Posts tagged with: developing nations

solar light, developing worldOver a billion people are still using kerosene as a primary fuel source, with over 1.5 million dying annually from issues related to indoor air pollution and kerosene fires. For many in the developing world, solar lamps are a new, inexpensive solution to the problem. A recent piece in The Economist hails solar lamps as the next “mobile phone” for the poor, noting that “its spread is sustainable because it is being driven by market forces, not charity.”

In an article for Christianity Today’s This is Our City project, HOPE International‘s Chris Horst interviews two business leaders from the industry who share how their purpose and direction in providing these products stems from a strong missional orientation toward work and a belief in the power of markets.

For Brian Rants, vice president of marketing for Nokero, a leading solar light company, involvement in the industry came after a fundamental transformation in his thinking:

“I am very surprised to find myself in business,” Rants says. “Business seemed to be a backup plan to being a missionary. Or being a pastor like I thought I would be. It seemed like businesspeople were just ‘extras’ in God’s story, rather than lead or even supporting actors.”

Over the past ten years, Rants worked for a number of nonprofits and churches. After going through graduate school, however, he began to discover the ways enterprise is improving the lives of the poor around the world. Rants excitedly joined Nokero, equipped with a restored vision of vocation. Through leveraging his knack for marketing, Rants fights poverty not just through his volunteerism and philanthropy, but inherently through his work in business. (more…)

Blog author: jballor
posted by on Monday, April 2, 2007

A couple weeks ago the NYT magazine ran a piece by contributing writer Tina Rosenberg, which attempts to outline some of the ways in which “everyone in a wealthy nation has become the beneficiary of the generous subsidies that poorer countries bestow upon rich ones.”

What does she mean? In “Reverse Foreign Aid,” Rosenberg asserts that there are five major forms of poor-to-rich international subsidy. The first is the tendency among poorer nations to build-up great reserves of hard currency, often in the form of T-bills. The problem here is that there is an opportunity cost in holding the low-return but ultra-secure US Treasury bills: “All the money spent on T-bills — a very substantial sum — could be earning far better returns invested elsewhere, or could be used to pay teachers and build highways at home, activities that bring returns of a different type.”

A second form of subsidy is in the WTO requirements that member nations abide by copyright and intellectual property protections. “There are good reasons for countries to respect intellectual property, but doing so is also an overwhelming burden on the poorest people in poorer countries,” writes Rosenberg.

So-called “tax holidays” form a third kind of subsidy, in which poorer nations offer tax incentives and various other breaks to multi-national corporations to entice them to bring their operations to their country. Rosenberg writes, “Since deals between corporations and governments are usually secret, it is hard to know how much investment incentives cost poorer countries — certainly tens of billions of dollars. Whatever the cost, it is growing, as country after country has passed laws enabling the offer of such incentives.”

Rosenberg also describes brain drain as a form of subsidy, in which skilled professionals who are trained in poorer nations emigrate to wealthier ones. She also points out the adverse effects that domestic subsidies of various industries, such as agriculture, can have on poorer nations. Somehow or other this direct subsidy becomes a “reverse subsidy” because “corn, rice or cotton exported by rich countries is so cheap that small farmers in poor countries cannot compete, so they stop farming.”

And finally, Rosenberg calls the disproportionate negative effects of climate change on poorer nations the “ultimate subsidy.” She writes, “American energy use is being subsidized by tropical coastal nations, who appear to be global warming’s first victims.”

The essay is really a bit uneven. It’s hard to fathom why, for example, cheaper imports of agriculture commodities from wealthier nations should be seen as “reverse” subsidies. Just because a certain practice or policy negatively affects a poorer country doesn’t mean that it is a “reverse” subsidy. And just because wealth is created in the first world doesn’t mean that it comes at the expense of someone in the third world, although there are good reasons to see that Rosenberg is right about the consequences on agricultural sectors in developing nations.

With respect to the second form of “reverse subsidy,” Rosenberg is really describing a kind of competition between developing nations, and the beneficiaries aren’t so much wealthier governments but large multi-national corporations. Of course, many critics of the developed world can’t or won’t distinguish between these two (all the better to fit into the picture of a growing neo-liberal “empire”).

Brain drain is a real problem for the developing world, but as is the case with so many of these instances of “reverse subsidy,” Rosenberg is pointing to a legitimate issue or concern but failing to ask the right kinds of questions, and thus providing some questionable solutions (a neo-Keynesian answer for T-bill stockpiling?). Why, for instance, are professionals leaving developing nations to work in places like the United States? In many, if not most, cases money surely is a motivation. But there certainly are other factors at work, and the potential for greater income isn’t a sufficient explanation as to why so many people leave their home, friends, and family to go live in a foreign country. Indeed, large-scale migration out of a nation is a pretty reliable indicator that something is wrong in the native country.

And maybe the fact that poorer nations don’t respect copyright and IP rights is as much a contributor as it is an effect of their lower economic status. How can you expect to be a country that fosters innovation if there are no legal protections for innovation and invention?

A recent NBER paper, “Globalization and Poverty,” examining some of these issues makes the case that globalization is a complex phenomenon and that in some cases segments of the poor can be made worse off. This is no doubt true, and the merit of Rosenberg’s piece is that it points out some of the real-world issues that a globalized economy faces. The question remains, however, whether at least some of these negative effects might be mitigated by a freer and more liberalized system of trade rather than one which relies on subsidies, tariffs, and protectionism.

Blog author: jcouretas
posted by on Tuesday, September 19, 2006

Africans are hailing a major shift in policy at the World Health Organization: A recommendation for the limited, indoor use of DDT to control malaria.

The fight against the disease, which is a leading cause of death in the developing world, has been hobbled by a long running campaign by environmentalists to ban the insecticide, a campaign that resulted in millions of needless deaths.

The South African health ministry welcomed the policy shift, noting that its return to the use of DDT had reduced malaria deaths from 64,868 in 2000 to 7,754 in 2005.

Health ministry spokesman Sibani Mngadi said that the “incidence of malaria had decreased from 15 per 10,000 people in 2000 to two per 10,000 in 2005 in malaria-affected areas.”

On Friday, the WHO released a statement that, nearly 30 years after phasing out the indoor spraying of DDT, gave a “clean bill of health” to the use of DDT. The organization is “now recommending the use of indoor residual spraying (IRS) not only in epidemic areas but also in areas with constant and high malaria transmission, including throughout Africa.”

“The scientific and programmatic evidence clearly supports this reassessment,” said Dr Anarfi Asamoa-Baah, WHO Assistant Director-General for HIV/AIDS, TB and Malaria. “Indoor residual spraying is useful to quickly reduce the number of infections caused by malaria-carrying mosquitoes. IRS has proven to be just as cost effective as other malaria prevention measures, and DDT presents no health risk when used properly.”

Read Paul Driessen’s commentary on the Africa Fighting Malaria site on the WHO announcement:

In Kenya alone, 34,000 young children a year perish from malaria, says Health Minister Charity Ngilu. Uganda suffers 100,000 deaths annually, notes Minister of Health Dr. Stephen Malinga — the equivalent of a jetliner with 275 people slamming into its Rwenzori Mountains every day.

Africa has 400 million cases of acute malaria per year; up to 2 million die. Countless millions are too sick to work or go to school, countless millions more must stay home to care for them, and meager family savings are exhausted on anti-malaria drugs.

The Wall Street Journal (subscription required) neatly summed up the issue yesterday:

Malaria is the number one killer of pregnant women and children in Africa and among the top killers in Asia and South America. It’s long been known that DDT is the cheapest and most effective way to contain the disease, which is spread by infected mosquitoes. But United Nations health agencies and others have for decades resisted employing DDT under pressure from anti-pesticide environmentalists. After tens of millions of preventable malarial deaths in these poor countries, it’s nice to see WHO finally come to its senses.

Click on the image above to vist Acton’s special Impact Malaria! Web page and to download the institute’s “Let Us Spray” print ad. The ad, which has run in Christianity Today and WORLD Magazine, is available for use in church bulletins, student newspapers and other publications — free of charge.

We often hear about the “need” for debt forgiveness. Our movie stars and celebrities like to clamour about it being a “moral obligation” and, of course, leaders of developing nations like the idea as well. But is debt forgiveness really going to help out the people of these developing nations? Samuel Gregg, Acton’s director of research, argues that debt forgiveness is not a moral obligation, nor is it necessarily such a great idea for the economies of some of these countries. Dr. Gregg examines the Republic of the Congo as an example of why debt forgiveness is a bad idea.

President Sassou-Nguesso is meeting with President Bush today, and will likely raise the topic of debt forgiveness. The average person in the Congo lives on about $2 a day. The nation does have a well supplied oil industry, although much of the revenue doesn’t ever make it to the marketplace.

Where does this money end up? Likely, it is diverted to extravagent spending for President Denis Sassou-Nguesso (for example, his 8-day, $295,000 trip to New York in 2005) and his entourage. Diverting monies from the oil industry hurts the economy directly by destroying the nations contractual accountability. In order for foreign investment to function well the investor needs to have some assurance that he will see profits and growth. If an economy tends to make money disappear, investment becomes unlikely. Dr. Gregg writes:

Allowing heavily indebted nations to walk away from their debts sends precisely the wrong economic signal to private and public international lenders of capital. Why should they lend any more funds to such countries in the future if they can never be sure their funds will be returned? Developing countries need to develop reputations as responsible borrowers who not only deploy the borrowed funds productively but who also repay their debts as contracted. How will debt forgiveness of a country like the Congo, especially given its extensive government corruption, help the Congo to achieve either goal?

The solutions to the problems of national poverty, especially in developing nations with rich natural resources and motivated, entrepreneurial, citizens lies in holding those nations’ leaders accountable rather than giving in to pleas for more money that can be further diverted into their own, personal treasuries.

For more information about debt forgiveness and solutions to poverty, look into our Impact campaign. The solution to poverty requires more than good intentions, it requires sound economics as well.

Related Items:

White House Press Office, “Remarks by President Bush and President Sassou Nguesso of the Republic of the Congo in a Photo Opportunity,” U.S. Newswire, June 5, 2006.

Associated Press, “Bush, President of Congo Discuss Darfur,” Washington Post, June 5, 2006.

Eli Lake, “Congo Battle Looms Over White House,” New York Sun, June 5, 2006.

Robert E. Wright, “Review of James Macdonald A Free Nation Deep in Debt: The Financial Roots of Democracy,” Economic History Services, May 31, 2006.

Marc Vander Maas, “Bono: Give Us a Call,” Acton Institute PowerBlog, May 19, 2006.

Jordan J. Ballor, “The Myth of Aid,” Acton Institute PowerBlog, May 15, 2006.

Samuel Gregg, Banking, Justice, and the Common Good. Grand Rapids: Acton Institute, 2005.

Jordan J. Ballor, “Movie Review: ‘The Debt of the Dictators’,” Acton Institute PowerBlog, July 21, 2005.

Osvaldo Schenone and Samuel Gregg, A Theory of Corruption. Grand Rapids: Acton Institute, 2003.

Blog author: jcouretas
posted by on Thursday, April 6, 2006
Where will they go?

Churches and religious relief organizations are playing a much more active role in U.S. foreign policy. And that has been obvious in recent months in the recovery efforts for the South Asian tsunami and the Pakistan earthquakes.

In March, the Pew Forum on Religion & Public Life invited Andrew Natsios, who recently left the U.S. Agency for International Development as chief administrator, to talk about his five-year term there. This is a must-read for anyone who works in this field, or donates money to religious relief organizations. Some of Natsios’ most fascinating observations are about the way “Beltway Politics” influences aid policy in remote corners or the world, and the conflict within Islam about its relations to the West.

He recounted a story about a meeting with religious leaders in an unnamed African country:

We had a discussion about how HIV/AIDS was ravaging their congregations and the mosque. And the man representing the Muslim community was the president of the Muslim Doctors Association of this country. The interesting thing was the tension in the room was not among the Muslims. Muslims were 20 percent of the population of the country. It was between the pentecostals and the Anglicans. That was the theological tension. I could see it going on at lunch. I was troubled by it. But by the end of it the ambassador said, this is the best conversation I ever heard. It was a wonderful conversation because they didn’t realize that they’re all active in this area. They are all worried about HIV/AIDS because when parents die, you know who they go to first. They don’t go to the NGO community in this African country. The government ministries are not that functional. They don’t go to the government. They go to the mosque and the church for the children. Who is going to take care of the children?

And they said, we’re completely overwhelmed by orphans. They don’t know what to do with them all. They don’t have any money; they are poor parishes and congregations.

Natsios talks about Eurpean and American NGOs that press a secular approach in societies that are fundamentally religious. In fact, he says, many are hostile to the Church:

The Europeans and the Americans go in, groups not necessarily associated with governments and they press this secular thing, but in fact they are deeply religious societies. Peter Berger has written something on this; the argument he makes is that the West is basically an island of secularism, particularly Europe, when the rest of the world comes from a religious tradition – regardless of what the tradition – whether it’s animism, Catholicism, Islam, Buddhism, Hinduism or Confucianism.

If you are really developmentally mature, you don’t go into another country and trash their culture because you’re not going to be very successful in the development process if you do that. Both the left and the right do this, and they have done it to AID. I have received letters attacking us simultaneously from the left and the right on the same policy.

Read the transcript for “Religion and International Development: A Conversation with Andrew Natsios” on the Pew Web site.

Blog author: jballor
posted by on Tuesday, February 28, 2006

I was watching my favorite rerun on TV Land the other day, Bonanza. If you don’t know Bonanza, you should. It’s perhaps the classic TV western, and I was watching episode #68 from Season Three, “Springtime.”

One of Ben Cartwright’s friends, Jedidiah Milbank is injured during a roughousing mud-wrestling match between Adam, Hoss and Little Joe. As reparation Ben volunteers the three boys to take care of Milbank’s business for him. It just so happens that there are three tasks, so each of the boys gets one.

Adam Cartwright gets the final task and it is to evict a family from a ranch for non-payment. It seems that Milbank had set up an arrangement for the family to pay for half of the ranch up front, and the rest in monthly installments. Well, the family was a number of months behind, and Milbank was eager to foreclose.

The eldest Cartwright brother dutifully rides off to the ranch, and happens upon a pleasant but beleaguered clan. It seems that the family had tied up most of their capital in a prize bull, who had been mauled by a bear before it could sire more than a few calves. And all but a handful of those calves were drowned in spring floods. When the water pump broke so they could no longer irrigate their crops, the family was left without any source of revenue.

That’s the situation when Adam arrives. The pieces of the pump need to be repaired, but one necessary part must be purchased new and costs $200. The family just doesn’t have it. Instead of foreclosing on the home, Adam, who shares his father’s “strong moral code,” decides to help out the down-and-out family. They aren’t poor because of the lack of effort or work, but simply because of circumstances and poor decisions such as tying up capital in the risky move to buy the stud bull.

So what does Adam do? He helps the father fix the pieces of the well that can be repaired and comes up with a plan to use the pump to double the land that can be irrigated. This will potentially double the family’s crop, helping them to get their heads above water again. The family will need to sell the few remaining calves from the stud stock to pay for the expensive replacement part for the water pump. In the meantime, Adam loans the family the money to get current on their debt to Milbank, averting the disaster of eviction.

Why am I talking about this episode?

I believe it is a great example of how compassion can work within the capital market system. Certainly Milbank filled the role of the archetypal greedy capitalist, but the Cartwrights themselves own a 1,000 acre ranch and are incredibly wealthy by the standards of the day. The difference between Milbank and the Cartwrights is in how they used their wealth and power. By the letter of the law and justice, Milbank had a right to foreclose. By contrast, it was compassion that motivated Adam.

The Heidelberg Catechism, a traditional symbol of Reformed Christianity, notes that one of the reasons we work is so that we can be good stewards of our wealth. It reads, “I faithfully labour, so that I may be able to relieve the needy” (Q&A 111). That’s exactly what Adam Cartwright was doing with his wealth.

And he did it in such a way that it was oriented toward the family regaining their own financial independence. He loaned them part of the money, as a sort of nineteenth-century version of a micro-capital investment, but also made sure they had to invest what they had in their own future by selling the remaining calves.

There’s a lesson to be learned in all this. The United States is in an analogous situation with respect to the developing world as the Ponderosa and the Cartwrights were to that struggling family. We can choose to embody the “cowboy compassion” of the Cartwrights or the craven greed of Jedidiah Milbank.

A great way to invest in the future economic development in poorer nations is through micro-loan investment. Very often it is difficult to get reasonable long-term or even short-term capital loans in these countries, because of the volatility of the currency and government corruption (for more on banking and corruption, see these two issues of the Christian Social Thought Series: Banking, Justice and the Common Good and A Theory of Corruption).

Here are some groups that do micro-loans in developing economies that are worth checking out: Five Talents, Opportunity International, and Kiva.