Archive for category: Economy

Information and stories about economy.

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The Benefits of Fecovita for Argentine Wineries

Benefits of FecovitaFecovita stands for the Federation of Argentine Viticulture Cooperatives; this group comprises 5,000 winegrowers that makeup 29 cooperatives. This group’s control of the wine market totals at 22 percent, with it owning roughly 30,000 hectares of land as of 2015 and producing over 260 million liters of wine in 2014. There are many benefits of Fecovita throughout Argentina. 

Fairtrade Advantages

The wineries that benefit from Fecovita operate as officially recognized Fairtrade producers. In this case, Fairtrade is an accredited certification company that works to provide a more equitable trade system for farmers and workers across the globe. Only four countries out of the 50 wine-producing countries in the world adopt Fairtrade labeling for their wine products including South Africa, Lebanon, Chile and Argentina.

Fairtrade labeling in Argentina has led to a floor price for grapes, which allows farmers to receive proper wages as well as improvements in farming practices, education and health care. As a result of Fairtrade labeling, workers have also been able to receive eye and dental care, help with nutrition and even community support for schools and health centers. 

Additional Benefits of Fecovita

The wine industry in Argentina has grown to thrive off of the foreign market. The Federation has provided small cooperatives with a seat at the negotiating table with much larger foreign and domestic wineries. As of 2015, Mendoza, a province to the west of Buenos Aires, supplied 70 percent of the world’s Malbec, becoming a massive wine influencer. Although reliance on exporting wine creates a sensitive reaction to the global economy, cooperatives and the contratista (contractor) system have helped to shield workers from this instability.

The contratista system entitles workers to a percentage of total grape sales every year, providing a voice when the meetings occur. Viñasol, an association of small wine companies, has used the extra profits that Fairtrade obtained for computer education for the children of the contract workers and also gave some money to a worker who was constructing a home for his family.  

Additionally, to ensure the production of quality products, Fecovita offers education and technical assistance. Some examples include the purchase of equipment, fertilizers and pesticides for individual members. The Federation also offers to local cooperatives for other necessary equipment, such as netting to prevent hail damage. Further, the cooperatives are able to transport the wine to the bottling facility just outside of Mendoza without cost.

All of these services come at a high cost that the cooperatives would not be able to afford without the support from key investors. Due to these investments, there are profound benefits to Fecovita. 

Altogether, the benefits of Fecovita have provided smaller vineyards and wineries the leverage needed to greatly impact markets and the support required to maintain stability for the businesses and the workers.

– Scott Boyce
Photo: Flickr
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Economic Growth to Reduce Poverty in Russia

Poverty in RussiaThere are almost 21 million poor people in Russia, constituting 14.3 percent of the population according to the Russian Federal State Statistics Service. The Russian poverty rate is comparable to Western countries’ rates. For example, the official poverty rate in the United States is 11.8 percent. However, while the poverty threshold in the U.S. is $12,490 per year, the minimum subsistence level in Russia is $169 per month, which translates to barely $2,000 per year. Luckily, there are some efforts to reduce poverty in Russia.

Poverty in Russia at the End of the 20th Century

After the U.S.S.R. collapsed, Russia faced huge difficulties leading to economic catastrophe. Finally becoming an independent democratic state in the 1990s, Russia began the transition from a command economy to a market economy. A record level of inflation and default took place in that period where people experienced an aggravated recession, ensuring a drop in income. Russian GDP per capita fell about 39 percent in real terms between 1991 and 1998.

Economic decline and political turbulence led to an increase in a criminogenic culture. Criminals in Russia became powerful and rich at the expense of the economy, all while the majority of the population became more and more impoverished. These obstacles formed exceptional economic inequality in the post-soviet state and impacted the increase of poverty in Russia.

Current Regime and the Economy

The economic situation changed dramatically with the power transition in the 21st century. From the beginning of Putin’s presidency in 2000 to the 2008 financial crisis, economic growth indicators reached impressive levels. For example, the average GDP grew by 26 percent on an annual basis. After the 2008 crisis, the economic situation has yet to regain the growth it once experienced.

One key factor of the Russian economy is oil prices, meaning a shift in price can be catastrophic to the nation. Another crucial factor is sanctions from the U.S. and other Western nations; the sanctions have a hefty impact on the poor economy, ultimately increasing poverty in Russia.

Halving the Poverty Rate

Despite the economic growth in the early 2000s, poverty in Russia remains a crucial issue; to combat poverty in Russia the state should take intense actions. In 2018, Putin signed a decree to reduce poverty in Russia by half by 2024. Today, Russian annual economic growth is at 1.5 percent. The current economic growth would indicate that the government would only be able to reduce the poverty rate by 10.7 percent by 2024. To meet the goal by 2024, the Russian government should strengthen the economy to increase annual GDP growth to at least 4.4 percent. The Russian government aimed to achieve this ambitious goal through a stimulus plan worth $400 billion that builds new infrastructure and investments.

Poverty in Russia is still a huge issue for the state and citizens. After the 2008 crisis, the Russian economy faces new challenges like a decrease in oil prices and economic sanctions. To combat poverty in Russia, the country should aim to strengthen its economy and reduce inequality.

– Elizaveta Naguslaeva
Photo: Piqsels

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Economy and Poverty in Greece

Economy and Poverty in Greece
The economy and poverty in Greece are two subjects that connect to one another. Starting in 2010, Greece has been climbing its way out of an economic crisis. The country is slowly paying back billions of dollars in debt due to chronic fiscal mismanagement. In the last decade, poverty in Greece has grown rampant. Incomes have crumbled by more than 30% and more than one-fifth of Greeks are unable to pay rent, electricity and bank loans. Additionally, one-third of families have at least one member who does not have employment. Due to its financial downfall, more than a third of Greece’s 10-million-person population is in poverty. Many citizens doubt that this nation will be able to turn things around fast enough and help those most in need.

5 Facts About the Growth of Poverty in Greece

  1. In 1999, the euro launched in 11 European countries. However, Greece did not meet the fiscal criteria due to its budget deficit and debt-to-GDP ratio.
  2. Greece adopted the euro currency in 2001 but did so by distorting its finances. During that time, Greece’s budget deficit was more than 3%. Additionally, it had a debt level above 100% of its GDP.
  3. In 2004, Greece held the summer Olympics in Athens. This cost the country approximately $12 billion, which it did not have.
  4. The United States suffered through a crisis of its own which triggered a global banking and credit crunch in 2007-2008. As a result, borrowing costs rose around the world, subsequently affecting Greece.
  5. The EU and International Monetary Fund (IMF) granted $146 billion in loans to Greece over the course of three years in 2010. In exchange, Prime Minister Papandreou promised to cut spending and increase taxes.

According to economist and former finance minister of Greece James Galbraith, the last decade will go down in Greek history as a period of asset-stripping, poorly funded health care and education, unemployment, bankruptcies and foreclosures, homelessness and even suicide.

The Good News

While financial devastation has affected Greece and its people, there is some good news. Greece now has more control than ever before when it comes to its economy. For the first time since 2010, Greece can borrow money at standard rates. The hope is that Greece will be able to pay back loans faster and with less burdensome contingencies.

How the United States is Helping Greece

The United States government and its people are attempting to help solve the issues regarding the economy and poverty in Greece. One way that people can help is simply by donating. Foundations such as SOS Children’s Villages works with children, families and communities to prevent family breakdown and ensure that children’s rights are met. Meanwhile, The Hellenic Initiative is an organization that is answering Greeks’ calls by providing a critical safety net to families that the crisis hit the hardest along with their relief partners. By donating to one or both of these organizations, children who have experienced abandonment or became orphans will receive a second chance, vulnerable families will be able to obtain psychological support and Greek hospitals will be better equipped.

Greek Americans who have dual citizenship can also help solve the problem of the economy and poverty in Greece because many can still vote in Greek elections and use their voices to make a difference. As for appointed leaders, Americans can urge their senators and congressmen to continue supporting Greece by exporting defense articles, medical, construction, food processing, specialty agriculture and packaging materials. Another way to show leaders that helping Greece matters is by simply emailing or calling them.

Though it has been a tough decade for Greece and its people, everyone and everything is capable of resilience. It may take a while for the nation to fully recover, but it can get there faster with a little hope from its people and a little help from the United States.

– Stacey Krzych
Photo: Flickr

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The Fight Against Locust Swarms in China

Locust Swarms in China
The beginning of 2020 has definitely been challenging for East Africa and South Asia because sweeping locust swarms struck agricultural production and threatened food security in those areas. China has been suffering from a similar situation, as it loses over 10 million hectares of crops annually from locust swarms. Locust swarms in China have led to it having some expertise in dealing with them, though. In fact, in the nearest decade, China has efficiently lowered the frequency of locust swarms and freed vast acres of land from them. Updated technologies have aided the fight against the locust swarms. Here are some of the hallmarks that make China stand out in the fight against locust swarms.

China’s National Campaign and Societal Engagement

One can trace the modern engagement of prevention and control of the locust swarms in China to land reform in 1950. Before China enacted its government-led afforestation, the local government effectively mobilized farmers to fight the locust swarms with the use of man-powered tools, minimal technology and scientific methods. However, this process clearly expressed that China would not succeed in its fight against locust swarms without massive societal involvement.

Societal engagement seems subtle compared with actual scientific studies about reducing locust swarms. Continuous alerts to the public regarding the seriousness of the locust invasion is the primary form of engagement. The database of the People’s Daily, a Chinese official newspaper, gives at least 270 news headlines mentioning damage or potential risk of the locust swarms in China each year from 1946 to 2019. Public awareness has yet to ease in regards to outbreaks of the locust swarms in China.

Besides the publicity, environmental education opens another gate for nationwide and generationwide involvement. At the state level, the progress of environmental education directly promotes the cultivation of a new generation of professionals who will work in the prevention and control of the locust swarms in the country. At the college level, over 200 universities and 44,000 students prepared to provide support with expertise contributions in 2012.

This nationwide campaign has evolved in the new era. For example, Ant Forest, launched by Ant Financial Service Group, has planted 122 million trees through societal environmental involvement. Ant Forest achieved the massive tree plantation through a 200 million user base and ease of access from users’ smartphones. People who would not touch environmental issues before can involve themselves more easily.

Inter-Agencies Arrangement

In addition to societal involvement, China has also demonstrated a rigid systematic intervention, which should ensure the enforcement and delivery of policies in any local area. The Ministry of Agriculture and Rural Affairs (MoA) is not only in charge of the prevention and control of the locust swarms in China but also has to coordinate with agencies such as the General Administration of Customs. One short answer to such a setup of complex agencies is the need to implement continuously improved strategies against the locust swarms. 

Some researchers have suggested that gaining knowledge about locusts in addition to the implementation of more efficient control techniques would decrease the destruction of locust swarms in China. Another research group found that human activities, such as deforestation and desertification, highly synchronize with the outbreak of the locust swarms in China. Overexploitation of the arable lands and grasslands in Northwest China used to cause the degradation of the land and therefore make them habitable for locusts. Due to such a phenomenon, working with the National Forestry and Grassland Administration (NFGA) is one of MoA’s immediate priorities.

One of the successful examples is the Three-North Shelter Forest Program. Despite the program not specifically aiming to reduce locust swarm damage, the program contributed to the total coverage of forest from less than 17 percent to nearly 23 percent. This increase tightened the space for the reproduction of the locust swarms and blocked the invading path. Other projects in flood control or grazing management also support the prevention of the locust swarms in China.

Conclusion

In short, massive social involvement makes the prevention and control of locust swarms a different game in China. Successful publicity mobilized a vast number of the people and the form of the national campaign injected enough attention to resolving the issue with maximized resources. The younger generation has a better understanding of the issue via intensive environmental education. Also, the environmental concept has deeply penetrated ordinary people’s perception because of the broad coverage of easy access, such as smartphones and online services. 

The benefit of these methods to decrease locust swarms in China is clear. On one hand, individuals have taken on the task of protecting and restoring the environment. On the other hand, this allows China to push new policies in environmental protection more easily, especially when the policy is in conflict with the fundamental way of living for people like farmers and nomads. 

A strong institutional arrangement also backs up the enforcement of the policy. It provides China with alternative tools in disaster management and has ultimately reduced the vulnerability of a sole emergency management strategy. By consolidating the collaboration of multiple systems, China is capable of stepping far beyond the boundary of passive defense to engage issues in advance. Therefore, for the African and other locust suffering countries, the key to the reduction of locust swarms may be in a different direction than relying on technology alone.

– Dingnan Zhang
Photo: Flickr

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Rutger Bregman’s Three Ideas to End Poverty

Rutger Bregman's Three Ideas to End Poverty
In the best-selling book, “Utopia for Realists,” author and Dutch popular historian, Rutger Bregman, outlines three utopian ideas to eliminate extreme poverty. Universal basic income, a 15-hour work-week and open borders are Bregman’s three leading solutions to creating an ideal global society. Bregman’s writings, interviews and fiery speeches, like the one he gave at the Davos World Economic Forum in 2019, reminds one of the importance of utopian thinking. Here is a breakdown of Rutger Bregman’s three ideas to end poverty.

Universal Basic Income

A universal basic income (UBI) is the first of Rutger Bregman’s three ideas to end poverty. UBI is an unconditional cash transfer that countries can give to citizens; the concept involves the allocation of a certain amount of funds regularly to cover essential living costs. Recipients of the grant are free to spend it however they choose. The idea has found support from a wide range of credible thinkers, including Dr. Martin Luther King Jr., economist Milton Friedman and Facebook co-founder Chris Hughes.

The longest-running UBI experiment is currently happening in Kenya. The charity GiveDirectly is paying more than 20,000 people roughly 75 cents per day. Less than $1 may not seem like a lot, but that amount is roughly what Kenya’s poorest make daily. Money from the nonprofit essentially doubles recipients’ annual incomes. GiveDirectly’s trial began back in 2016 and should span over 12 years. So far, the results have shown a positive impact. By using a cellphone-based payment system, the nonprofit has increased food consumption by 20 percent, reduced the number of days a child goes without food by 42 percent and increased revenue from livestock and small business by 48 percent.

Additionally, UBI might be around the corner for the United States. As the coronavirus health crisis unfolds, the U.S. government is moving quickly to jump-start the nation’s economy. In a rare bipartisan effort, Republicans and Democrats have signed a colossal $2 trillion stimulus plan which will include direct cash payments to American citizens. The Senate aims to send one or two cash transfers to American adults for $1,200, and an additional $500 for children. It is the most extensive emergency stimulus package in American history.

15-hour Work Week

In “Utopia for Realists,” Bregman reminds his readers that at one time the idea of a 15-hour work-week was not as inconceivable as it may sound today. In 1930, British economist John Maynard Keynes predicted that a 15-hour work-week would be inevitable by 2030. He believed that society’s real problem would be dealing with boredom from all the spare time. Alas, his prediction did not come true. In fact, the opposite is true in some cases, and people are working more hours than they did in previous generations.

In a world where time is money, it is hard to imagine the practicality of working less to earn more. However, Bregman insists that “productivity and long work hours do not go hand in hand.” Over time, fatigue and stress are causing burn-out in workers all over the world. The problem is so severe in Japanese corporate culture that it has a name for it, Karoshi, meaning death caused by overwork. There comes a point when working more becomes less productive.

Americans, on average, are clocking in 137 more hours than Japanese workers every year with 52.3 percent of people report being unhappy at work. Although average productivity has gone up 400 percent since 1950, real wages (adjusted for inflation) have remained stagnant. People are working more than they did 70 years ago and are not seeing the difference in payment.

But does working less pay more? A New Zealand based estate planning company, Perpetual Guardian, believes so. The staff experimented with working four days a week and have dubbed it a massive success. A survey from before the experiment determined that only 54 percent of employees felt they were able to manage a work-life balance. After implementing a four-day work-week, 78 percent felt they could. Employee stress levels dropped 7 percent and team engagement rose 20 percent. This idea of Rutger Bregman’s three ideas to end poverty would allow greater pay with shorter hours.

Open Borders

Open borders may be the most radical solution of Rutger Bregman’s three ideas to end poverty. Opening up the world’s borders to allow the free movement of people across any country makes many skeptical and afraid of societal collapse.

Development economist Michael Clemens argues that open borders would double global GDP by allowing the free movement of labor to become more productive. Clemens also dissuades fears of job loss and culture degradation pointing to the U.S. Chinese immigration ban that was in place from 1882-1965, and how after the ban lifted, none of the predictions became true.

Economist Bryan Caplan argues that nation-dividing borders more often act as a form of global apartheid. The level of economic inequality one experiences generally depends upon which country they were born in. Rutger Bregman states that 60 percent of someone’s income depends simply on their country of origin. With the enforcement of stricter border policies all over the world, poor people have little to no say in where they can live.

Rutger Bregman’s three ideas to end poverty are bold and unorthodox, however, some are conducting studies around the globe to determine their viability. Bregman’s ideas are utopian, and that is the point. Ending slavery, improving women’s rights and adopting a 40-hour work-week were once utopian ideas too. “Utopia for Realists “argues that it is essential to dream big, to create a better society for everyone.

– Henry Schrandt
Photo: Flickr

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Democracy in Ghana: An Evolution of Freedom and Stability

Democracy in GhanaGhana, formerly known as the Gold Coast, was Sub-Saharan Africa’s first nation to declare the end of British colonial rule. Kwame Nkrumah led the country into independence in 1957. The newly formed country became a catalyst for independence movements across the continent. Ghana was seen as a stronghold for a well-functioning democracy that few other nations have established since garnering their independence. Since holding its first elections in 1992 under Jerry Rawlings, democracy in Ghana has had a strong influence on the standard of living in the country and on its political and economic institutions.

Country Profile: Then and Now

When Jerry Rawlings won the 1992 election with the National Democratic Congress, it the beginning of a road to change in Ghana. A referendum pushing for a new constitution passed in April of 1992 that allowed for the reintroduction of a multiparty system. The first democratic elections were representative of the future development the country would undergo in the coming years. Previously, the nation underwent a series of military-led coups that ultimately undermined efforts to create a unified nation after independence. Ghana struggled, as most countries have, after the throws of colonial rule and the quick, jarring shift from little independence to that in full.

Under Jerry Rawlings and his Provisional National Defense Council (PNDC), Ghana created “a structural adjustments economic reform” in 1983 that carried them into a new democratic regime and greatly affected the economic development of the country. Empirical data concerning factors such as GDP, life expectancy and primary school enrollment rates can give valuable opportunities for analysis of the upward trajectory that Ghana experienced after 1992.

In 2018, Ghana’s GDP was $65.56 billion while, in 1992, it was almost 10 times lower at $6.4 billion. Life expectancy has risen from 57.4 years to more than 63. The infant mortality rate, a common indicator of development and the degree of public service provisions in developing countries, has dropped drastically from 75.6 percent to 35 percent. Furthermore, primary school enrollment has undergone a 24 percent increase.

Influence of Democracy

When Jerry Rawlings ended his two terms as president in 2000, the handover of government to John Kufuor was peaceful and without incident. In the 2008 election between former Foreign Minister Nana Addo Dankwa Akufo-Addo and former Vice-President John Atta-Mills, the Electoral Commission did as they had done for previous elections and invited foreign observers to oversee the production of the election. Again, the transition was smooth and transparent.

Advancements in democracy in Ghana are due, in part, to the fact that it puts politicians in a position to appeal to the needs of their constituents. The 1992 election is a prime example of this. The PNDC became popular with rural Ghanaians because of its role in the allocation of government funds to development projects in rural areas that were headed by local District Assemblies. The rural sector represents a large majority of Ghanaians, a majority that previous administrations had long since neglected.

The representation of all Ghanaians strikes at the core of the importance of providing democratic practices to transfer power to those who have traditionally and historically had none. Political incentives for leaders to invest in the needs of their people allow for the decentralization of economic power so citizens can keep their governmental institutions accountable.

Enhancing the Lives of Ghana’s Citizens

Democracy in Ghana has provided more than a baseline of free and fair elections. The day to day aspects of people’s lives change when they are accurately represented in their leadership. According to a transformation index set by a project by Bertelsmann Stiftung, which aims to understand the transition from authoritarianism to democracy in various countries, Ghana stands at 32 in a list of 129.

Indicators are measured on a scale from 1-10 and demonstrate the degree to which the country has made advancements in their transformation to inclusive institutions. Political participation and the stability of their democratic institutions are 8.5. International cooperation comes in at 8.3 while political and social integration is 7.8. These measurements provide evidence that democracy in Ghana has extended beyond promises on paper to protect civil liberties and the wellbeing of its citizens.

Perhaps the most important change that has come out of Ghana’s transition to democracy is the shift in reality for the millions of citizens who depend on their governmental institutions to provide inclusion and transparency. The implications of democracy run through their daily lives, specifically through increased attention by their leaders to the protection of human rights, civil liberties and the provision of public services. Democracy in Ghana has granted opportunities for representation and participation. Ghana’s economic, societal and political future beam with promise as the nation continues to make its way as an example of democratic rule in a developing country.

– Jessica Ball
Photo: Flickr

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9 Facts About the Informal Economy in Latin America

9 Facts About the Informal Economy in Latin America
The informal economy is a fluid area of work that people may drift in and out of. Certain companies may live in both the formal and informal job sector as well. The International Labor Organization (ILO) distinguishes between the informal sector and informal employment, stating that the former is an “enterprise-based concept and is defined by the characteristics of the enterprise in which workers are engaged” while the latter occurs on a case-by-case basis regarding the employee’s relationship to the enterprise. For example, some companies operate within the formal sector but hire certain employees “informally.”  In other words, one can define the informal economy as “firms and workers that stand outside a country’s tax and regulatory systems.”

It is important to note that the informal economy is not synonymous with the black market or the underground economy. Additionally, the informal market is not necessarily illegal. However, many countries do not mandate the social benefits and protections included in the formal economy. Informal work can include a variety of jobs including street vendors, subsistence farmers, seasonal workers, industrial workers and others. Given this characterization, below are nine facts about the informal economy in Latin America.

9 Facts About the Informal Economy in Latin America

  1. A total of 140 million people work in occupations involving social vulnerability, limited rights and precarious conditions. According to the ILO, this number translates to roughly 50 percent of total employment in the region. It is a little less than the global average but more than double for the developed region.
  2. The percent of informally employed workers varies greatly across the region. Costa Rica had the lowest rate of informally employed workers as of 2013 at 30.7 percent. In addition, Guatemala had the highest at 73.6 percent.
  3. An International Monetary Fund study found four main contributing factors to the expansive informal economy in Latin America. Some of these factors include the heavy tax burden on corporations and individuals as well as minimum wage constraints. Another factor is the importance of agriculture because informal employment is much higher in the agricultural sector.
  4. Although there are poor and non-poor alike across the informal and formal sectors, empirical research has displayed that those working in the informal economy may be at a higher risk of poverty than those employed in the formal economy. The exact relationship between the informal economy and poverty is difficult to determine. This is due to a variety of circumstances that can affect poor households. For instance, the income an individual brings home may not technically be below the poverty line, however, it may not be sufficient to support five people. Regardless, informal employment is often unstable due to inconsistent wage earnings and a lack of social protection.
  5. The informal economy affects youth in Latin America. According to the International Labor Organization, there are an estimated 56 million Latin Americans in the age range of 15 to 24 in the workforce. A little over 7 million are jobless and 27 million are working informal jobs. Many quit without much of a choice as six out of the 10 jobs available to them are in the informal economy.
  6. In 2013, 44.5 percent of the non-agricultural informal employment in Latin America was male while 49.7 percent was female. However, globally males make up a higher percentage because they make up a larger portion of the workforce. In contrast, when looking across developing countries, 92 percent of all women have informal employment compared to 87 percent of all men.
  7. The informal economy in Latin America represented 34 percent of its average gross domestic product (GDP) from 2010-2017, which is higher than any other region in the world. This is true despite Latin America being in possession of one of the lower percentages of informal work, 40 percent compared to the 85.8 percent of employment in Africa.
  8. The informal economy has been reducing in Latin America and the rest of the world for the past 30 years. This could partly be due to a reduction in the challenges to register a business.
  9. Improving transit infrastructure and access to education can reduce the size of a country’s informal economy. A case study of Mexico City found that high transit costs can lead to an increase in the percentage of workers on the outskirts of cities choosing informal work. Furthermore, by improving access to cheaper and more efficient transit services, informal employment can decrease. Meanwhile, a case study in Peru showed that it is easier to obtain formal employment if one has higher education. This was true even for indigenous groups in the country who often face discrimination when entering the formal sector.

Informal work remains an ambiguous topic requiring more research. Nonetheless, it is important to keep in mind that the informal economy is not inherently bad. While many struggle because of their informal work, they often cannot afford the costs of transitioning to the formal sector. For instance, one may deem small businesses that have under 10 workers as informal, and therefore, they would not have to pay social benefits, thus saving them money. In other words, in some circumstances, informal workers may require additional support, but would not necessarily benefit from transitioning into the formal sector.

– Scott Boyce
Photo: Wikimedia Commons

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The Progress of Laos’ Growing Economy

Laos' Growing Economy
Laos is growing rapidly thanks to high economic growth since the early 2000s. Its GDP growth rate has hovered around 7 percent since 2000, which makes Laos one of the fastest-growing countries in Asia. The infrastructure and tourism sectors have developed at a fast rate since 2017, which makes poverty reduction a possible side effect. As an economy grows, poverty tends to decline. Poverty in Laos was 46 percent in 1996 and around 23 percent in 2015. This cut in the poverty rate is partially due to Laos’ growing economy. Key sectors such as agriculture, tourism and infrastructure continue to be strong focus areas in Laos’ development.

A Commercialized Agriculture Industry

Agriculture remains important to Laos’ growing economy. About 70 percent of all workers have employment in the agriculture sector. Although the service sector is growing while agriculture is declining, the agriculture industry remains an important contributor to its GDP and the main source of employment for many Laotians. Most of the cultivated land consists of rice, and, as is common in developing countries, the main type of work is subsistence farming. There is a shift toward commercializing the agriculture industry, though, and this emphasis remains important in increasing wages and pulling more Laotians out of poverty. The Ministry of Agriculture and Forestry’s Agricultural Development Strategy 2011-2020 outlines the goals in increasing productivity and transitioning the industry toward commercialization.

Rural Infrastructure Growth

Infrastructure, which includes bridges, roads, schools and hospitals, remains an important foundation to a country’s livelihood. Without the necessities, a country may have difficulty helping its people and increasing its development and trade. Laos’ infrastructure is developing at a fast rate. Infrastructure growth remained around 8 percent for 2017, 2018 and 2019. While infrastructure is growing, there are still issues in rural areas that people tend to overlook. Electrification is about 80 percent in rural areas, though the country could resolve this in the future. The challenge to electrifying rural areas relies on navigating the rough and mountainous terrain of Laos. While Laos is growing rapidly, a higher emphasis on rural infrastructure development could help pull more Laotians out of poverty.

The Rising Tourism Industry

The tourism industry in Laos has grown fast since the 1990s. In 1995, about 350,000 international tourists visited Laos, yet that number grew to more than 4 million in 2018. Tourism contributes almost $2 billion to its GDP, so Laos has big stakes in the industry for its current and future economic well-being. China and neighboring countries, such as Thailand and Vietnam, comprise most of the tourists visiting Laos.

The tourism industry is yet another reason why Laos is growing rapidly. More than 100,000 jobs are related to tourism, and many expect that number to grow to 121,000 by 2028. The tourism industry grew by 9 percent in 2019, and Laos’ goal for 2020 is to reach 5 million international visitors. Job growth and GDP growth are two major effects of the rise of tourism in Laos, but there is also the effect tourism has on infrastructure. Hotels, resorts, entertainment venues and parks receive revenue and expand thanks to tourism growth.

Future for Laos’ Growing Economy

Laos’ high economic development could simultaneously transform its economy and continue to reduce its poverty. Poverty in Lao reduced by half while it was developing its economy since the 1990s. Thanks to its key sector developments, Laos is growing rapidly and poverty is continuing to decline. Rapid economic growth since 2000 shows that it may become a developed country in the near future, even though it is one of the least developed countries in the world currently. According to the U.N.’s Economic and Social Council and due to meeting two of the three criteria for development, Laos will leave the Least Developed Countries list by 2024.

– Lucas Schmidt
Photo: Flickr

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Socio-economic Equity in Brazil and Chile

Socio-economic Equity in Brazil and Chile
Latin America has the worst socio-economic equity gap in the world. The average Gini Index (percentile measurement of income distribution) is 41, which is a 10 point difference in comparison to the Organization for Economic Cooperation and Development (OECD) average. The Gini Index is like golf in a sense—the lower the score, the better the distribution. Although this region has a high Gini rate, Brazil and Chile have shown real promise in leading the rest of the region in socio-economic equity.

Chile: Counter-cyclical Spending and Education Investments

The Bachelet Administration effectively implemented a counter-cyclical spending policy that helped safeguard against a total economic collapse during the 2008 global crisis. Essentially, social spending reduced and taxes increased during a boom period, allowing Chile to save approximately $18.1 billion with the Economic and Social Stability Fund. During the global recession, Chile increased its social spending and lowered taxes creating demands for goods. When properly executed, counter-cyclical spending more evenly distributes resources without causing stagnation or inflation.

Education is essential to decreasing inequality between low-skilled workers and high-skilled workers; it provides an endowment of marketable skills. Generally speaking, better skills receive better pay. Chile spends 1.2 percent of its total GDP on Early Childhood Education and Care programs.

 In 2017, nearly 33 percent of 19 to 20-year-old Chileans enrolled in tertiary education and 25 percent finished with a four-year degree. Systemic education reform made tertiary education 100 percent free for low-income households. As a result, students receiving government loans and scholarships increased from 17 percent in 2007 to 58 percent just 10 years later.

Chileans have benefited from a reformed education system in a tangible way. Individuals with vocational degrees earn 40 percent more than secondary educated workers. Those with a bachelor’s degree earn upwards of 100 percent, and doctoral graduates earn 4.7 times the average of upper secondary educated workers.

Universal education invests in resource mobility; however, this is only possible if leaders prioritize the fundamental needs of those living in extreme poverty. Brazil, through conditional cash transfer programs, directly addresses the imbalance of socio-economic equity by providing those needs.

Brazil: Conditional Cash Transfers

Non-contributory social protection or social assistance works specifically for those in vulnerable living situations. These programs, funded through a general budget and taxation of public companies, provide monetary assistance to low-income households with children.

Of more than 30 active conditional cash transfer (CCT) programs in Latin America, Bolsa Familia (PBF) is the most prevalent. PBF reduced poverty in Brazil by 28 percent during its first 13 years and assisted over 11 million families a year.

The goal of PBF (and CCTs) is to end cyclical systemic poverty by investing in human development. Families receive assistance after they agree to social responsibilities like taking their children to health care providers and attending school.

Since its inception in 2003, Bolsa Familia integrated four other CCT programs. Today it reaches 46 million people, 54 percent of whom are women. The Economic Commission for Latin America and the Caribbean estimates that out of 133.5 million people living, 30.2 million households receive a conditional cash transfer.

There is no denying the obvious progression in addressing the imbalance in socio-economic equity in Brazil and Chile; however, much of Latin America still lives in poverty. The long term solution for socio-economic equity is to integrate non-discriminatory policies into law.

Universal Social Protection

The idea of a basic level of income is not new; the concept received debate during the early 19th century in the U.K. Meanwhile, some proposed it in the U.S. in the 70s and then again in 2019 with Andrew Yang’s promise to give $1,000 to every U.S. citizen every month.

Creating a “care pillar” would not only meet the urgent needs of those who need it most but would also promote human development for all. A stronger care system by function distributes necessary provisions of public goods and services, creating socio-economic equity. Unconditional, universal payment to the state inhabitants allows them to meet their basic needs.

The Universal Social Protection in Latin America and the Caribbean states that “by freeing people of the more serious consequences of material dependency, a basic income could lead to a rearrangement of social hierarchies, increase bargaining power of women…and [others facing] discrimination…and open up spaces for greater autonomy…for all people.”

In other words, bettering the linkage between the components of social protection and coverage, while eliminating discriminatory mechanisms, guarantees access to a decent life.

Brazil and Chile have made exemplary progress in the battle for socio-economic equity, but like the rest of Latin America, they have a long way to go before income distribution is fair and balanced. Breaking the cycle of poverty begins with policy. It is up to the countries that have disposable funds to implement policy change and reform. Once those countries reach socio-economic equity, they will have the resources to help neighboring countries reach the same goal.

– Marissa Taylor
Photo: Flickr

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The Rise of Venezuela’s Rum Revolution

Venezuela’s Rum
Extended hyperinflation continues to cripple Venezuela’s economy with prices of basic groceries skyrocketing to five times the monthly minimum wage from 2015 to 2017. Estimates determined that extreme poverty in Venezuela in 2016 was 82 percent. Yet, there is a shimmer of light with potential economic growth through Venezuela’s rum industry.

Fall in Whiskey Sales

For a long time, people have seen Scotch as a status symbol in Venezuela and often only for the upper-class to enjoy at home or for middle-class friends to have on a night out. In 2007, Venezuelans consumed over three million boxes of whiskey, fifth in consumption worldwide and priced at nearly $151 million in imports. In 2009, imported Scotch whiskey outsold Venezuela’s rum sales nearly two to one.

However, with hyperinflation setting in, reaching over 60,000 percent in 2018 and almost 350,000 percent in 2019, imports experienced restriction and the tightening of currency controls, putting whiskey out of reach for many. At the black market rate, a bottle of Chivas Regal 18-Year-Old Whiskey costs $31, more than the country’s monthly minimum wage.

Rise in Rum Sales

The popularity of whiskey began declining in 2013, with a 29 percent drop in sales. At this point, the country had only recently crossed the hyperinflation threshold of 50 percent, while Venezuela’s rum sales increased by 22.6 percent. During that same time period, domestic rum production increased from 15.8 million to 21.8 million liters.

In addition to the rising cost of imports, the government’s recent introduction of relaxed regulations and loosening price controls has bolstered domestic rum production. This has led to Santa Teresa, one of Venezuela’s rum distilleries, to become the first in the country to release a public offering in 11 years, selling one million shares on January 24, 2020. With banks hesitant to lend, public offerings provide alternative forms of capital that can allow businesses to grow and become more competitive in the global market.

Project Alcatraz

Project Alcatraz, a recreational rugby initiative, launched as a means of rehabilitation and to serve as a deterrent for gang violence after gang members broke into the grounds of the Santa Teresa rum distillery. Now, Project Alcatraz includes vocational training, psychological counseling and formal education, reaching roughly 2,000 adolescents and a few hundred inmates.

Additionally, experts believe that the project has led to a drop in the murder rate of the local municipality. In 2003, the year the project originated, there were 114 murders per 100,000 people; as of 2016, that number had dropped to 13 per 100,000 people.

Cocuy

Venezuelan rum has not been the only liquor that has seen recent success in the country. Cocuy is a liquor similar to that of Mexican tequila because it comprises of fermented agave plants. Cocuy has a long history in the country, with indigenous groups originally making it 500 years ago. The country reportedly outlawed the drink prior to 2006 to boost Venezuela’s rum and beer production and sales. Cocuy production companies regained licensure, resulting in the drink gaining popularity throughout the years. This once stigmatized drink meant for the poor and less refined is now one of choice primarily because of its low price point.

While the rise in domestic liquor sales may be seemingly insignificant, the growth of any domestic industry can play a critical role in the reversal of the economic climate of an impoverished nation. Venezuela’s rum revolution in the past decade could turn the country’s economy around.

– Scott Boyce
Photo: Pixabay