Short Cuts (XII)

More short cuts to the news for the weekend. Some are good, others not! like life I guess!

1. Keneth Sokoloff passed away this week. Every scholar and researcher interested in Latin America, and more concretely, interested in why the region is where it is right now, should read some of his articles. He gives interesting ideas about all of these. Especially this ((gated though!):

Engerman, S. L. y K. L. Sokoloff. 1997. “Factor Endowments, Institutions and Differential Paths of Growth Among New World Economies: A View From Economic Historians of the United States”

2. When we were at the university and we read a lot of things about people we never saw, like Stiglitz, Lucas, North,... and many others it was quite disappointing! I always wondered how they looked alike. I even remember asking one friend who was heading towards the university of Chicago to send me pictures of some of them. Internet helped me with this! Now you can also see them moving! Wanna see Acemoglu talking about the rise and fall of nations?

3. Music suggestion: for those of you who love 70's R'N'R -ac/dc (with Bon Scott, of course), Led Zeppelin and Black Sabbath- then you should listen to this Australian power trio "Wolfmother". This saturday they play in Barcelona. I was really tired of listening to death bands!

Degrowth economics?

I cannot empirically demonstrate this whole idea (I'll try it, though, with some examples in successive posts) but a lot of signals lead me to think that we, developed societies in developed countries, live well over our possibilities. And certainly, if every citizen in the world were supposed to enjoy the same level of consumption we enjoy in the first world, I do think the planet could not handle with such pressure. Last Easter I came across a short article appearing in a national newspaper talking about a new radical growth theory called Degrowth Economics. An interview (in Spanish) with the creator can be found here.

More or less this field of study argues "for the need to deconstruct the current development debate, which he views as an unsustainable result of westernization. In order to truly develop, poor countries must break from the path of mental, cultural and economic dependency the so-called “developed countries” want to impose."

Something similar happened to us when we went to Bolivia to talk about the necessity to fight against cronyism in the national economy and tried to show the good things about markets (with strong states, of course!). Congressmen from the political party of Evo Morales -MAS (Movimiento al Socialismo)- were reluctant to accept our vision of the markets... indigenous had very different metal models to accept some of the basis of markets. Something similar happens with Islam and the predominant (western) views of what a good market looks like.

All of this came to my mind because I receive the interesting newsletter from New Economics Foundation explaining how they have tried to established the day when Britain's national level of consumption would start to go beyond their environmental means. According to them it was last 15th of April. Here you can download the whole report.

Short Cuts (XI)

Those involved in the invasion of Iraq seem to be falling! Some short cuts to the info in the net to enjoy during the weekend:

1. Time waits for no one and it won't wait for Wolfowitz! He quits! An interesting chance for the Bank to make important changes within. Interesting people talking about the Wolfowitz's affair (longer than a Brazilian soap opera). Nancy Birdsall, for example, asks herself which kind of World Bank we need. Dani Rodrik asks for candidates in his blog. And remember, it HAS to have US nationality! UPDATE: the Center for Global Development has released an interesting online survey to gather opinions from the development community about the selection process and the qualifications the candidate should meet to replace Wolfotwitz.

2. A recent report released by the Servicio de Estudios del BBVA analysing the economic impact of the Free Trade Agreement between Peru and the USA.

3. Everybody interested in LATAM should follow this interesting blog promoted by Nouriel Roubini. They have started with an interesting question about whether the actual economic success in the region is due to external conditions or good policies promoted within. Leaving aside the important differences existing among the different countries in the region (Hirschman would be very angry, though!) and without doing the appropriate analysis case-by-case, I think it is still too soon to have your say, but certainly the hike in prices of natural resources in international markets is playing a crucial role! Unfortunately, I'm not so sure about the crucial role of policies and initiatives promoted within the countries!

China is (unintentionally) promoting democracy abroad

An important amount of newspapers and news editions on TV here in Spain are increasingly promoting the participation of the audience. If you are involved in the news and if you can take a picture or capture a video of it you are very welcome to send it to the news editor. Some of these news groups are also offering cash in return, something that can create important perverse incentives. Here and here you can find some examples (if you enlarge the picture attached you will see one of these ordinary reporters capturing the news!).

This new capability is possible thanks to the affordability of mobile phones. (Almost) everybody has a mobile phone, and a great majority of these communication devices now bring a high-definition camera on it. The funny thing about all of this is that most of these mobiles phones and the majority of the components in them are being manufactured in China, the main reason explaining the low cost of them (the decreasing price of these type of products also explains the contention of inflation in developed countries given the hike in oil prices!).

It is funny... whereas in developed countries information and communication technologies (ICTs) are promoting transparency and participation, the country where most of these products are made is still characterised by the lack of transparency and democracy. Certainly, China is promoting democracy abroad! Unintentionally though!

Short Cuts (X)

More shortcuts (a few days later, though)...

1. Pretty good news last week! Bill Clinton (well, his foundation) has reached to an important agreement with some indian chemical firms to reduce the price for second line AIDS treatment in developing countries. Here you can find three interesting articles analyzing the impact of AIDS in developing countries. My question is... Why couldn't WHO or UNAIDS reach to this agreement before? My answer is... doing business with ex presidents from the US you get much more public awareness (signalling theory!)

2. A couple of friends flied last sunday to Zimbabwe, Tod Moss from CDG talks here about what to do in the country.

3. Why meddling children in the Palestinian cause with rage and fury? This footage, from Hamas tv station and addressed to infants, makes me really sad. Certainly, promoting these mental models is not the best way to enhance the appearance of individuals looking for peaceful solutions to the disastrous situation in the region. Instead of that, maybe they should teach the historical pact subscribed past week to bring peace back to Northern Ireland.

Short Cuts (IX)

Short cuts to interesting stuff in the www. Nice weekend!

1. Last 3rd of May it was World Press Freedom Day! Reporters without borders publish an interesting list of predators of press freedom. In this short piece Amartya Sen shows some of the positive consequences of having an independent media.

2. According to a recent report made by the World Economic Forum, the climate change, the political instability and the persistent and high levels of inequality are the most important obstacles for maintaining economic growth in Latin America.

3. There are two cartoonists I follow. One is El Roto, from EL PAIS, and the other is KAL, from The Economist. It is amazing how they depict our world!

The importance of taxing for development... the case of Latam

During the past year, and thanks to the funding of the Fundación Carolina, me and a colleague at the IIG, we have been able to research on the difficulties of reforming tax systems in the Central Andean region, more concretely: in Bolivia, Ecuador and Peru.

Why reforming? It seems pretty clear that these governments are incapable of obtaining the necessary resources to fulfill their main duties and responsibilities (those assigned by the society). In addition, in those countries there exists a widespread perception that taxes are collected in an inadequate manner (that is, inequitably and very complicating). The same negative perception appears when asked about public expenditures. The great majority of society perceive that taxes are spent inefficiently and rampant corruption facilitates misappropriation.

As a consequence, fiscal policy in these countries is trapped in a sort of vicious cycle by which people tend to do whatever they can to avoid paying taxes, whereas those in government lack the incentives to offer adequate public services such as education and health. The access to easy money, imposing taxes on activities to natural resources deepens these sort of problems.

Our main hypothesis relied on the idea that inequality and institutions (either formal and informal, and endogenously explained by this same inequality) play a great role in explaining the distortionary tax system prevalent in the region (low tax pressure, low redistribution, limited tax bases, progressive direct taxes on paper not in practice, tax system biased towards indirect taxes,...)

In a recent post on marginal revolution about economic heterogeneity in Latin America I came across this other interesting post on the necessity to spread the use of property taxes in developing countries.

Additionally, the necessity to achieve a new fiscal pact is achieving more and more importance in the developing agenda (especially in the LATAM region). The research department from the Inter-American Development Bank has recently edited a special issue on this important ingredient for the development recipe (here in English and in Spanish) which supposes an interesting start for those of you interested in this key issue!

Inequality lies in the heart of the "underdevelopment problems" in LATAM. Facing them becomes crucial, and constructing better public institutions with more resources seems to be a good first step! More on this issue to come!