Archive for category: Economy

Information and stories about economy.

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The International Monetary Fund: Friend or Foe?

Growth does not happen instantaneously and, oftentimes, catalyzing economic growth is a decades-long venture. No one expects positive results immediately, but people do expect a fair approach to promoting wealth. In times of crisis, most countries answer to the same worldwide organizations dedicated to ameliorating economic recession. Primarily, the International Monetary Fund (IMF).

Founded shortly after World War II, the IMF’s mandate was to promote international trade and economic cooperation by aiding countries in times of crisis, vis-a-vis loans and budgetary advice. It is predominantly counseled by six nations according to a weighted voting system. Germany, France, Japan, Britain, China and the United States control over 50 percent of the organization’s voting power. This is an important consideration when one considers that small, poverty-stricken countries, like those in Africa or Latin America, have absolutely no say in the IMF’s policies in comparison to a few powerful member states.

While the IMF may masquerade as an institution seeking to mitigate poverty, its economic decisions stem from countries that prioritize their own power and wealth. Noam Chomsky, a prominent political analyst and professor emeritus at MIT, described the works of the IMF and its top-member nations as “Designed for capital, not people.”

Most loan agreements from the International Monetary Fund come with harsh conditions that encourage the eventual triumph of capital while simultaneously removing social safety nets. Stipulations on loan agreements require severe cutbacks on wages and welfare in order to receive critically needed funds. Invariably, these loan conditions target the programs used by the working class majority.

News outlet Global Exchange (GE) documents the history of IMF protocol, reporting that “The IMF and World Bank frequently advise countries to attract foreign investors by weakening their labor laws – eliminating collective bargaining laws and suppressing wages.” Rather than encouraging domestic development, the IMF enforces economic policies that favor en mass, cheap exports operated through low wage labors costs and weakly regulated industries.

The results of Latin America’s arrangement with the IMF is indicative of the results of a “capital over community” approach. Argentina, once considered the model of financial prowess by the IMF, has steadily declined following the organization’s intervention during the late 90’s. According to University of Washington professor Victor Menaldo, “Public investment is the lowest it has ever been, less than 2 percent of GDP. Taxes on capital gains are less than 5 percent as of 2000. Lastly, along with Argentina, Brazil and Mexico are experiencing the highest amount of foreign debt in their histories.”

For many developing nations and countries under recession, poverty can be right around the corner. The way international organizations and enterprises collaborate in dealing with such potential poverty will determine whether a nation prospers or stagnates. Eliminating poverty is dependent on adjusting the failures of mainstream economics. This means stepping away from the IMF, preventing reductions in labor laws and not withholding loan agreements on conditions—such as eliminating bargaining rights or striking pensions—that have shown to only hurt economies in both the short and long term.

— Michael Giacoumopoulos

Sources: Global Exchange, The Tech, The Washington Post
Photo: NSZ

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5 Facts About the Food for Peace Reform Act of 2014

Food for Peace Reform Act of 2014
On Tuesday, U.S. lawmakers introduced the Food for Peace Reform Act of 2014. U.S. Sen. Bob Corker, R-Tenn., and Sen. Chris Coons, D-Del., jointly introduced this legislation, which would end restrictions on international food aid programs.

“More than anything else, the mission of America’s food aid program is to save lives,” Coons said. “Our current system for acquiring and distributing food aid is inefficient and often hurts the very communities it is trying to help.”

1. Feed More People
The reformed food aid legislation would feed about 9 million people around the world.

2. Greater Efficiency
The legislation would make hundreds of millions of dollars more available per year. Currently, the food aid program has restrictions that require food to be produced in the United States rather than purchased locally. It costs more and takes months to reach people in disaster areas. It would also allow U.S. locally or regionally acquired commodities, cash transfers or vouchers to be used for aid.

3. Small Effect on U.S. Agriculture
U.S. food aid contributed merely 0.86 percent of total U.S. agricultural exports between 2002 and 2011 and just 1.41 percent of net farm income.

4. Let USAID Ship Food on Any Available Vessels
Currently, half of food aid must also be transported on U.S. vessels, which takes months and costs more. The cargo preference requirement means that aid is shipped at 46 percent higher than the market rate.

5. End Monetization
“Monetization” is a requirement that says 15 percent of all U.S. donated food must be sold first by aid organizations, which produces cash that funds development projects. Removing this would save 25 cents out of every taxpayer dollar, would feed 800,000 more people and make about $30 million per year more available. Many development supporters argue that monetization upsets local markets.

“At a time when our budget is strained and U.S. resources are limited, Congress needs to find ways to be more efficient and effective with every dollar,” Corker said.

– Colleen Moore

Sources: Reuters, Agri-Pulse
Photo: Africa Green Media

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The Relationship Between Aid and Security

Since the end of World War II, foreign aid and national security have evolved in close proximity. Indeed, in the decade that followed, United States foreign assistance would range between 1.5 percent and 3 percent of gross domestic product (GDP.)

Since then, foreign aid has played an important role in advancing national security through several of its components: “bilateral development aid, economic assistance supporting U.S. political and security goals, humanitarian aid, multilateral economic contributions and military aid and assistance.”

However, during the Cold War, this relation began to change. As the U.S. refocused its foreign policy toward containing the Soviet Union, foreign assistance began to drop as a percentage of GDP. But still many development programs remained in place, working toward bringing about political reform and democratization. The dominant logic that political reform and development would create stable and open regimes that could resist communist ideology.

The purpose of many programs did not changed since then: expanding access to healthcare services and education, reducing infant mortality rates, reducing hunger and even protecting the environment. Following the end of the Cold War, the main purpose was refracted; by then, the main target was no longer to contain the Soviet Union but to foment development and economic growth in poor countries.

This also meant that the share of military assistance versus aid also changed. During the Cold War, almost 50 percent of the foreign aid’s budget was allocated to military assistance. By 2001, it had dropped to 24 percent. While the humanitarian and development aid budget increased from 33 percent to 46 percent. The period between the end of the Cold War and the September 11 attacks is characterized by a shift toward prioritizing economic development and opening access to healthcare and education in poor countries. Although no imminent threat existed at the time, national security consideration always remained at the heart of foreign aid.

After the attacks of September 11, this relation between national security and foreign aid changed once more. By 2005, the war on terror had the U.S. engaged in providing foreign assistance to almost 150 countries. Once more the shift was toward containment, but this time of jihadists and extremist activities. Since September 11, the region that has received the bulk of U.S. aid is the Middle East.

Despite the many ups and downs in the road of U.S. foreign aid, the world still looks to U.S. to provide leadership in response to erupting crises around the world. If we are to take a few lessons from this close relationship between aid and security, they are that no matter what the threats are, a key component of national security is a stable world and the best way to achieve is by bringing people out poverty and giving them access to healthcare and education.

Responding to crisis world wide does not have to entail military might. While development and economic aid results can be longer term than military intervention, the long history of the U.S. as a major aid contributor shows that it certainly pays off.

– Sahar Abi Hassan

Sources: Foreign Aid and Foreign Policy: Lessons for the Next Half-Century, The Foreign Policy Initiative
Photo: ForeignPolicy

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Bolivian Income Gap Causes Extreme Poverty

Bolivian_Income_Gap
Bolivia is the poorest country in South America. It possesses the largest ratio of indigenous people, who make up 62 percent of the population. Most of these indigenous groups suffer from poverty—over 74 percent are poor. The indigenous groups also make up most of the rural areas, where the greatest amount of poverty in the region is found. The unemployment rate remains high, with 8 percent of the population without jobs, increasing poverty in rural areas.

Bolivia’s income distribution is one of the most uneven in the world, ranking second in unequal income distribution. The land is rich in minerals and resources, but the elite Spanish ancestry dominates the economic system. Most Bolivians are low income farmers and traders. There has been long running tension over the rich natural gas resources by exploitation and export, which continues to strengthen the Bolivian income gap.

Social unrest in Bolivia is growing with the tax reform. The inflation rate is controlled by the tax reform and causes more tension within Bolivia’s economy. These issues in the economic system are creating poverty that affects groups like the indigenous people. Poverty can lead to inequality, which limits human rights and mobility through different strata of class, causing a separation of income.

Throughout history, indigenous people have been the poorest and most excluded from social economic growth. Access to basic health care and necessities is limited due to isolation. The high fertility rate among the indigenous people of Bolivia has increased their population to over 5 million people. The increase is so drastic because of the lack of access to education and health care needs.

Bolivia sees the highest rate of child malnutrition, particularly among indigenous cultures. World Vision estimates that over a quarter of the children under the age of five are malnourished and do not have access to proper health care.

Recent organizations, like World Vision, have formed local centers in Bolivia to help monitor the well-being of these children. This includes the implementation of training for local health care workers to bring awareness to kids to stay safe from different forms of child maltreatment.

 

Causes of poverty.

 

Most of the women living in rural areas have limited education or training for employment. There is also a lack of health services and education in the health sector for women. This restricts the growth of the economy by preventing these women from bettering their futures and the economy.

The rural areas continue to suffer from poverty. With the deficiency of natural resource management and limited approach to technology in rural areas, infrastructures such as roads will be neglected. Without the proper road system, isolation of indigenous groups will increase, causing lack of job opportunities and access to education.

These regions of Bolivia are facing obstacles in the economic development in many of the indigenous groups. The advancement of these obstacles relies on policies to protect the economic growth in the rural regions, where indigenous groups reside, and to help increase labor productivity.

— Rachel Cannon

Sources: BBC, UNICEF, Georgetown University, World Vision
Photo: Next Starfish

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Marketplaces Connected to Global Artisans


Etsy is an online marketplace for consumers to purchase art and handmade crafts from global artisans. It is also a Certified B Corporation, meaning that the company operates as more than a profit-seeking business; it is a company that uses its power to solve social and environmental problems.

Etsy is not the only company focused on improving the lives of global artists. GlobeIn launched in 2013 to help connect local artisans to the global economy. Many artists featured on GlobeIn’s online marketplace may not even be familiar with the idea of the Internet, but they now have a way to expand sales of their crafts.

GlobeIn focuses its efforts in nine countries with regional managers, who oversee shipping and money transfers to the artisans. The website presents the story of the artists along with their products. The artisans decide the price of the items and they receive the full amount. GlobeIn’s local infrastructures are managed by regional directors, who help artists get their product listed on the online marketplace.

In contrast, Etsy users rely on the online marketplace to sell their crafts. Etsy was established in 2005 and continues to grow. The website hosts 875,000 sellers from all over the world, and the company is working on creating more international websites that operate in more languages to reflect the 147 countries of the sellers.

GlobeIn is a newer company—it was established in 2013—and caters to those who may not be able to use Etsy because of language barriers or lack of access to the Internet. Both companies are fighting global poverty by giving access to those who otherwise would not have access to the global online marketplace.

Both companies share a mission to connect local artists to the global community through an online marketplace. By giving these artists a platform on which to sell their crafts and goods, Etsy and GlobeIn help bring income to the artists and to make their stories known.

– Haley Sklut

Sources: Etsy, GlobeIn, Mashable, Venture Beat

Photo: WordPress

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Deforestation and Economic Injustice in Haiti


Spring is upon us but in many places April showers don’t necessarily bring the hope of May flowers, instead they promise environmental disaster and damage to surrounding communities.

Every year, floods ravage Haiti’s countryside, injuring, displacing, and economically crippling many of its rural villages and townships. Rainfall, though necessary for agriculture in the hot Caribbean nation is more feared than it is welcomed these days. Due to widespread deforestation, the soil around riverbanks has eroded, the land has become arid, and there is nothing to anchor the foothills and prevent devastating mudslides.

Between 1954 and 1984 alone, nearly 90% of Haiti’s once abundant rainforests were depleted. An estimated 2% of what was once there remains today, and even that is at risk. Without tree cover or a natural means to replenish the soil with nutrients, the mountain region is now agriculturally useless, only perpetuating a cycle of poverty and harmful environmental practices.

Deforestation has been made significantly more prevalent by corrupt business practices and irresponsible regulations. Under the abusive dictatorships of Francois and Jean-Claude Duvalier, many Haitians was forced to rely on the production of charcoal for subsistence, turning to the harvesting and burning of trees to supplement widespread unemployment. Charcoal is now, unfortunately, one of Haiti’s most thriving markets.

Additionally, like other developing nations, economic instability and unaffordable trade options have forced millions of Haiti’s inhabitants to rely on this “woody biomass” for fuel.  More viable options of electricity, petroleum, and even kerosene, though also not earth friendly, are less encroaching on the communities themselves. However they are nearly unattainable in many areas.

In more recent years, illegal logging, price negotiations, structural trade agreements, and the seizure of property rights from outside actors has also contributed to an economic environment that leaves many Haitians without much choice but to contribute to cutting down the forests.

For example, Swine Flu paranoia in the 80’s essentially wiped out Haiti’s once successful pork market. This forced pork farmers to annihilate their own acclimatized pigs and replace them with the more delicate North American variety which was too expensive to keep. This paved the way for Reagan’s “American Plan” for the country, which implemented a weak export economy of cheaply and inhumanely manufactured goods. With such bleak options, charcoal and deforestation are increasingly chosen out of necessity.

Journalist and political analyst Amy Wilentz states, “You can read about deforestation and its affects in the books and pamphlets written by these experts, and then you can read about it in the faces and bodies of Haitian peasants…. The summation of a story of dry earth, of the need for sustenance and comfort, of crops that are impossible to raise, even with the hardest and most grueling work, of rain that never falls, of food that just isn’t there.”

People continue to fight back, such as Chavannes Jean-Baptiste, who is a renowned in the world of environmental activism for his work in Haiti. After receiving a formal education in agronomy, he went on to found the Peasant Movement of Papay (MPP) in 1973 with the expressed goal of establishing principles of sustainable agriculture. The Movement has been effective in the fight against deforestation and other contributions to soil erosion.

His life of activism has not been without contention though. Before winning the Goldman Environmental Prize in 2005, he suffered multiple assassination attempts, death threats, and periods of forced exile. His outspokenness regarding forest protection and his role in sparking political dissent made him highly targeted. Still, he leaves an unwavering legacy of land protection in a previously colonized nation, and the MPP continues to be a strong political force.

Deforestation’s effect has been horrible, for the people, the infrastructure, and the very landscape of Haiti, which has seen its fair share of economic and political storms over the past half century. However, scientific awareness, increased environmental consciousness, and a climate of political activism provide hope that Haiti’s rainy season will come to an end.

— Stefanie Doucette

Sources: The Energy Journal 1, The Energy Journal 2, The Ecological Society of America, The World Today, The Journal of Developing Areas, Nathan C. McClintock, The Rainy Season
Photo: 

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Venezuela Raises Its Minimum Wage


Venezuelan President Nicolas Maduro raised the country’s minimum wage by 30 percent in May 2014. This marks the second time the standard has been raised this year, which, in total, accumulates to a 43 percent increase since the end of 2013.

These measures were implemented to help citizens overcome the country’s crippling inflation. Over the past twelve months inflation has risen by 59 percent, a staggering rate that exceeds any other country in 2014.

The new minimum wage is expected to provide the equivalent of 657 U.S. dollars a month for the citizens of Venezuela.

Aside from porous economic fundamentals, mass popular unrest may have influenced the President’s willingness to take action. Violent protests have pervaded the the country for the past two months, leaving 41 Venezuelans dead. Demonstrators are demanding greater government intervention to improve the prospects of middle class families.

The escalating situation has pressured Maduro to remain proactive. The President recently issued a statement promising that he will take the necessary steps to ensure inflation is conquered within the next year.

“If another increase is needed, the working class can rest assured that I will do it,” Maduro told laborers in the nation’s capital.

Although inflation has plagued the nation’s current financial woes, economists blame past government policies for the recent recession. Hugo Chavez’s rule oversaw decades of price controls and currency manipulation, inefficiencies that have stymied growth and facilitated an unhealthy dependence on imports.

Economists are also pessimistic about Venezuela’s future. Many see the recent minimum wage adjustments as purely reactionary responses that will further accelerate inflation and exacerbate the government deficit.

On the other side of the spectrum, the Venezuelan opposition party has criticized Maduro for not doing enough. Henrique Capriles, Maduro’s opponent in the last election, maintains that the minimum wage raise should have kept pace with inflation.

Although protesters continue to call for Maduro’s resignation, the President remains steadfast in his commitment to help Venezuelans through this difficult time as he claims, “I am a worker president committed to the class that works and struggles.”

Unfortunate for his re-election prospects, many citizens remain unconvinced.

— Sam Preston

Sources: BBC News, Bloomberg
Photo: TT News Flash

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The Unwanted Women in China

Over the past few years, Chinese media has been portraying the image of an unwanted leftover woman. The term leftover woman, has been used in the media to persuade women to be less career-minded, ambitious and be more centered on matrimony. The prospect of an educated, successful women in her late 20s is made to appear more like a death sentence than a good thing.

There has been a recent backlash over the past few decades against women’s rights in China. Recent gender inequality is beginning to rear its ugly head again and perpetuating the idea that women are not focused on the traditional way, which is marriage and motherhood. Less than half of China’s women are employed and that rate continues to drop each year. The Gender Gap report stated that an average income for women is 67% of men’s income while the nation is ranked 50 out of 137 countries for equal wage. Female employment has gone down over 10% through the past 10 years, due to the gender based view of the unwanted, over-achieving women in China.

A woman facing the business marketplace in China endures discrimination based on her gender and measuring up to the beauty standards placed on women in the professional world. Some Chinese women are told from a young age not to pursue certain careers like those in the medical field, because that would make them seem undesirable to a man. The pressure increases as women finish school and grow into their mid-twenties to settle down and have a family. There is also the pressure to maintain a perfect figure instead of embracing the normalcy of aging. Women that do not fit these molds and instead gain higher education are blamed for the high numbers of unmarried men.

Leta Hong Fincher, author of “Leftover Women,” states that “the image of the left over women is everywhere and in the end it is insulting.” In her book, she explains that the Chinese government is blaming these women for the high number of single adult males. The fear is that those unmarried men will cause problems relating to the social stability in China. Moreover, problems like bride kidnapping and prostitution are increasing each year the marriage crisis continues.

The traditional view of men and women, that men are superior to women, has molded the Chinese culture today. The Chinese government passed the one child law in the 1980s and gender-based abortions have skyrocketed since 1995, when gender-confirming technology was introduced. The fact is that Chinese families prefer a son over a baby girl. This supports the overwhelming number of men under the age of thirty in China today.

China’s rapidly-changing economy is changing how women view their positions in society. Women want access to the same positions as men, and are doing so by obtaining higher degrees such as masters and PhDs. These degree programs require more time spent in school and women are not looking to marry until later in their twenties. The traditional mind-set of these women is fading and marriage is no longer the focal point. The market in China continues to be flooded with men, but the future of  highly-qualified women reaching the same opportunities is changing China’s structure and providing women with more rights.

– Rachel Cannon

Sources: The Telegraph, The Economist
Photo: Ministry of Harmony

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Africa’s Biggest Economy

The largest economy in the world is the U.S. with a GDP of $17.5 trillion, followed by China with $10 trillion. However, Nigeria has now earned bragging rights for being the largest economy in Africa with about $500 billion. It is the 26th largest economy in the world.

With success in telecommunications, information technology, music, agriculture, tourism and “Nollywood” film production, Nigeria’s GDP has increased in the last few years. Although it is the highest economy in Africa, 70 percent of Nigerians still live in poverty.

In comparison, South Africa has a GDP of about $370 billion. With a population three times larger than South Africa, Nigeria may have a larger GDP but its economic output is underperforming for its population size.

Most countries measure GDP every three years, but Nigeria’s last update before April 2014 was in 1990. Even with the previously uncounted industries, Nigeria’s higher GDP is not feeding more people or putting more money in their wallets.

However, there have been many improvements since the 1990 GDP measurements. The country went from having 300,000 phone lines in 1990 to 100 million cell phone users today. Also, in 1990 Nigeria only had one airline. Now the country has many airlines and the tourism industry is growing.

While the recalculation doesn’t provide much benefit for the ordinary Nigerian citizen, it positions the country as one of the world’s best emerging-market investment opportunities. But, the nation remains 121st in the world in income per capita, with an average income of $2,622 per citizen.

Nigeria may attract foreign investors with its new GDP calculation, but after the initial attention, investors will have to base their decision on other factors including the governance system, corruption and infrastructure.

Ordinary citizens are not going to change their behavior because of the rebasing of the Nigerian GDP, but the attention the country will get from investors has the potential to help lift the country out of poverty.

— Haley Sklut

Sources: BBC, USA Today, CNN Money, Investing

Photo: The Gaurdian

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NGO Disappointed with 2015 House Budget Proposal

2015 House Budget Cuts
In its recently released April 2014 newsletter, Bread for the World voiced its “deep disappointment” for the 2015 fiscal year House budget proposal. This proposal, introduced by Representative Paul Ryan, makes deep cuts to programs that help poor and hungry people in the United States and abroad.

The budget proposal cuts over $5 trillion over 10 years and calls for many changes to low-income programs. These policy changes will kick an estimated four million people out of the Supplemental Nutrition Assistance Program (SNAP), or food stamps, program. The changes to SNAP are significant, as assistance will now come in the form of a federal block loan and will not be able to increase should need arise. Negative impacts also reach Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) and low-income tax credits.

The House’s proposal also cuts the International Affairs budget by 11 percent. Decreases to the International Affairs budget are detrimental to the success of food aid and other humanitarian efforts and undermine U.S. ability to fight poverty in the world’s poorest countries. The proposal also moves the Millennium Challenge Corporation to the position of lead agency for foreign development assistance, diminishing USAID’s role in ending global hunger.

Although many agree that federal spending is out of control, David Beckmann, President of Bread for the World, believes that pulling funding for programs that support the most vulnerable is clearly a poor reallocation of resources. “Fiscal responsibility means not sacrificing our commitment to reducing hunger and poverty for the sake of reducing a deficit that vulnerable people did not create,” Beckmann states. “Lawmakers must stop violating the basic principle to protect ‘the least of these’ in budget decisions, which Congress has adhered to in all major budget agreements over the past 30 years.”

– Madisson Barnett

Sources: Bread for the World, Bipartisan Policy Center
Photo: PennLive