Global Poverty Rates and Economic Growth -- Growth (not Greed) is Good

Roger Pielke's blog highlights an important insight: Growth is good:
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The figure above comes from a recent, excellent paper by Martin Ravallion, The Idea of Antipoverty Policy, which shows a dramatic acceleration in the reduction of global poverty since 1950,

Ravallion makes two observations based on the graph (of which he notes, "Neither observation has been made before to my knowledge"):

The middle of the 20th century saw a marked a turning point in progress against poverty globally. Figure 2 plots two series for the $1 a day poverty rate, from Bourguignon and Morrisson (2000) and Shaohua Chen and Ravallion (2010). There is a long list of data problems in these sources and their comparability. However, these are the best estimates we have, and the comparability problems are unlikely to alter two key observations from Figure 2: First, the incidence of extreme poverty in the world is lower now than ever before. While there have been calls to end extreme poverty at various times during the last century or so, they are surely now more credible than ever. Second, the time around 1950 saw a turning point, with significantly faster progress against extreme poverty.

More @ Roger Pielke Jr.'s Blog: Global Poverty Rates and Economic Growth:

Genetically Modified Domestic Product is $350 billion in revenues, or about 2.5% of GDP-- synthesis blog

Rob Carlson is good for providing the bottom line on synbiology:
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GMDP

As I announced during a Congressional Briefing in November, the total 2012 U.S. revenues from genetically modified systems, hereafter the Genetically Modified Domestic Product (GMDP), reached at least $350 billion, the equivalent of approximately 2.5% of GDP, up from $300 billion in 2010. For comparison, according to IHS iSuppli, the 2012 globalrevenues for the semiconductor industry amounted to $322 billion. Remarkably, assuming a 2011-12 GDP annual growth rate of 2.5%, the two year, $50 billion increase in GMDP accounted for almost 7% of total U.S. GDP growth.
Due to differences in regulatory structure, financing, and, consequently, pace of development and commercialization across the industry, the GMDP naturally breaks down into the sub-sectors of biotech drugs (biologics), GM crops, and industrial biotechnology...

More @ The U.S. Bioeconomy in 2012 reached $350 billion in revenues, or about 2.5% of GDP. - synthesis:

The challenges of food security and sustainability

At the Prospect Round Table Dec 10:

...“Markets and trade are the only way we are going to feed the world” said Alfred Evans, CEO of Climate Change Capital. “But you need an effective system with good price signals and policies to make them more effective. There is a policy deficit and a lack of link-up between global organisations.”

“International negotiations are failing across different fronts,” said Professor Sandy Thomas, Head of Foresight at the UK Government Office for Science. “National governments may be aware of these problems but there isn’t a lot of political appetite for this issue and voters aren’t demanding their governments act.”

But what is the scale of the problem, both internationally and at a country specific level? Professor Sir Gordon Conway, the agricultural ecologist who heads the Agriculture for Impact Programme at Imperial College London said one of the big demands would be for meat-based diets (from the burgeoning middle classes of developing countries). Extensive use of fertiliser, rising oil prices, and the fact that we are running out of good land and water pointed to a massive crisis in which the poor would suffer.

The problem of a lack of understanding about the systemic connection between water, food and climate was raised by James Cameron, the vice-chairman of the World Economic Forum’s Global Agenda Council on Measuring Sustainability and chairman of CCC. His concern was a lack of long term thinking— “a scarce resource” —when it came to investment. He was worried too about the inability to value “public goods” or to change the value of assets. For instance land liable to be made infertile by flooding was a “stranded asset” which was not reflected in its price.

Climate change, and its effect on food production, was high on the agenda too. Kevin Watkins, the executive director of the Overseas Development Institute, said that there was a “total disconnect” between climate discussions and food production. A three degree rise in temperature would be unthinkable. He asked whether we wanted cheap energy or our world leaders to get to grips with climate change.

He spoke of the climate change “adaptation apartheid” between rich and poorer countries. The last big drought in the US led to insurance pay outs of $17bn to farmers which is more than all the contributions to sorting out climate change. He illustrated the point: “We have the Thames barrier while in Bangladesh they teach the children how to swim.”

Red tape also hinders investment in agricultural infrastructure, a point made by Stewart Lindsay, the director of sustainability and global corporate affairs at Bunge Ltd, the global agribusiness and food company. He said that approximately $60 trillion of investment was required in global infrastructure between 2013-2030. We need to maximise the efficiency of agriculture by connecting infrastructure—roads, rail and water systems. He said that the amounts involved were beyond the private sector and that governments must support large infrastructure initiatives as well as reduce bureaucracy. Storage infrastructure is often inadequate in developing countries causing sizeable losses to producers and excessive costs which lessen competitiveness in the market.

On the issue of diet, the panel agreed that the possibility of cultural change or “demand suppression” is important but will be hard to achieve. Professor Tim Lang, Professor of Food Policy at City University, London said “If we are going to have a meat based diet then there will not be enough food. We need to start thinking differently about the sorts of food we eat and the west is going to have to eat less and waste less.” On food waste, Robert Gladwin, the head of sustainability at BASF said the one in three calories of food was wasted, a crisis in production. Viki Hird, senior campaigner on land use, food and water security at Friends of the Earth, questioned whether there was a crisis in production, citing the huge waste in the system...

Prospect Blog @The challenges of food security and sustainability:

Agriculture Development and Nutrition Security Special PNAS USA Feature

From Joonkoo Lee, Gary Gereffi, and Janet Beauvais, Global value chains and agrifood standards: Challenges and possibilities for smallholders in developing countries doi:10.1073/pnas.0913714108

Agriculture Development and Nutrition Security Special Feature - Perspective

C. Peter Timmer
Behavioral dimensions of food security
PNAS 2012 109 (31) 12315-12320; published ahead of print September 20, 2010, doi:10.1073/pnas.0913213107

Abstract
The empirical regularities of behavioral economics, especially loss aversion, time inconsistency, other-regarding preferences, herd behavior, and framing of decisions, present significant challenges to traditional approaches to food security. The formation of price expectations, hoarding behavior, and welfare losses from highly unstable food prices all depends on these behavioral regularities. At least when they are driven by speculative bubbles, market prices for food staples (and especially for rice, the staple food of over 2 billion people) often lose their efficiency properties and the normative implications assigned by trade theory. Theoretical objections to government efforts to stabilize food prices, thus, have reduced saliency, although operational, financing, and implementation problems remain important, even critical. The experience of many Asian governments in stabilizing their rice prices over the past half century is drawn on in this paper to illuminate both the political mandates stemming from behavioral responses of citizens and operational problems facing efforts to stabilize food prices. Despite the theoretical problems with free markets, the institutional role of markets in economic development remains. All policy instruments must operate compatibly with prices in markets. During policy design, especially for policies designed to alter market prices, incentive structures need to be compatible with respect to both government capacity (bureaucratic and budgetary) and empirical behavior on the part of market participants who will respond to planned policy changes. A new theoretical underpinning to political economy analysis is needed that incorporates this behavioral perspective, with psychology, sociology, and anthropology all likely to make significant contributions.

behavioral economics, structural transformation, food crises, world rice market


Joonkoo Lee, Gary Gereffi, and Janet Beauvais
Global value chains and agrifood standards: Challenges and possibilities for smallholders in developing countries
PNAS 2012 109 (31) 12326-12331; published ahead of print December 13, 2010, doi:10.1073/pnas.0913714108

Ted London and Ravi Anupindi
Using the base-of-the-pyramid perspective to catalyze interdependence-based collaborations
PNAS 2012 109 (31) 12338-12343; published ahead of print April 11, 2011, doi:10.1073/pnas.1013626108

Michael Kevane
Gendered production and consumption in rural Africa
PNAS 2012 109 (31) 12350-12355; published ahead of print May 4, 2011, doi:10.1073/pnas.1003162108

Daniel Maxwell, Luca Russo, and Luca Alinovi
Constraints to addressing food insecurity in protracted crises
PNAS 2012 109 (31) 12321-12325; published ahead of print June 6, 2011, doi:10.1073/pnas.0913215108

Prabhu L. Pingali
Green Revolution: Impacts, limits, and the path ahead
PNAS 2012 109 (31) 12302-12308; published ahead of print July 23, 2012, doi:10.1073/pnas.0912953109

Laurette Dubé, Prabhu Pingali, and Patrick Webb
Paths of convergence for agriculture, health, and wealth
PNAS 2012 109 (31) 12294-12301; published ahead of print July 23, 2012, doi:10.1073/pnas.0912951109

Thomas Reardon, C. Peter Timmer, and Bart Minten
Supermarket revolution in Asia and emerging development strategies to include small farmers
PNAS 2012 109 (31) 12332-12337; published ahead of print December 6, 2010, doi:10.1073/pnas.1003160108

Global standards and local knowledge building: Upgrading small producers in developing countries
PNAS 2012 109 (31) 12344-12349; published ahead of print June 13, 2011, doi:10.1073/pnas.1000968108

Ross A. Hammond and Laurette Dubé
A systems science perspective and transdisciplinary models for food and nutrition security
PNAS 2012 109 (31) 12356-12363; published ahead of print July 23, 2012, doi:10.1073/pnas.0913003109

Patrick Webb and Steven Block
Support for agriculture during economic transformation: Impacts on poverty and undernutrition
PNAS 2012 109 (31) 12309-12314; published ahead of print December 20, 2010, doi:10.1073/pnas.0913334108


@ Special Issue 2012

USDA ERS - Increased productivity now the primary source of growth in world agriculture

The average annual rate of global agricultural growth slowed in the 1970s and 1980s but then accelerated in the 1990s and 2000s. In the decades prior to 1990, most output growth came about from intensification of input use (i.e., using more labor, capital, and material inputs per acre of agricultural land). Bringing new land into agriculture production and extending irrigation to existing agricultural land were also important sources of growth. Over the last two decades, however, the rate of growth in agricultural resources (land, labor, capital, etc.) slowed. In 2001-10, improvements in productivity—getting more output from existing resources—accounted for more than three-quarters of the total growth in global agricultural output, reflecting the use of new technology and changes in management by agricultural producers around the world. This chart is found in the ERS data product, International Agricultural Productivity, on the ERS website, updated November 2013.
@ USDA ERS - Chart: Increased productivity now the primary source of growth in world agriculture:

Ireland's Renewable Energy

 

 

Today a Memorandum of Understanding has been singed between the Minister for Communications, Energy and Natural Resources Pat Rabbitte and his British counterpart Ed Davy. The agreement paves to way to allow Irish wind farms to export directly to Britain.

 

Speaking on RTÉ's Morning Ireland, Mr Rabbitte described the memorandum as a "win win" development.

 

This will enable Britain to buy renewable energy from Ireland helping the country to meet mandatory EU targets on renewable energy and save British consumers £7bn. As well as providing 10% of it's 2020 renewable energy target, it will mean that the British countryside will not be blighted by wind turbines.

 

So what's in it for Ireland?

 

The Irish Times states "the industry generally has been arguing that a deal will provide the trigger for billions of euro in investment with the potential to create tens, if not hundreds, of thousands of jobs". Every unemployed person costs the state in the region of €20,000 directly, through lost money in income tax and social welfare costs. So if this scheme takes 50,000 off the unemployment register, it could be worth €1bn to the state annually.

 

An EU Directive (2009) requires all EU member states to reach a 20% share of energy from renewable sources by 2020. Currently Ireland's share stands at 18%. This memorandum should comfortably bring Ireland over this target (expected to increase to 40% by 2020) and avoid paying penalties for failing to meet the target.

 

Minister Rabbitte has stated that "Ireland has the potential to generate more wind energy than its population could consume". Basic economics tells us that a surplus in supply leads to a reduction in price. Reduced energy costs of course reduce the cost of doing business.
 

While this is obviously very good news for the Irish economy, there are some areas which have not been clarified under this agreement.

 

How much of this energy will be supplied to homes and business in Ireland? The value of oil imports to Ireland is staggering. In 2010 it was estimated that Ireland imported 166,000 bbl/day, costing a whoppong US$5.3bn. In 2008 this figure was US$7.2bn. Naturally the more green energy that is supplied to Irish homes and businesses, the less reliant they are on oil. The lower the reliance on oil, the greater the savings to the Irish economy. So this begs the question, why are we exporting to Britain when the benefits of keeping green energy at home are so great?

Only the state can own electricity networks, However the private developers will effectively be establsihing their own networks by connecting their windfarms to Britain. How much will be the benefit to the state if they are to transfer ownership of the networks on commercial terms?
 

The most fundamental issue with this agreement is Ireland's share of the revenue (or lack of revenue!) generated from the wind tubines. The export of goods and services is not subject to Vat. Therefore the benefit to the exchequer from the sale of Ireland's natural resources, is dependent on tax revenues generated from profits of the energy firms.
 

However, renewable energy firms are not subject to the same taxation measures as non renewable energy companies. So instead of paying the 25% (before tax write-offs) tax rate applied to the profits a company makes from the sale of Irish oil or gas, and an additional Profit Resource Rent Tax (PRRT) of between 5% and 15%, levied on post-tax profits of licences issued after 2007, these wind energy companies are only liable to the standard corporation tax rate of 12.5%.
 

Not only should all profits made on the expolitation of Ireland's natural resources of renewable energy be taxed at the same level as natural resources of finite energy, the

government then needs to legislate to increase this 25% rate to a level that is similar to our European neighbours and remove the scope for tax write offs, loopholes and accountancy tricks which yields some of the lowest government takes in the world according to a report by Indecon Economic Consultants.

Ireland has astounding wealth in natural resources which provides a means to solve our economic problems. But this would require a fundamental change in policy.

Time for a Referendum?

This week there has again been calls for a referendum on a United Ireland. Unionist politicians such as Jeffery Donaldson a.k.a Mystic Meg tell us there is no need to call a referendum as neither the South nor the North will vote in favour. Some Nationalists tell us that we should have a referendum but now is not the right time to have it, as there remains a Unionist majority in Stormont and because of the current economic climate.

In my opinion these Nationalists are correct. Now is not the right time. I do not really think Sinn Féin want a referendum in 2013 or in the short term either. But this is not the point. They know the only way of getting a Green Paper on Irish Unity is to have a referendum called. And when it is called or agreed to, there will be alot of work to do before a date for the referendum can be set. You can't expect people to vote for something in the future if you do not know what you are voting for. How would 26 County voters have voted on the Lisbon Treaty before the terms and conditions of the treaty were set out? If around 30% (as some estimate would be the percentage in favour of a UI if a referendum was held today) were in favour before they even read the treaty, the bookies may have stopped taking bets by the time terms were published.

A series of talks should begin bewteen the Irish government, the British govenment and all parties in order to trash out the Green Paper. An agreement could take several years! So in this light Sinn Fein are correct to call for a referendum now as it needs to be set out what a United Ireland would entail - Federal arrangement?, Fiscal policy?, Health? Education?, Welfare?, Commonwealth membership? etc.

The British government will have an important role to play and they will need to be careful. If they maintain that they have no strategic interest they will agree, should the people vote for reunification, to subsidise the transition period as the North's economy is rebalanced (1 public sector job cut for every 2 private sector job created anyone?). Otherwise disidents can argue that the British purposely positioned the North as a welfare dependent economy in order that the South could not initially afford reunification.

I say initially becasue it is not yet known whether the sum of savings from synergies, removal of duplication of servies etc and the extra revenues from suitable fiscal policies, economies of scale etc that would occur in a UI are greater than the current British subvention to the North of Ireland.

And speaking of the economic argument. To those who suggest that people will not vote for a UI for economic reasons, let me ask them this. Say in a UI, the OAP of the South is to be maintained. How many Unionists (and there are alot of them over the age of 65) will vote No to having their weekly income doubled from £97.65 to €230.30 at todays rates?

Economic woes

In a week that we have learned that 11,000 private sector jobs have been lost in two years a leading economist has warned that the North's economy is facing meltdown.

Attempts to lower the North's Corporation Tax rate appear to have failed. Although we hear Finance Minister Sammy Wilson insisting that the issue will be revisited in the Autumn, the fact is, The North will not receive a special dispensastion for a reduced CT rate. The main reasons for this are that if NI were to receive a lower CT rate from the rest of the UK, there would be nothing to stop British firms based in London from moving operations to The North in order to avail of the lower CT rate. The other reason is that if NI got a lower tax rate Scotland, Wales and North East England would be screaming from the rooftops for equal treatment. With a Scottish referendum on independence in the pipeline, offering NI a lower CT rate while refusing to give it to Scotland is a high risk strategy for the Tory-Lib Dem coalition. It could be enough to swing the referendum for the 'Yes' side.

With a CT rate of 24% a deterrent to Foreign Direct Investment (FDI), the key strategy used to attact FDI to The North has been Sustainable Financial Assistance (SFA). This is basically EU funding used to offer foreign companies cash to locate to the region. This economic lever used to attract FDI to NI is due to be abolished by the EU next year. Given that SFA sounds very much like bribery this should not come as a surprise.

With the two most powerful economic levers either being phased out (SFA) or unattainable (CT), The North does not have many hands left to play. There is one hand though, a pocket of aces, if only it could be seen!

We've Struck Oil!

After decades of being told that Ireland has no natural resources, years of digging and after some 215 barron holes, in March of this year Ireland's first commercial oil well was discovered by Providence Resources off the Cork coast. Initial estimates stated that the Barryroe oil well contained between 373 and 893 million barrels of oil. However today Providence has stated that the oil field may contain up to 1.6 billion barrels of oil, four times the original estimate!

We are rich, rich I tell you, rich beyond our wildest dreams! Not quite. Given that all previous attempts to find oil off the Irish coast have been fruitless the Irish government, in an attempt to attract exploration and investment has had to set a relatively low tax levy of 25% on profits companies make from oil and gas found in Irish territories. For the same reason the state does not receive Royalties from oil and gas discoveries.

Joe.ie reports that even with the low tax levies and lack of royalties, the State could benefit to the tune of a whopping €100 billion. Others stress that significant losses on Providence's books will be written off against profits made on the Barryroe oil well hugely reducing the benefit to the Irish exchequer.

Even if the latter is correct, not all is lost. It is likely that the Government will increase the 25% tax and introduce royalties in order to benefit from further discoveries but not to an extent that will scare off future investment, exploration and drilling.

But is there more oil and gas and if so why has it not been found previously? Well it is generally accepted that the twenty fist centuary has shown enormous advancements in technology. If it is there they will find it. But is it there? David Horgan MD of Petrel Resources plc certainly think so.

"The oil world has been transformed in recent years: despite fluctuations, the oil price remains high. Ireland’s fiscal terms are competitive and legal title is secure.

"Technology has leaped ahead on several fronts, reducing costs and risks. The combination of three dimensional seismic surveys and directional drilling allow explorers to map and drain complex reservoirs.

"The planned development of the 1981 Ballyroe discovery, after a dramatic increase in reserves, shows what is now possible. We believe that the Irish offshore will be increasingly attractive to investors."

Economic argument part 1

This week the UK Treasury has dashed hopes of a cut in the Corporation Tax (CT) in Northern Ireland from the UK rate of 24% to 12.5% to match the rate of the Republic of Ireland. This of course does not come as any surpirse. There are two main reasons why the Westminster Government and Treasury would not/will not agree to a cut in CT.

One reason is that if NI received a special dispensation to cut it's rate of CT, Scotland, Wales and North East England would be up in arms if they are not also allowed a similar cut. The other major reason is that if the cut in CT for NI was enforced there would also be nothing to stop large companies based in London and other parts of Britain from relocating in Northern Ireland to avail of the lower rates and pay less taxes resulting in fundamental job losses in greater London and other parts of Britain as well as decimating the tax take from Corporation Tax for the UK exchequer.

Calls for a reduction in CT in the North demonstrate the weakness of the Northern Ireland economy. The reason for this weak economy boils down to simple economic policy. Economic policy of course is made up largely of fiscal policy. In NI fiscal policy is controlled by London. The UK government determines fiscal and economic policy on the basis of policy decisions which will maximise the tax take for the UK as a whole. Not surprisingly this is entirely based on what is in the best interests of the greater London and South East England region. The UK government can afford to charge high Corporation Tax in London as being one of the major cities of the world and a financial powerhouse companies need to have a base in London regardless of the taxes imposed. The UK government can also charge other high taxes such as airport passenger duty (APD) for similar reasons without affecting tourism or business in the greater London area.

While British economic policy may indeed maximise the tax revenues for the UK exchequer it has done nothing to prevent a basket case economy that has developed in the North with a public sector which employs almost a third of its total workforce, compared with 21 per cent across the UK and less than 20% in the Republic. By throwing thousands of poorly paid public sector jobs and a block grant of some £6 billion at Northern Ireland the UK government has largely succeeded in disguising the real state of the local economy in Northern Ireland. The truth is that NI will never reach its potential as part of the UK and will forever point the begging bowl towards London.

Of course there is an alternative, an alternative where economic and fiscal policy would be focused on what is in the best interests of the region, economic and fiscal policy which would allow Northern Ireland to reach its undoubted potential. The economic opportunities and strenghts of Northern Ireland are almost identical to that of the Republic of Ireland. In this context a United Ireland makes economic sense. An all Ireland economic policy would have huge benefits for the six north eastern counties of Ireland. CT of 12.5% would create between 58,000  and  90,000 private sector jobs in the medium term. The abolishment of APD and agressive marketing of Ireland as one country would see the north reach it's vast tourism potential creating thousands of additional jobs in this industry vital to Ireland's economy.

These are just two examples of how focused economic policy that would be brought about in a United Ireland would allow Northern Ireland to dramatically increase foreign direct investment, tourism numbers leading to mass job creation allowing NI to  rebalance the economy (in terms of reducing public sector jobs and creating private sector jobs) and create wealth. Economic policy of the Republic of Ireland implemented in Northern Ireland would allow the region to reach its undoubted vast potential which cannot happen so long as NI is subject to UK economic policy tailored to meet the best interests of South East England. .