quite clear: Rs.300/day from 9AM to 5PM, with a one hour break in between, for lunch. Despite a clear excess of supply, it is good to see that nobody is desperate to undercut these terms.

Where do these daily wagers come from? What are their numbers in Noida?  Do they all move back to their villages during the harvesting seasons?

A Give & Take Relationship

Is it really true that while rich countries give $130 billion in aid to poor countries, they actually extract stuff worth $ 2 trillion every year?

Data published by the UN shows that 300 years ago, rich countries were only three times richer than poor countries. By the end of colonialism in the 1960's this rose to 35x. Today, the difference is 80x!

Rich countries try to compensate by giving aid to poorer countries each year. This amounts to about $130 billion. If you think this is a large amount, consider the fact that large corporations are taking more than $900 billion out of poor countries each year in a form of tax avoidance called "trade mis-pricing". Also each year, poor countries pay $600b in "debt service" to rich countries, paying the originally borrowed amount many times over. Add biased trade rules that costs poor countries $500 b every year (Univ Massachusetts study), and you have the rich-poor divide in two startling figures:   Every year, in exchange for $130 billion in aid, rich countries take back home a total of $2 trillion!

Here is an info-graphic video that conveys this much better:



So, how does this work?

Take the case of Guinea, West Africa. A recent article in the New Yorker (see here), describes in detail how two transnational companies, Rio Tinto and BSGR, "lobbied" their way to gain control over the Simandou Mountains, which was, "without doubt, the top underdeveloped tier-one iron-ore asset in the world." In 1997, the Anglo-Australian mining giant Rio Tinto gained exclusive rights to explore and develop the mines.

Ten years later, Guinean officials passed these rights to a much smaller Israeli company, Beny Steinmetz Group Resources (BSGR). No fees were paid for the exploration license. Since BSGR had no expertise or experience in the iron-ore business, it sold a controlling stake (51%) to Vale, a Brazilian mining company,  for $2.5 billion. So, in exchange for 'investing' $160m (mostly bribes to the ruling elite?), BSGR got $ 2.5 million, plus a 49% stake in a $5 billion asset.

However, as of now, the Simandou mountains are still intact. The iron ore will continue to remain unexploited until the big boys settle their fight and find a way to transport the ore to a seaport. Until educated and public- spirited Guineans take control of their own affairs, the country may continue being one of the poorest in Africa.

Until then, perhaps it is good to remember what Joan Robinson had to say -- "The misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all."

View Larger Map

Simandou mountains in Guinea are near Nzerekore, which is tucked away next to Liberia

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LINKS

* Simandou Mountains - http://en.wikipedia.org/wiki/Simandou
* Economics Quotes -http://quotes.cat-v.org/economics
* Illicit Financial Flows from Developing Countries -- http://www.gfintegrity.org/storage/gfip/executive%20-%20final%20version%201-5-09.pdf

Food for Thought

The National Food Security Bill 2011 is all set to be introduced in the second-half of the Budget Session of Parliament. The Bill presents a difficult set of dilemma's and conundrums.

On the face of it, there could be no cause which is more noble: using our surplus stocks of foodgrains to feed the poor. The Bill proposes to use large-scale food distribution to feed 67% of the country's population of 1.2 billion.

Yet, as always, the devil lurks in the details.

Where will the food come from?

Even though our FCI godowns are overflowing with foodgrains, the Bill needs our Public Distribution system to handle 74 million tonnes by 2013-14. However, just 29.7 million tonnes were lifted by states in 2009-10 as against 45.4 million tonnes allocated for the PDS!

Where will the money come from?

The official estimated cost is Rs.95,000 per annum. Experts say that this is a rather conservative figure. Gulati & Gujral (2011) calculated the minimum annual expenditure at Rs. 200,000 Crores. To put the amount in perspective, total subsidies budgeted for 2011 on everything was Rs 140,000 crore.

Can the existing logistics network handle this?

You could call this 'new wine in an old, leaky bottle'. Until inefficiencies in the existing distribution systems are addressed on a war footing, we might be sending more money than ever before, down the drain. To take one example, labour in FCI is highly organised and an unskilled worker (loading and unloading job) earns around Rs 35,000 per month -- much, much more than the average skilled worker.  According to reports, 'hundreds of such FCI workers get more than Rs 1 lakh a month and the highest is about Rs 1.85 lakh per month'.

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LINKS & REFERENCES

The cost of Food Entitlement

* Aggarwal, Ankita and Harsh Mander (2013): ABANDONING THE RIGHT TO FOOD, EPW, Feb 2013 -- url -- http://www.epw.in/commentary/abandoning-right-food.html --- http://centreforequitystudies.org/wp-content/uploads/2013/02/Abandoning_the_Right_to_Food.pdf

* FE Editorial: NOW TO DIGEST THAT FOOD, 19 Dec. 2011, Financial Express, 19 Dec., 2011 -- url -- http://www.financialexpress.com/news/fe-editorial-now-to-digest-that-food/889477
- To put the amount in perspective, total subsidies budgeted this year on everything are R1.4 lakh crore.
- spends 5-6 times more on farm subsidies than it does on farm investment where the returns in terms of poverty reduction and higher farm growth are several times higher.
- other distortions like the Essential Commodities Act that allows states to ban movement of agri-commodities and suspending futures markets to the APMC Act that allows commission agents to take away as much as 15% of the farmers revenue

* Gulati, Ashok and Jyoti Gujral (2011): "FOOD SECURITY BILL: Can we afford Rs. 6 lakh crore food subsidy in three years?", The Economic Times, 17 Dec., 2011 -- url -- http://articles.economictimes.indiatimes.com/2011-12-17/news/30528849_1_food-subsidy-subsidised-grain-priority-households
- The farmers are not happy as the MSP for wheat and rice has gone up by less than 20% against a cost escalation of about 45%.
- But Punjab imposes 14.5% taxes and various forms of cess, etc, on top of the MSP for any procurement of grain being done from the state. The argument is that many states have minerals and they impose large royalty on their mineral wealth.

* PRS Legislative Brief - NFSB-2011 - http://www.prsindia.org/uploads/media/Food%20Security/Legislative%20Brief%20National%20Food%20Security%20Bill%202011.pdf

* Swaminathan, MS (2009): SYNERGY BETWEEN FOOD SECURITY ACT AND NREGA, The Hindu, 1Jun2009 ---url---http://www.hindu.com/2009/06/01/stories/2009060153470800.htm

'What is it to sleep hungry?'

What is it to sleep hungry?

This was a question Harsh Mandar asked an audience of university-educated, middle-class Indian youngsters. Since no answers were forthcoming, he went on to talk of his experiences with some of the poorest communities in the country.

Folks belonging to the Musahar ('Rat-eater') community in Eastern India, learnt the answer to this question quite early in life. During the lean seasons, when even rats are hard to come by, mother's apply a herb to their baby's thumb fingers which they suckle to sleep. Older children are taught more advanced survival skills -  picking edible food-grains and nuts from animal feces, raiding burrows for remnants of food and chewing on 'fake foods'.

The point being driven home was that it is unconscionable for citizens to go hungry in a country that is sitting on huge "buffer-stocks" of nearly 80 million tonnes of food grains. According to Dreze and Khera, never in history has so much under-nutrition co-existed with so much hoarding of food.

This simple assertion - or fact - forms the basis for the Food Security Bill currently being considered by the Parliament.

Critics of this Bill insist that it would become another law which just cannot be implemented. Food, along with Fuel and Fertilizer forms the 'subsidy triad' which is already a burden on our finances. Even though volume of food grains needed to implement food security schemes is just 8 million tonnes more than the 55 million tonnes being channeled down our leaky Public Distribution System,not everyone is sure whether the food will actually reach the intended beneficiaries living in remote rural areas.

One also wonders which is the greater evil -- feeding the rent-seekers already entrenched in the system, or creating a another form of 'state dependency'.

......................................................................................

REFERENCES & LINKS:


* Sharma, Vijay Paul (2012): FOOD SUBSIDY IN INDIA: TRENDS, CAUSES AND POLICY REFORM OPTIONS, IIMA Working Papers, Aug2012, url - http://www.iimahd.ernet.in/assets/snippets/workingpaperpdf/5337679172012-08-02.pdf
- trends in post-reform period 1991-92 to 2012-13
- Subsidy was Rs.72,283 Cr (2011-12) - 5% of Agricultural GDP -- it was just Rs.2,850 Cr in 1991-92...increased 25X in 21 years!
- bottom decile class of consumers (based on per monthly per capita consumer expenditure) spends about 65 per cent of total expenditure on food items in rural areas and about 62 per cent in urban areas.
- Minimum Support Price (MSP) for rice and wheat doubled between 2005-2012

* Patnaik, Banikinkar (2012): FOOD SECURITY BILL LIKELY IN NEXT SESSION, SAYS THOMAS, The Financial Express, 29Sep12, url - http://www.financialexpress.com/news/food-security-bill-likely-in-next-session-says-thomas/1009615/0
- The proposed Bill aims to provide legal entitlement for subsidised grain to around 63.5% of the country’s population. Provisional estimates suggest the government needs as much as 63 million tonnes (mt) of grain to implement the Bill, nearly 8 mt higher than the current requirements. However, the Bill, once enacted, may drive up the government’s annual food subsidy bill to R1,19,000 crore, compared with R72,823 crore in 2011-12. (FT)


* Dreze, Jean and Ritika Khera (2012): A BILL THAT ASKS TOO MUCH OF THE POOR, The Hindu, 5Sep12, url - http://www.thehindu.com/opinion/lead/article3859455.ece
- procurement has crossed 70 million tonnes per year, distribution is not keeping up, and excess stocks are growing. Never in history has so much undernutrition co-existed with so much hoarding of food. The government is desperately trying to export the surplus stocks, or simply allowing them to pile up unprotected. Reviving and revamping the Food Security Bill sounds like a better idea.


* Mander, Harsh (2012): Book Review - Big Talk at High Tide, Outlook, 16 July 2012, url - http://www.outlookindia.com/article.aspx?281531
* Mander, Harsh (2012): Dissent is a Virtue Too, The Hindu, 2 June 2012, url - http://www.thehindu.com/opinion/columns/Harsh_Mander/article3482956.ece
*Mander, Harsh (2012): Barefood - Their Discovery of India, The Hindu, 7 April 2012, url - http://www.thehindu.com/opinion/columns/Harsh_Mander/article3290891.ece
*Mander, Harsh (2008): Poverty the Eye Cannot See, Himal, October 2008, url - http://www.himalmag.com/component/content/article/910-poverty-the-eye-cannot-see.html
. Poverty and its handmaiden, inequality, he says, “are everywhere for all those with eyes to see”, yet academics and policymakers “have an almost existential need to know how much of ‘it’ there is, and who ‘they’ are.” In fact, they are in “every landlord’s house, in each village, every five-star hotel is surrounded by them, every posh colony has its antithesis outside its gate, where the other half strives to survive … they greet you again on the pavements after a late night … you have a brush with them at traffic lights.”

Country Equivalents

.
Interesting data comparisons from the Economist:



* Comparing INDIAN states and territories with countries

* Comparing CHINESE provinces with countries

* Comparing  the states in USA with countries

C for Chocolates

.
Out in the markets today, florists and chocolate shops were seen doing brisk business...tomorrow, after all, belongs to them - its Valentines Day.

The rush for tiny bits of sweets packaged like jewelery brings to mind a nagging old question: why is it that West Africa produces over 70% of the worlds' cocoa, and yet, it is the Swiss and Belgians who take all the credit for making the finest chocolates?

In 1957, when Gold Coast became an independent country called Ghana, it supplied two-thirds of world cocoa. Today the largest exporter is another West African country - Côte d'Ivoire - but still, Ghana continues to hold the second position at 379,000 tonnes (1997/98). And the irony is that even while companies like Meiji-Japan maintain a brand-line of chocolates named "Ghana", its customers are assured (on the wrappers) that a fraction of the retail-price is being sent back to Ghana... as charity.

Why does the second-largest producer of cocoa need charity from chocolate manufacturers?

A part of the answer is that cocoa producing countries are poorly governed, leaving their agriculture-commodity traders rather disorganized. Gervase (2000) points out that it was the planters in tropics who did the most to reduce returns from cocoa exports, through misguided attempts to force up prices in the short term.Their governments worsened the problem through harmful policies which included:

...failing to protect the forest, favoring estates, allowing labor coercion, discouraging savings, restricting immigration, allowing cartels, and interfering in marketing. Over and above all this, many governments taxed heavily and indiscriminately, while failing to provide essential public goods.

Ghana, in fact, figures as a typical case where, in addition to all the above problems, ethnic and tribal rivalries (Akan-Ashanti) killed the proverbial goose that laid golden eggs. Now the country just figures on chocolate wrappers while international commodity traders rake in all the profits.

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REFERENCES / LINKS

• Federation of Cocoa Commerce - http://www.cocoafederation.com/education/produce.jsp
• Easterly, William (2002). The Elusive Quest for Growth (MIT Press)
• International Cocoa Organization (ICO) - http://www.icco.org/
• Gervase, William Smith-Clarence (2000). Cocoa and Chocolate, 1765-1914, Routledge-London (preview on Google Books)
• World Bank - Ashanti Region Cocoa Project (2000)
• Richard Asante & E.Gyimah-Boadi (2004). Ethnic Structure, Inequality and Governance of the Public Sector in Ghana. UNRISD.
• Fair-Trade International - Cocoa. http://www.fairtrade.net/cocoa.html

Demolishing Dogma`s in Economics

.
A few days ago, I fished out a book from a crate awaiting its turn to get dumped in the `combustibles` garbage-bin down the corridor. It was a book by William Easterly, titled `The Elusive Quest for Growth`. Having read some of his papers for my thesis, I flipped through it and found that it was written while he was working as a World Bank economist in 2001.

In the original edition, Easterly had praised WB for letting letting gadflies like him to `exercise intellectual freedom`, but later, for the paperback edition, he modified it to `the WB encourages gadflies like me...to find another job`. Now this got me curious. What was in this book that made the bank so queasy?

Quite a lot, actually. The book is essentially a sugar-coated indictment of the Western approach to aid & development, for overlooking (or ignoring) one basic tenet -- that people respond to incentives. One by one, Easterly picks up the growth-mantras promoted by the Bretton Woods institutions and shows how shallow and grossly inadequate they were for the task at hand: growth and poverty alleviation. What is even worse is the fact that these misguided approaches continue to be the bedrock of most multilateral programs in international development.

He starts with the dogma of `Aid for Development` (aka the financing-gap approach) and illustrates with the case of Ghana (1957-84) how it reduced a country full of potential and promise into a basket-case banana republic. This idea of aid-financed investment in dams, roads and machines to promote growth, was based on a 1946 paper by an economics professor, Evsey Domar, who disavowed it in less than ten years. Yet, thanks to the fog of the Cold War, it continued to be the basis (the Harrod-Domar Model was re-bottled as ICOR) for lending to 138 countries, of which just one - Tunisia - could be claimed as a success story.

Easterly then turns to `capital fundamentalism` - the belief that increasing buildings and machinery is the fundamental determinant of growth - and its conflict with Robert Solow`s argument that the only only source of growth in the long run is technological change. But Solow`s model too was based on just the study of USA and not on any tropical country. He then tries to see if there has been any correlation between growth of education and GDP-growth (there isn`t), population-growth vs. GDP (again, nil) and discusses the futility of the conditional, `adjustment lending` by WB and IMF.

What I liked especially in this book was the way it illustrates macro-economics situtations with real, down-to-earth examples, starting with the `Intermezzo`s` with the struggles of his own ancestor, a homeless, impoverished migrant. For, `when we look at poor countries today, we see out own past poverty. In the long run, we all come from the lower class`.

I can`t remember the last time I felt so connected to anything written by an economist. And I am so glad I saw this book before it landed in the garbage-bin! :)

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LINKS

Easterly, William (2001). The Elusive Quest for Growth: Economist`s Adventures in the Tropics. MIT Press 2002. Amazon - http://www.amazon.com/Elusive-Quest-Growth-Economists-Misadventures/dp/026205065X

Connections!

One of the most fascinating TV series I've ever seen, is available online for free!  :-)

James Burke's BBC series - "Connections" and its sequels were telecast on DD-India, a few decades ago. Here are links to the entire blessed series, on YouTube:

Episode I - The Trigger Effect

Part 1/5 - Intro questions - dependence on tech networks - Eg. Manhattan, NY
Part 2/5 - Niagra power-station Adam Beck 2 - a Relay trips on 9 Nov., 1965
Part 3/5 - Grids shut down; black-out in hospitals, subways, ATC controls - Technology Trap - escape to the countryside? can you use a plough?
Part 4/5 - 12,000 years ago - migration to river valleys - invention of the plough; bread > oven tech; straw mats > cloth weaving;  laws & weapons to protect ownership. Building canals teaches you to work stone, geometry and mathematics > then you can build pyramids - step-pyramid of King Djoser at Saqqara near Cairo (2700BC)
Part 5/5 - Nile flooding - astronomy - Sirius rises before dawn on the 17th of July every year - one day before the annual flooding begins - Karnak - centre of a 4000-year empire built on simple technology - tech that `tied us for good`; Kuwait's dependence on technology - built in 4000 days!

Why those inventions happened between 6000 yearsago and how...or where they happened or when they happened, is a fascinating blend of accident, genius, craftsmanship, geography, religion, war, money, ambition...above all, at some point, everybody is involved in the business of change - not just the so-called "great men"....at no point of time did an invention appear just like that. You had to put together a number of things that were already there..

Episode II : Death in the Morning

Part 1/5 - Lydia (Turkey) - touchstone for testing gold purity - Alexander`s standard gold coins - Alexandria Library - 500,000+ books, ran for 1000+ years - Crafty law - `if you came to the port with a book, it had to be copied by the library` - Ptolemy`s (150AD) calculations & astronomy - star catalogue - 1022 stars.
Part 2/5 - - Lateen sail vs. old roman square sail - 1200AD -  Chinese stern-post rudder + lateen sail + Ptolemy`s star-charts - not used widely until 1456AD when the Turks took Constantinople and blocked East-West trade - triggered 16th Century - Voyages of Discovery -  - Francis Drake`s (1540-1596) - sea-captain, pirate, politician - the queen got 50% of the booty and pirates became `nobles`)- Portolan charts - mostly made in Majorca -  the Compass and the inaccuracies between `True North` vs. Magnetic North! - Elizabeth-I`s (1558) England - `worthless money, plague, filthy cities...stimulated a depressed economy by encouraging privateering sea-dogs - Drake, Raleigh and Hawkins...they went about with a gutsy disregard for convention which we describe today as `criminal``! 
Part 3/5 -1581 - compass-maker Robert Norman`s puzzle about a stationery needle > doctor, William Gilbert`s book on magnetism > Otto von Guericke`s invention of Vacuum Pump > Impressed Ferdinad-III (Holy Roman Emperor). Guericke`s spinning suphur ball (sparks) led to the discovery of electricity & telegraph! Many facinating branches - (1) Vacuum pump > discovery of gases > oxygen > how lungs work > respiratory medicine (2) Vacuum Pump > steam engine > railways (3) Vacuum pump > testing for sparks > modern radar.
Part 4/5 - Electricity - lightning strikes on gunpowder stores - Benjamin Franklin - lightning rods - interest in weather stations - hot-air balloons-  Ben Nevis in Scotland - morning `Glory` - Charles Wilson 1896 - International Cloud Atlas
Part 5/5 - Charles Wilson`s Cloud Chamber 1895 > X-ray clouds > Watson Watt - Radar + Rutherford`s - atom disintegration in cloud chamber + B29 bomber --> Hiroshima 6 Aug., 1945, 8:15AM....death in the morning.

Episode III - `Distant Voices`

Part 1/5 - Normans knights beat the Saxons at the Battle of Hastings (1066 AD). Advantage -  the stirrup
Part 2/5 - Henry-V ends the 400-year domination of the knight on horseback at the Battle of Agincourt (25 Oct., 1415). 8000 vs. 30,000 Frenchmen - secret weapon - the Welsh Longbow. Three inventions that bossted agriculture productivity - mouldboard plough, horse-collar and horse-shoe...and the 3-field system
Part 3/5 - Gunpowder from urine and dung (Urine > ammonia; bacteria+dung + nitrate; mix with woodash, filter with water = saltpetre crystals (KNO3);  So gunpowder = KNO3+sulphur + charcoal  /// Why didn't China not transform the world with its inventions?...
Part 4/5 - Cannon mania needed cash which came from the silver mines of Jachymov (aka Joachimsthal) in the moutains of northern Czech (1536) - produced 3m ounces in silver coins a year (Thaler > Dollar) -
Problem of flooding mines refered to Galileo who sends his student, Toricelli.  Experiments on  air pressure and effect on vacuum - Fr. Matin Mersenne connects with  Blaise Pascal (mercury dish experiments)> invented the Barometer! French astronomer Jean Picard carrying his barometer observed sparks...
Part 5/5 - Luigi Galvani (1783) sees frogs legs jump with charged scalpel // Volta's "pile" for electricity - Oersted's (1820) class with compass needle - electricity has a magnetic field - 1825 - first electomagnet in England - 1875 - A. Graham Bell reaches patent office just 2 hours before competitor...and people start hearing distant voices.

Episode IV - Faith in Numbers

Part 1/5 - Aqueducts that fed the gain-mills at Barbegal near Arles (28t of flour/day)- ruined when the Roman empire fell apart 1500 years ago -  burden of taxes -  The church held together through the chaos of middle ages - it was the `telecom dept`
Part 2/5 - Water wheels- Bennedictian monks  - systems management - best sheep rearing techniques - best wool - 2 key inventions - the foot-loom (too fast - no enough yarn!) and spinning wheel - Bruges  became a huge wool-textile centre - surplus cash  spent in Champagne Fairs  -  Italians most active - 15 cities had consulates in Troyes - until 1340s famine - 1347 - attack by fleas....black death! arrived in a ship from Crimea - before receding four years later, it killed 40 million people, 200,000 villages wiped out.
Part 3/5 - Prosperity again after black-death - old linen > paper. Paper became cheap but clerks were few (black death) so printing evolved - a goldsmith named J. Gutenberg (1450s) invented inter-changable typeface - this democratized knowledge - most influential:  an Italian named Aldus Manutius  came up with the first `pocket edition` in Venice. Also invented the `italic` type to fit more into his pocket editions - Venice - richest city in Europe, full of businessmen...and Greeks- refugees from Turkish conquest of Constantinople (1453)
Part 4/5- Greek workers in printing presses popularized the classics...arts and architecture.
This got people like Michaelangelo into big prestige projects...1615 - building in Salzburg - mechanical toys, fountains - Lyon - craze for Chinese silk weaving patterns - perforated paper and cards.
Part 5/5 - The Jacquard loom  did not catch on in France because of the Revolution...it was a hit in England...paisley shawls became popular - automatic riveting machines helped build great iron ships...corssing the seas became easier! Ships moved the `poor huddled masses of Europe` to America...by 1870s more than 7000 per day....8 million between 1850-1880! - 10 year census - John Shaw Shillings - Herman Hollerith  > Tabulating Machine ...1890 census was done in half the time - US pop 62m.

Episode V: Wheel of Fortune

Part 1/5 - Priest-astronomers observing the moon - told farmers when to sow - also observed planets (from `planeta` Greek for `the wanderers`!) - dusted out Ptolemy`s chart for 1022 stars -  Arabs - Astrolabe
Part 2/5 - Khalif Al Mansur - founder of Baghdad, got sick as a dog in 765 - cured by medico-astronomer from mountain monastry - Jurgis ibn Bakhtishu - First European medical school at Salona (?) in Italy - on the route of returning crusaders -- conflict between the traditionalists (church) and new thinkers --> nasty inquisition. Astronomy also helped in telling the time (replacing sundials and candles) - for praying at the right time - water clocks! But water froze in winter...so they used just the weights and came up with the verge & foliot!
Part 3/5 - Clock - machine telling people when to pray, when to work - a tapering "fuzee" to help a spring unwind evenly - main centre for watchmaking - Nuremberg (eg. Nuremberg egg by Peter Henlein) < good at metal work < because it was in a mining area -- produced best armor + best trinkets - Hans Lipperske - offers a looker (telescope) to the Dutch army (1603) -- Galileo used it to see Jupiter`s moons, questioned the catholic church`s earth-is-centre view and got imprisoned (1609) - Pisa cathedral 1681? swinging lamp.....Christiaan Huygens  1656 invented the pendulum....but it was not useful for the mariners.
Part 4/5 - Irregular spring problem - glass makers and refractory furnance...technique taken to steel furnaces by a clockmaker called Benjamin Huntsman  for making better springs - Jesse Ramsden - marked precise measurements on a sextant (1774) -- using screws made of Huntsman`s steel
Part 5/5 - America did not have skilled workers so they borrowed the Factory system and the idea of interchangeability parts from Honoré Blanc - then came Frank Gilbreth`s time & motion studies - went crazy seeing the inefficiency of bricklayers - The price of mass consumption...loss of individuality. Is there anything in your pocket (paraphelnaria of people`s pvt lives) that is not machine-made??

Episode VI: Thunder in the Skies

Part 1/5 - Rising prosperity in England - chimney, plastered walls, drapes and glass panes of Hardwick Hall. Kitchens & glass factories - flue drafts, mini-turbines..

Part 2/5 - Queen-E desperate to make bronze cannons - Copper from Bristol mines (1566) - Zach`s coal furnaces for making glass - 16th century property boom - shortage of wood for navy ships, so glass-makers packed off to cut forests in America for their charcoal, to Jamestown, Virginia.

Part 3/5 - History of Steam Engines - Bristol entrepreneurs: Miner Sir Robert Mansell helps Zach with money; 1699,  a young Quaker called Abraham Derby  turns up, makes brass utensils and then iron-ware, then copper at Coalbrookdale --- ends up making iron without impurities. The problem of flooding in coalmines solved using the Neocomen Engine (Thomas Neocomen building on T. Savery`s idea). Improved further by James Watt with his double cylinder, using John Wilkinson`s (1773) cannon-boring technique to make sturdy cylinders.

Part 4/5 -  Wilkinson`s BiL, Joseph Preistley tinkers with gas in brewery next door, makes soda, writes to Alessandro Volta about sparks. Volta, roaming around the Italian lakes of Cona and Maggiore uses `marsh gas` (methane) to fire his  uses his Glass Electric Pistol - 1850 Arctic ocean - whaling - oil for lamps replaced by an alternative discovered by Edwin Drake  - petroleum.

Part 5/5 - G. Daimler  and W. Maybach working at Otto Engines near Stuttgart, make first motorcar engine 1892 fuel spray (based on perfume spray!) in the Carburetor. Daimler`s distributor, E. Jellinek , comes up with a better idea(1899) for fuel ignitition using an electric spark! New car named after Jellinek`s daughter - Mercedes!

Summary: Neocommen`s piston + Drake`s oil + scent spray + Volta`s pistol = better engine. Wilhelm Kress tries to use it in a flying-boat 2 yrs before the Wright brothers...an idea that evolves into `thunder in the skies` -- a Concorde. `Invention capable of annihilating both distance and people...`



Episode VII: The Long Chain

1/5 - Freight transport - Fluyts from Holland (warehouse of Europe) - developed in Horne (1595) - stripped the fighting galleys to basics, added control & automation (block & tackle); 1648 - Edward Llyoyd started an insurance company - categorized ships according to soundness of its hull (AEIOU - U =bad), and equipment (Good, Middling, Bad) - protecting wooden hulls against worms with a mix of pitch & tar...America becomes supplier - buys slaves as labor - to cut pine trees, bury them in pits and roast them...tar bubbled out with turpentine
2/5 - 1776 - tired of being ripped off, the Americans declared independence...and so ended cheap pitch & tar; Karl Ross, Earl of Dundonald,  tried recuperating fortunes by going into the inventions business...found way to make coal-tar -- discovered that gas from coal ovens was flamable...told J.Watt, who told his employee William Murdoch, who became the `inventor` of gas lighting -- Artificial colors from coal-tar + waterproofing material with rubber (1823) - Macintosh

3/5 -  http://en.wikipedia.org/wiki/Mackintosh
- Mackintosh and Hancock started delivering waterproof everything all over the country - approached Kew Botanical Gardens for growing rubber in colonies
- Penang, Malaysia - nutmeg plantations....hacked forests - exposed, warm ponds - anopheles, malaria
- 1852 - malaria epidemics - the cure - Cinchona http://en.wikipedia.org/wiki/Cinchona grown in A.America or Java - neither belonged to the Brits
- Cinchona powder (quinine) + sugar + water + gin = malaria cure = gin & tonic invention!
- So Kew was not keen on rubber because the GovGen of India had demanded production of Q in India
- Royal College of Chemistry - William Perkin - finds a way to make synthetic quinine http://en.wikipedia.org/wiki/William_Henry_Perkin
- 1856, while playing with a bye-rpduct of coaltar...he got a molecule very close the Q but it was the worlds first artificial dye -
- In 1982, most of these well fed, complascent, middle-class victorians regarded themselves and their country as the rightful guardians of anybody in the world they could muscle in on militarily or economically, to save them from themselves, of course!
- Chemistry was a very low-class thing to do...that is why Perkins teacher was a German, who were very good at promoting merit...
-But the Brits blew the opportunity ...and the Germans grabbed it!

4/5 - - By 1870 Germans were leaders in color chemistry - BASF, Hoechst, Bayer, Agfa
- You learnt much about chemistry though color - painkillers
- Green color which a crafty designer got the empress Eugene to wear
- Combine harvesters http://en.wikipedia.org/wiki/Combine_harvester invented by American Mccormi -- dropped price of wheat sharply
- But the Germans ate black rye bread made by Prussian aristrocrats - the Yonkers?
- But rye was being exported in leaving a growing population short of food...so they tried growing wheat but that needed fertilizer from Chile
- By 1890 all the money made by the industry was going to import food and fertilizer
- 1900 Fritz Haber http://en.wikipedia.org/wiki/Fritz_Haber tried to make fertilizer...succeeded in making sodium nitrate  http://en.wikipedia.org/wiki/Sodium_nitrate
- 1909 - Haber and Bosch http://en.wikipedia.org/wiki/Carl_Bosch were making tons of fertilizer

5/5 - - Germany - chemical industry + metal industry + now discovery of coal in Rhur moved her into the major league
- It bacame a major steel manufacturer - weapons and the first monorail in 1900 http://en.wikipedia.org/wiki/Wuppertal_Schwebebahn
- Growth reflected ambitions of Kaiser Wilhelm http://en.wikipedia.org/wiki/Wilhelm_II, who brought the country to the edge of greatness all because of coal-tar and the way German chemists had used it
- Also in 1900 W-II started building a big navy...arms race with Britain that ended in war in 1914
- First major battle was off the coast of Chile because it was the biggest source of sodium nitrate. NaNO3 + sulphuris acid = nitric acid, which is essential for making explosives ....but Chile had been blockaded by Britain, so the Germans came up with the Haber-Bosch process
- WW-I lasted four years...
- What happend to the Acetylene, discovered by http://en.wikipedia.org/wiki/Fritz_Klatte... but he flushed it down the toilet...it later a polymer - plastic, nylon -- unveiled by DuPont at Chicago WorldExpo 1933
- Acetylene also became a welding tool - oxy-acetylene http://en.wikipedia.org/wiki/Oxy-fuel_welding_and_cutting
http://www.thepirateking.com/ships/brief_history_wind_powered_ships.htm

 Episode VIII: Eat Drink & Be Merry

1/5 - http://www.youtube.com/watch?v=y-bz7nYGxgo&feature=related
2/5 - http://www.youtube.com/watch?v=xa588EDwwiE&feature=related
3/5 - http://www.youtube.com/watch?v=oiaQdoC92Ls&feature=related
4/5 - http://www.youtube.com/watch?v=qRr2FltLwYI&feature=related
5/5 - http://www.youtube.com/watch?v=zxkaD02iO1g&feature=related

Trailing the Tigers

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I was a bit shocked when I realised yesterday that within the area occupied by one of the tiniest states in India - Goa - you can fit in two Singapore's, two Hong Kong's, and still have more than a 100 sq.km to spare.

Before trying to figure out why, in the whole of South Asia, there isn't a single world-class port or international trading hub, a more basic question: despite their late start, how did a some countries in South East Asia Asia become so prosperous?

In his book, "Innovation in East Asia", Michael Hobday gets down to brasstacks - the firm/company level - to try and explain explain how four "Tiger economies" - South Korea, Taiwan, Singapore and Hong Kong - were able to upgrade their technology and their marketing to compete in increasingly sophisticated products and services.

He uses the term - latecomer firms - to describe manufacturing companies that face two sets of competitive disadvantages in attempting to compete for export markets - (1) they are technologically dislocated from main sources of tech and R&D (local labs & universities being poorly equipped), and are (2) dislocated from mainstream international markets & sophisticated users.

The book was written in the early 1990s, so it is a bit dated in the sense that such firms may no longer exist - local labs are stronger, and regional markets may now be more lucrative. But it does give you an idea of how the firms evolved in each of these four, newly industrialised economies (NIE's).

It was no doubt their good fortune to be sitting on the right side of the cold-war fence during the turbulent 60's and 70's. Sitting under the US umbrella not gave them a good dose of enforced political stability but also free access to Western technology, capital and markets during their formative years. The respective national governments also played no small role in getting their priorities right - basic education, healthcare, housing, and macro-economic stability.

Even then, fact is that not all American allies in East Asia prospered. Even within the four NIE's patterns of learning and development varied -

SOUTH KOREA

Under the military dictatorship of Gen.Park Chung-hee (1961-1979) took a leaf from the Japanese Zaibatsu strategy and promoted large corporations - the Chaebol's - especially in niche areas like heavy industries, chemical industries, steel, construction and ship-building. The national education budget shot up from 2.4% (1951) to 22% (1981), skilled craftsmen were treated on par with engineers and scientists, all of whom were exempt from the compulsory military service. As a result, companies like Samsung, which began as a trading company dealing in fruit and dried-fish,went on to become world leaders in the manufacture of dynamic random access memory (DRAM) chips.

Home-grown Champs:  Samsung, Daewoo, LuckyGoldstar

TAIWAN

In 1949, this island, smaller than Kerala and the oldest Japanese colony in the region, found itself flooded with 2 million refugees from mainland China. Most of these newcomers were soldiers, and, fortuitously, a good number of intellectual & business elites fleeing Mao's communists with their moneybags in tow. Gen.Chaing Kai-shek's KMT preferred to encourage a multitude of small companies (SMEs) rather than large corporations.

In 1985, the average SME size was just 24 workers, aAnd they produced everything from bicycles and footwear to sewing machines and high-end electronics. To help these firms, the government set up a range of effective institutions - Industrial Technology Research Institute (ITRI), Institute of Information Technology (III), Electronic Research Services Orgn (ERSO, under ITRI).

The entrepreneurs then went on to exploit FDI to their advantage,eventually making TNCs dependent on their manufacturing skills and their highly productive engineering. Local companies reversed the pattern of TNC exploitation, often complained of in Latin America and other developing areas, by supplying low-cost OEM/ODM services, components, systems and complete products.

Home-grown Champs: Acer, Tatung, Datatech (world's largest motherboard producer), EliteGroup, Mitac, Cal-Comp (calculator champ)

SINGAPORE

Even before it parted ways with Malaysia in 1965, Singapore's Economic Development Board (EDB) took a number of steps to woo TNC's. It allowed a level of foreign control inconceivable in either South Korea or Taiwan. While setting up its first industrial park at Jurong (1961) it established training institutes and implemented a series of measures for improving education and technical training. Once the training target was achieved it recommended a large increase in wages to attract technology-intensive manufacturers, moving the less lucrative firms into a "Growth Triangle" in neighboring countries.

By 1990, more than 3000 TNCs were thriving in the city-state, employing one of the most highly educated, ethnically diverse workers, living in the second-most densely populated places on Earth.

HONG KONG

Unlike the other three NIE's, this former British entrepot, started out with a laissez-faire approach. The leaders here knew the city born out of the earliest "unequal treaties" would return to China in 1997. So the government just let the traders and entrepreneurs do what they knew best. The big opportunities came after Deng Xiao-Ping initiated his reforms in 1978. Joint ventures (JVs) with mainland China shot-up from less than 100 in 1980 to nearly 40,000 in 1992. The neighboring Guandong province expanded at around 30% in the early 1990s fueld by investments from Hong Kong.

In Hong Kong too official support bodies did their bit - especially the Hong Kong Productivity Council (HKPC), Vocational Training Council (VTC), TDC and IDC.

Home-grown Champs: VTech, KongWah (flatscreen TVs), RJP (palmtops), Varitronics (touch-sensitive, portable hand-heldsystems)
 
 
After reading Hobday's book, one cannot help concluding that the biggest advantage these four NIE's had was that they all had pragmatic, competent leadership that shielded itself from the divisive pressures of populist electoral politics...

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REFERENCES

Hobday, Michael (1995), Innovation in East Asia: The Challenge to Japan, Edward Elgar Publishing Company, USA, 1995

Prof. Mike Hobday - CENTRIM, Brighton, UK - http://centrim.mis.brighton.ac.uk/people/a-z/mgh1

Grasshopper & the Ant

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The FT columnist, Martin Wolf has come up with the all-time-favourite Aesops fable to explain the ongoing "global financial crisis".

In this version, ants are Germans, Chinese and Japanese, while the grasshoppers are American, British, Greek, Irish and Spanish.

Ants produce enticing goods grasshoppers want to buy. The latter ask whether the former want something in return. “No,” reply the ants. “You do not have anything we want, except, maybe, a spot by the sea...”

In the end...

...the leader of China’s nest tells America: “We, your creditors, insist you stop borrowing, just as European grasshoppers are now doing.” The leader of the American colony laughs: “We did not ask you to lend us this money. In fact, we told you it was a folly. We are going to make sure American grasshoppers have jobs. If you do not want to lend us money, raise the price of your currency. Then we will make what we used to buy and you will no longer have to lend to us.” So America teaches creditors a lesson from a dead sage: “If you owe your bank $100, you have a problem; but if you owe $100m, it does.”


The Chinese leader does not want to admit that his nest’s huge pile of American debt is not going to be worth what it cost. Chinese people also want to go on making cheap goods for foreigners. So China decides to buy yet more American debt, after all. But, decades later, the Chinese finally say to the Americans: “Now we would like you to provide us with goods in return for your debt to us. Thereupon, the American grasshoppers laugh and promptly reduce the debt’s value. The ants lose the value off their savings and some of them then starve to death.


What is the moral of this fable? If you want to accumulate enduring wealth, do not lend to grasshoppers.

The story is obviously an over-simplification. But it has provoked comments that are even more interesting.

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Full Article:

Wolf, Martin (2010), The Grasshoppers and The Ants - A Modern Fable, Financial Times, 25 May 2010 - http://www.ft.com/cms/s/0/202ed286-6832-11df-a52f-00144feab49a.html

Japan's Population Dilemma

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Finally an article that brings out the dilemmas and Hobson`s choices linked to Japan's plunging population growth:

Japan’s Phony Solution - The half-truths about immigration, Paul J. Scalise, NEWSWEEK, Apr 30, 2010

Exerpts -

Japan’s population has peaked. A downward turn is expected to follow, reaching close to 100 million in 2050 and 45 million in 2105. That means fewer workers paying fewer taxes to support an already expanding army of senior citizens. With social security, pensions, and interest payments on the national debt occupying more than 50 percent of Japan’s national budget in 2009 (up from 19 percent in 1960), the government, sooner or later, will face a decision of crisis proportions. Does it raise taxes sharply? Cut benefits drastically? Go deeper into debt? Or throw open the doors to young foreigners to restore balance between workers and retirees?

...Highly skilled, high-wage immigrants present their own problems. Feldman’s Japan model assumes that the average immigrant would be less productive than local hires because of different languages, work habits, traditions, and educational needs. And what’s never explained is how to attract the “right” immigrants and assimilate them in the first place. Right now, Japan’s average compensation per employee (adjusted for purchasing-power parity) is 36 percent lower than in the U.S. and 15 percent lower than in the euro area, according to the OECD. Worse, monthly cash earnings have been falling slowly for the past decade. If Japan wants to attract doctors, nurses, and engineers, and keep them, it needs to pay them more. And therein lies the rub. Is it really worth it in the long run?

Japan’s Ministry of Health, Labor and Welfare estimates the fiscal cost and benefits of an influx at three different stages of an immigrant’s life. In stage one, when only single youths are admitted, the government gains more in tax payments than it pays in benefits. In stage two (with spouse) and stage three (with spouse and two children), the benefits paid by the local and central governments far exceed the tax revenues. If 500,000 migrants were to enter Japan in stage three, the ministry estimates, the net loss would become a whopping ¥1.1 trillion, or about $12 billion.

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REFERENCE - 

Japan’s Phony Solution - The half-truths about immigration, Paul J. Scalise, NEWSWEEK, Apr 30, 2010 http://www.newsweek.com/id/237213

Iwakura Mission - Insights & Observations

This post is a collection of some interesting observations and insights recorded by Kume Kunitake, during the tour of the Iwakura Mission. What strikes you is how effectively the Mission Report managed to commnunicate the urgent need to pick-out and transplant a whole range of ideas from the West.

Excerpts -

Britain: Prosperity in just 40 years (pp.120)

European countries of the present day atand a the pinnacle of civilization. They are immensely rich, their trade is on a huge scale, they excel in arts and manufacturers, and their peoples live pleasant lives and are extremely happy. It is natural to assume that all this is the product, achieved over many centuries, of the high value which Europe places on commerce, and that it is peculiar to this continent. However, the truth is otherwise. It is since 1800 that Europe has attained its present wealth; and it is only in the last forty years that it has achieved the truly remarkable level of prosperity we now see.

France: Preserving old ways - Libraries & Museums for accumulating knowledge (pp228-229 )

At the root of the march of progress in the West is a profound love for antiquity...It is the accumulation of knowledge over hundreds and thousands of years which fosters the enlightenment of a civilization

Belgium:  Forethought and attention to detail necessary for a successful enterprise (pp. 267)

Whenever plans for a new enterprise are drawn up, the people of the West are just the opposite of the Japanese in the degree of forethoughtand attention to detail they bring to the task. After they have carefully weighed the idea and cosider the project to be feasible, they start by accumulating the necessary capital. Then they obtain the permit, put up a temporary workshop, install the machinery and gradually build up the enterprise over the course of two or three years. They will plan for the future, setting aside a part of their profits for improvement of buildings and equipment, and it will take ten years of sustained effort before they can display their achivements to the world at large.


People in Japan, however, assume profits will come easily even before they have made any money at all. They rush into plans for new forms and expand the business in such haste that within the space of a year, even as the fine premises they have built are still impressing people, their profits will be starting to dwindle. This may be attributed to their impulsive, carefree spirit, but the truth of the matter is that, as yet, they simply do not have an understanding of the fundamental nature of profit.

Germany: The influence of a frual monarch - Friedrich II (pp.300)

The political culture in Prussia seems to be founded on the legacy of Frierich-II, a monarch who despised outward showy displays. It is even said that at the time of this death he had no new clothes he could be dressed in... He once said that Prussians are not frugal by nature, and that even those with the smallest sums to spare will dress themselves in fine clothing...German aristocracy's admiration for French culture and of the way Austrian nobelmen wallow in a life of gilder splendour, all of which reveals the true character of the German people. It is the nature of man that a convenience once employed can never be foregone, while a taste once acquired cannot be forgotten.

Chancellor Otto Von Bismarck's timeless advise regarding realpolitik (15 March 1873)

Field Marshal Moltke's Views (pp 311-312)

Nations these days all appear to conduct relations with amity and courtesy, but this is entirely superficial, for behind this fascade lurks mutual contempt and a struggle for supremacy...First, so-called international law, which is supposed to protect the rights of all nations,afford us no security at all. When there is a dispute, the great powers would invoke international law and stand their ground if it stood to their benefit; but if they stood to lose, they would simply change direction and resort to military force, which was never limited to self-defence alone. However, small nations like ours would assiduously stick to the letter of the law and abide by univrsal principles, not daring to trnasgress these. Consequently, in the face of manoeuvring with flattery and contempt by the great powers, we invariably failed to protect our right of independence, no matter how hard we tried.

The principles of law, justice and freedom serve to protect the country domestically, but only military power can protect it abroad. International law, too, is concerned only with a country's strength or weakness, for it is small nations which will remain neutral and re protected solely by this law, whereas great powers must use their strength to claim their rights.
Somehow we begrudge military expenditure and yearn for a life of peace, but if war were to break out, would this not promptly squander the wealth we have worked so hard to accumulate all these years? To disband our regular army in response to encouraging signs of peace is a dream for future generations, not something which can be accomplished at present. On all sides our neighbors fear and etest our power, as if the devil himself were glaring down at them from pictures hung on their walls...

Russia: Wealth among commoners (pp.330)

It used to be argued that in Britain, France, Belgium and Holland there were more wealthy people among the commoners than among the nobility, and that for precisely this reason the population in each country was flourishing and popular rights were well developed. In Germany (including Austria), and Italy, the wealth of the nobility exceeds that of the common people, and therefore those countries cannot escape being pooer in the visible levels of civilization, and the rights of the rulers are greater than those of the people. In Russia, by contrast, it is only the nobility who are at all advanced and the common people are like slaves.

East vs. West (pp.336)

The Eastern races are less inclined to greed; they submit themselves to moral governance; their sovereigns are conscientious and frugal and thus have raised their people to great heights. Even so, the welath they have accumulated is found astonishing by foreigners. The Westerns races by contrast, are given to rampant greed and are slow to correct their conduct; as for the rulers, it would not be clumny to say that they tax the people of their lands heavily and make themselves wealthy by keeping the revenue to themselves, and that they are all but tireless in their cupidity and rapacity. This explains why the notion of freedom has sprung forth among the people of Europe and why Europe is seething with the views of those who would wipe out the rights of sovereigns and establish the rights of the people. The peoples of the East and West are different in character; they are almost opposites.

What should Politics be about? (pp. 372)

It is a vulgar notion, born of a narrow-minded outlook, to suppose that other people, because of some minor difference in bone structure or customs, are not our equals...What is it that politics should be about, that education should be inculcating? Surely not such trivial matters as these. Rather, let the focus of politics and education be on these two words: 'wealth' and 'strength'. The goal for which we should be striving is that all the people of the land workd hard at their occupations, achieve independence, be courteous in their dealings with others and be trustworthy, and that we exploit the benefits of all the foods which are desired. Thus will our national pride not be affronted abroad and we will be able to lie in good public order at home and progress towards a state of peace.

Switzerland: On how the government avoids recruiting excess staff (pp.457)

This day we visited various administrative departments which are under the direction of the members of the State Council...The appointment of officials in the various departments is simple in the extreme. At very busy times, when there are not enough clerks for the work on hand, passers-by are somtimes asked to help in such tasks as copying documents. This obviates the need for emplying superfluous officials, which would lead to a reduction inthe amount of workd done by each. One lazy official, we were told, would infect the others with his idleness.

European Commercial Enterprise - Industrial arts leading to vast gains in wealth and power (pp.482)

Because they are no more able to depend on their native ingenuity than on their infertile soil, Europeans make every effort to conquer nature by thoroughly investigating its mechanisms, by unremitting labout, and by close cooperation with one another. This capacity for investigation leads to advances in knowledge, their capacity for hard works leads to invention of machines, and their capacity for cooperation leads brings prosperity in trade. It is a combination of these qualities which has produced the flourishing civilization we see today.


An examination of the situation in Europe shows that while people in the East have developed agriculture and manufacturing through 'practical' experience, people in the West have developed agriculture and manufacturing through 'theoritical' study. Thus their technology cannot escape a dependence on machines.


We should not therefore be overawed by their engineering feats. What should give us greater cause to worry is their capacity for cooperation and their untiring attention to the minutae of trade. They always obtain the best possible prices for the goods which their nations produce, and their commerce is like an army on the march. They cannot rely on nature, so they make human cooperation their chief principle. It is in commerce that Europe can best serve as an example to the world.

A Show-piece Garbage Incinerator

The visit to Kanazawa Waste Incineration Plant was a real eye-opener.

In a country where just about every consumable is over-packaged and where every garbage-bin is segregated, I have often wondered where all the waste goes. Now I know - it all ends up in massive incineration plants where the waste is converted into energy and a range of bye-products, with hardly any harmful emissions.

The plant building covers an area of ~ 50,000 sq.m. It was designed by NKK & Daiken Design and took about six years to build in March 2001, at a cost of about Yen 62.6 billion. Its three furnaces have a combined processing capacity of 1,200t/day, and if you thought that this was rather lavish for a city of just 3.5 million, just remember that this just one of the four inceineration facilities in Yokohama!

The other four plants are at Hodogaya, Tsuzuki, Tsurumi and Asahi. But the Kanazawa facility is the latest one equipped with a high temperature and pressure boiler (for pollution control and effective use of residual heat) and an ash fusion-furnace which produces a slag used as base material for road construction.

Another amazing thing is that the whole facility has been designed with public-relations in mind. The main entrance leads to an exhibition area where simple models (made from discarded bottles and boxes) are used to explain the plant operations to kids; a visitor's gallery runs around the perimeter of the building providing a bird's eye-view of all but the most hazardous operations.

However, there were many things I just could not understand, and on top of this list was the question of operating costs.

According to the guide, the annual budget for this plant is Yen 43 billion but it receives an income of only Yen 2 billion/year from electricity sales (Another official stated that last year's income from electricity sales was Yen 700 million with units sold at Yen 13/kW). The cost of garbage collection, processing and disposal was given as Yen 50,000/tonne...somehow things just don't seem to add up.

I guess its not easy to get a clear picture from a two-hour conducted tour. However, it does seem to be fairly obvious that this impressive, show-piece facility is viable only because of government subsidies.
 

Main control-room

Dumping area

Krugman's Mahajanapadas'

This year’s Nobel Prize for Economics has gone to Paul Krugman. I’ve read some of his political commentaries but until this announcement came in, I never knew that he was better known for his work as an original thinker in the field of economics.

This week, the Indian Express published a couple of articles on the Krugman’s work that got me interested in learning more about the award citation – “ for his analysis of trade patterns and locations of economic activity”. The first one was an op-ed piece by Bibek Debroy, linking his work tantalizingly to Indian history, and the second one by Karna Basu, praising Krugman for ‘clarifying complexity’.

First, Debroy. In “Krugman and the Indus”, he begins with a grand sweep of urbanization in ancient India and highlights two major events –the Indus-Ghaggar-Hakra civilization (5500 – 1300 BCE) and the birth of the 16 Mahajanapadas in the pre-Maurya, pre-Gupta period (~ 500 BCE). What are the forces that led to the creation and dissolution of these republics that perhaps had better urban planning, better municipal councils and systems for sewerage, drainage and sanitation, than most cities in ‘modern’ India?

Debroy’s article draws you in with its title and leaves you feeling marooned. Karna Basu, on the other hand, gives you a better perspective of Krugman’s contribution. But you are likely to find the most straightforward explanation in a PDF document at the Swedish Academy’s website.

International trade has a direct impact on billions of people. The dynamics of this have been traditionally explained by Ricardo’s (1800’s) ‘theory of comparative advantage’ and then extended by Heckster & Ohlin (1920’s) who looked at trade in terms of access to factors of production – some countries have relatively abundant labor but a scarcity of money, whereas some countries have lots of money but fewer workers. As a result some countries export industrial products and import agricultural products and vice versa.

This was a neat theory but failed to explain why trade keeps on increasing between identical countries. Krugman covered this by stating the seemingly obvious – consumers like to have choices. Given a choice, folks in Germany, Sweden and Japan would like to have the option of buying a BMW, a Saab or a Toyota.

But what about the cost of transporting a BMW to Japan? This is a topic covered under “Economic Geography”, which deals not only with what goods are produced where, but also with the distribution of capital and labor across countries / regions. Krugman reasoned that the real wages of labor are higher in countries with a larger population. Better economies of scale allow firms to produce a wider range of goods at lower prices, and this, in turn, encourages more people to migrate to urban areas seeking better wages and more choices. So it seems the location of cities and firms is a trade-off between economies of scale and transportation costs.

But I still have not understood how this allegedly path-breaking theory links up with the location of cities in ancient India. I have this sneaking feeling that this was Debroy's ruse to get more people interested in economic theories. He got me hooked for sure.

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References / Links:

• An Absolute Advantage - Karna Basu, Indian Express, 15 Oct., 2008
• Krugman and the Indus - Bibek Debroy, IE, 15 Oct., 2008
• International Trade & Economic Geography - The Royal Swedish Academy of Sciences http://nobelprize.org/nobel_prizes/economics/laureates/2008/info.pdf

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Note:

The 16 Mahajanapada's ('Great Kingdoms' / Republics) of Ancient India:

1. Varanasi (Kashi)
2. Ayodhya
3. Sravasti
4. Saketa (Koshala - Northern Uttar Pradesh)
5. Rajagriha (Magadha -- modern Bihar)
6. Vaishali (Vriji -- Northern Bengal)
7. Kaushambi (Vatsa -- Modern Madhya Pradesh)
8. Indraprasta (Area around modern Delhi)
9. Hastinapura (Kuru)
10. Adhichatra (Panchala - modern Uttaranchal)
11. Mathura (Surasena)
12. Podana (Ashmaka -- modern Maharashtra)
13. Ujjain (Avanti)
14. Purushapura (Modern Peshawar, Pakistan)
15. Taxashila (Gandhara -- modern Khandahar, Afghanistan)
16. Rajapura (Kamboja -- modern Afghanistan)

This list is just one of the many disputed lists. The confirmed ones are highlighted in bold.