Information and stories about economy.

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Was Karl Marx Correct?

Karl Marx Correct Income Inequality Communism Socialism Wealth Redistribution
Was Karl Marx correct? Considered one of the fathers of modern communism, Karl Marx is not exactly a celebrated figure in western culture. Nor is he well understood. It is not possible to provide an adequate summary of his political or economic theories in this space, but a general discussion of some of his ideas may prove beneficial to understanding the current global economic crisis and the growing crisis of income inequality. Whatever our preconceived notions about Marx may be, one cannot deny the thought-provoking nature of his ideas.

Marx envisioned history as a kind of evolution in the modes of production, each mode being defined or characterized by class struggle. Marx theorized that the capitalist mode of production relies on profits that are generated by the exploitation of workers’ time and labor. The desires of the workers–higher wages and better working conditions–will always be pitted against that of the capitalist, who seeks only to maximize profits.

Naturally, this idea is not popular in western societies where “free markets” and “capitalism” are considered canon. But Marx’s theories may need to be revisited. Since 2008, the world’s economies have experienced sluggish growth, stagnant incomes and widening gaps in income inequality. As a result, there is an increasing tension between the rich and working classes as evidenced by movements such as Occupy Wall Street and the fast-food workers’ strike in the United States and the garment workers’ protests in Bangladesh. Though these events garner little mainstream media attention, they are worth exploring and understanding.

If there is one Marxist idea that is particularly relevant today, it is this–capitalism will impoverish the working masses and concentrate wealth in the hands of a very small but very powerful class of über-rich individuals. According to a study by the Economics Policy Institute, between 1983 and 2010, 74 percent of the gains in wealth in the U.S. went to the richest 5 percent while the bottom 60 percent suffered a decline. There are plenty of troubling statistics like these that evidence a crisis of wealth inequality in the United States and across the world.

Marx wrote, “Accumulation of wealth at one pole is at the same time accumulation of misery, agony of toil, slavery, ignorance, brutality, mental degradation, at the opposite pole.” Any objective view of global economics today can see how this statement makes practical sense.

This is not to say that Marx developed a perfect worldview or flawless economic theory. But perhaps the critical question is not whether Karl Marx was correct, but whether western policymakers are (at best) the victims of dogmatic groupthink or (at worst) well-compensated puppets of the über-rich.

To change current economic trends, people everywhere will need to come together to generate new ideas and begin thinking about alternatives to capitalism. Marx might be a good place to start.

– Daniel Bonasso

Sources: Time, Economic Policy Institute, Stanford Encyclopedia of Philosophy
Photo: Critical Theory

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Poorest Country in the World: Democratic Republic of Congo

Poorest Country in the World Democratic Republic of Congo
You might be surprised to find that the United States isn’t the richest country in the world. Actually, that crown goes to Qatar who has recently jumped ranks to take first place. But what about the other side of the spectrum, the parts of the world struggling with devastating poverty? Well, on that end the Democratic Republic of Congo comes in first – or last, to be more accurate – as the poorest country in the world, with the lowest GDP per capita than any other country.

 

The Poorest Country in the World: The Democratic Republic of Congo

 

Determining a country’s rank in wealth isn’t the easiest of tasks when you sit down and think about the data and economics involved. However, a good indicator of a nation’s standard of living is the assessment of its GDP (gross domestic product) per capita, which is defined as the total value of all domestic goods and services that country produces annually, times its PPP or purchasing power parity. GDP per capita (PPP) isn’t a perfect shot because its purpose isn’t to calculate that kind of economic rank but it’s measured frequently, widely and consistently, allowing trends to become visible.

In 2010, GNI (gross national income) per capita replaced GDP in the calculation, but the list is the same between the two. Qatar was still first with about $100,000 GDP per capita (PPP) in 2012 just as it was on the GNI list and the Democratic Republic of Congo came in last at around $370 GDP per capita (PPP). The gap is massive.

Of the 40 poorest countries in the world, a solid 33 are in Sub-Saharan Africa. They include Zimbabwe, Burundi, Liberia, and Niger. Other parts of the world notoriously infamous for high poverty rates include Afghanistan, Haiti, and Nepal. But none of these places takes it quite as harshly as the Democratic Republic of Congo (not to be confused with the Republic of Congo) whose turbulent past and bloody wars have eclipsed the nation’s potential to thrive.

Since its independence in 1960 and once the most industrialized country in Africa, Congo has bled onto the ground because of its lack of infrastructure and the brutal impact of civil war. Disputes between Congo’s prominent rival groups, the Hutu and Tutsi, erupted after the Rwandan Genocide in which 500,000 people, mostly Tutsi, were victims of mass slaughter by the Hulus in the East African state of Rwanda.

The result was an exodus of over 2 million Rwandans fleeing to neighboring countries like the Democratic Republic of Congo, known in that time as Zaire. Most of the refugees were Hulus attempting to escape the Tutsi who had climbed to dominance at the end of the genocide. The Hulu refugee camps in Zaire, however, became politicized and militarized and when Tutsi rebels invaded Zaire to repatriate the refugees, the conflict escalated into the First Congo War in 1996.

The situation only grew worse and by 1998, the Second Congo War, which was sometimes called the “African world war” because it involved a total of nine African countries and twenty armed groups, devastated Zaire and laid waste to her population and economy. The political turmoil continues today despite intervention and peace attempts and is one of the world’s deadliest conflicts with a death toll of 5.4 million people.

More than almost 90 percent of the conflict’s victims, however, died due a lack of access to shelter, water, food and medicine – all severely aggravated by displaced and overcrowded populations living in unsanitary conditions. Not to mention, 47 percent of deaths were children under 5 and some 45,000 children continue to die each month.

The nation also faces the problem of human rights and the countless crimes against humanity because while many have returned home, an estimated 1.5 million are still displaced. DR Congo is also infamous and heavily criticized for its treatment of women. The east of the country has been described as the “rape capital of the world” and rates of sexual violence has been described as the worst in the world.

It doesn’t help that DR Congo is consistently poisoned by corruption and greed. While mining growth has somewhat boosted the country’s economy, the elite are said to syphon off revenue for their own personal gain due to the nation’s lack of strong central government. Conflicts over basic resources, access and control over rich minerals and oil, and political agendas are some of the many complex causes behind the Democratic Republic of Congo’s inability to rise among the ranks and take the title of the poorest country in the world.

–  Janki Kaswala

Sources: World Bank, Maps of World
Photo: The Telegraph

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Civil War and Economy in Sierra Leone

Economy in Sierra Leone
The Sierra Leone civil war destroyed the national economy, making it one of the poorest countries in the world. The civil war that ravaged the small west African nation from 1991-2002 was the impetus for a huge displacement of people within Sierra Leone, leading to a downturn in the economy that left almost 75% of the population living in extreme poverty.

Sierra Leone’s main export is diamonds. Diamonds have created a significant wealth gap in Sierra Leone that has benefited the rich and paralyzed the poor for decades. The country’s dependence on this single mineral resource impedes economic growth. In order for Sierra Leone to lift itself out of abject poverty, the economy must diversify. Economic diversification is exceptionally difficult, however, with around 50% of the adult working population working in subsistence agriculture. Luckily, the IMF set up a program in 2010 to deliver $45 million to Sierra Leone through 2013.

Over the last few years, Sierra Leone has developed its offshore oil resources as another source of income. This, however, does not negate the enormous need for international aid to power the development process and prevent increased in inequalit in Sierra Leone. In order for the economy to stabilize, foreign aid must be delivered on a consistent basis and domestic peace must be preserved at all costs.

– Josh Forgét
Source: BBC News, Rural Poverty Portal, CIA World Factbook
Photo: Human Trafficking Movie Project

Top 10 Microfinance Blogs

Microfinance Blogs
Blogs are a great way to hear a variety of voices and experience an issue from diverse perspectives, and there are a variety of sites full of information, opinions, and more. Below are 10 interesting blogs that present unique perspectives on the topic of microfinance.

  1. The Consultative Group to Assist the Poor (CGAP) Microfinance Blog discusses the benefits and challenges of various tools used in microfinance and provides a forum to learn more about new microfinance initiatives. There is a variety of contributing writers who share their expertise on the nuances of microfinance, and CGAP also presents fact-based blog entries in addition to opinions on how to improve the industry.
  2. The Nicholas D. Kristof blog is a favorite of many readers of The New York Times. This blog is not directly related to microfinance but discusses many of the world problems that microfinance addresses.  It tackles many development issues around the world and discusses issues ranging from hunger to education to women’s rights.
  3. A Grameen Foundation blog (Creating a World Without Poverty) discusses Grameen’s work in microfinance and showcases thoughts and feelings from the organization’s volunteers in the field. It provides a variety of voices experiencing microfinance in action around the world.
  4. The Wall Street Journal’s India Real Time blog provides a “daily pulse for the world’s largest democracy.” This blog is not solely about microfinance or poverty eradication but it does provide many articles related to daily life and the economic growth of India. It offers regular comments and critiques of the Indian microfinance industry.
  5. The Center for Financial Inclusion blog from ACCION International covers and comments on the many new ventures currently in progress in the field of microfinance. It also discusses methods for how to enable more people to access microfinance services in the future.
  6. Defeat Poverty provides reviews on current books in the field of development and microfinance, in addition to covering many other issues related to poverty eradication.
  7. The India Microfinance blog discusses the issues and triumphs of the microfinance industry in India. It discusses many specifics on the financial tools used. India’s microfinance industry is critiqued by many and this blog provides voices that speak on either side of the issue.
  8. Banking with the Poor Network blog discusses microfinance in Asia and around the world, with a focus on a wide variety of organizations.
  9. The MF Transparency blog deals with some of the challenges faced by for-profit and nonprofit microfinance organizations and offers information and resources that encourage transparent pricing.
  10. The myKRO blog serves as an online community where microfinance organizations can raise awareness about their work, offering and receiving commentary about their actions with other players in the field.

 – Katie Brockman

Source: Opportunity International
Photo: Fairview High School

Sugar Does Not Sweeten Nigerian Economy?

Nigerian Farmers
When seeing the productive land for sugar, northern Nigerian farmers have expressed frustration because they say that productivity is wasted without big-time local buyers. Farmers sell sugar cane as snacks on the street while the country imports 97 percent of the sugar it consumes.

Mallam Usman Abdu Gubuci describes himself as one of the sugar-farming “giants” in his area, with five hectares of land. He states that his part of northern Nigeria could be a major supplier of sugar to West Africa, but that farmers no longer even bother to grow sugar that can be refined. “There is special sugar cane for that sugar, which we were introduced with. But when we planted it, there was no buyer… so we ended up wasting our money,” said Gubuci.

Sugar officials say Nigeria spent $620 million on sugar imports in 2012, and they do not expect that number to decline soon.

Hajiya Bilkisu Mohammed, who heads the Association of Women Farmers in northern Nigeria, asserts that part of the reason local farmers cannot sell sugar for refining is that factories in this part of Nigeria have to battle constant electrical shortages. The factories must rely on expensive generators, driving up costs and making their products more expensive.

The Nigerian government also has announced plans to reduce imports of other food products in recent months. In January, President Goodluck Jonathan promised to increase food production by 20 million metric tons by 2015. He announced that increased food production will create 3.5 million jobs and reduce Nigeria’s dependence on imports.

Lack of electricity may be just one reason for the heavy costs of production. Local areas may also need more advertisements. Furthermore, the lack of proper and efficient infrastructure does not allow sugar to be transported effectively within Nigeria.

Potential for economic success is usually accompanied by challenges. For the Nigerian sugar industry, government support and intervention are needed. The local sugar industry needs to help from different directions. To start, it would be advantageous if the government were able to solve the shortage of electricity for factories and give some strategic policy and financial support to cut down the cost of sugar production. Additionally, it is important for the government to strengthen sugar and trade facilities, and transportation infrastructure. Offering more benefits and welfare to workers would attract more investment and encourage more people to get involved. In this way, local factories and farmers become more profitable and can expand their businesses. In this way, Nigeria would have the capacity to become a net exporter of sugar.

– Caiqing Jin(Kelly)

Source: VOA
Photo Source: ROPAfrica