Friday, July 29, 2005

Where do we live?

We live in a shanty town of a city in the global south. That is if by 'we' you understand 'humanity' and you are talking in terms of the median person.

  • How do we transform this situation? How do we change stagnant poverty into thriving empowerment?

Education is certainly a key factor, however I think the ideas of Hernando de Soto (interviewed on Zakaria's show) are incredibly important. Let me try to encapulate the central issues:

Almost by definition ending poverty requires improvements to the vitality of the impoverished areas. In order to create a thriving market you need a degree of stability i.e. some rules that are consistently followed (typically laws) so that people are confident that if they take risks by investing, then they will be able to reap those rewards and won't have them stolen or otherwise undermined. However even once there is enough stability that people can profit by investing you still need access to capital in order to invest. Personally I can easily raise capital through education loans which I can use to further my education - investing in my future; but most of the worlds poor don't have that luxury. Even if they have an idea - like building a new chicken coop to increase egg production - that would enable them to lift themselves out of poverty (and possibly also provide a new service to their community) most people simply wouldn't have the capital to invest to make the idea a reality.

There are successful cases where poor people are given access to capital such as the gramin bank in India where micro credit is issued on the collateral of social incentives, i.e. people make sure to pay back their loans because they don't want to be shamed by their community. However this model doesn't (and hasn't) worked everywhere, especially where communities are more transitory and social incentives aren't as strong. What might work better? Issuing property rights. Most people in slums by defacto own their land though they have no legal right to it and thus cannot morgage it to gain access to capital. De Soto suggests that institutionalizing the property rights of urban poor would dramatically increase poor people's access to capital and do much to end poverty. Of course such an approach is problematic.

  • Will it encourage more land invasions?
  • Will people break their mortgages since they know their land won't likely be taken away?
  • Would it work without an effective rule of law?
  • How much is a little plot of land worth anyway?

Despite these questions the point that I am trying to make is that as people ponder the question of how to solve global poverty along with:

  • Increased education
  • More food/medical emergency assistance
  • Decreased trade barriers
  • Debt reduction
  • Increased aid
  • Fighting corruption and
  • Improving markets

they also remember that important parts of the equation are:

  • Property rights
  • The rule of law and
  • Access to capital.

Wednesday, July 27, 2005

You belive that totalitarian propaganda?

If you think this is going to be a posting about the US media you need to get some perspective dude. Try going to North Korea. Kristof of the NY Times did just that and did some ground breaking reporting, the highlights are covered in this insightful web chat. In particular it mentions the fundamental thing that I don't understand about North Korea: Why do people "still believe in a system that has failed so badly." This is central to understanding North Korea because this isn't Eastern Europe or even Russia where people were privately cynical about communism (in public fear commanded vast support) . There is fear to be sure in North Korea (and some private opposition), but there is also significant support for this terrible regime. Is it because the intellectuals have been co-opted? Is it the effective marshaling of Nationalism? Is it the way the state has morphed itself into a religion?

These questions are important not only because the Korean peninsula is a potential military disaster that would make Iraq look like a walk in the park, or because the people of North Korea are some of the most oppressed in the world. But also from a more academic perspective because before you can understand Freedom you have to understand North Korea. Any reasonable definition of a free society must exclude North Korea, yet many people there believe in the government and choose to support it. It is a bit exaggerated to do so but would someone else consider me to be similarly misguided when I proclaim myself free? Just how exactly do you draw that line? Education level? Non-Dogmatic belief system? How easy is it for a society to turn into a North Korea, and just how sustainable is it?

Wednesday, July 13, 2005

Secret is sooo Cool!

When I heard that the name of the group of bombers in London was the secret society of al qaeda in Iraq. I was like: give me a fucking break! Your al qaeda! Everyone knows you're secret already. I mean, is it called the SCCIA? (Secret Club of the Central Intelligence Agency) No. I used to belong to a secret society too. It met in my tree house. Based on the name of the group alone you could guess that the bombers were 25 years old or younger. As it turned out one was 35 but the youngest was still a teenager.

What does this mean? I'm not sure, but I just think that as we try to understand how to solve the problem of terrorism everyone should keep in the back of their head that Shahzad Tanweer, Hasib Hussain, and Rashid Facha probably have a lot in common with Eric Harris and Dylan Klebold.

Friday, July 08, 2005

Can Words Move the Market?

Have you ever wondered when a talking head on TV says: "The Federal Reserve's comments on inflation have driven down the market today" if they aren't just saying things that sound reasonable but really the market was reacting to something else? I mean the central problem is you never can take two copies of the exact same market, give them two sets of Fed comments and then contrast their different responces. Well you couldn't have exactly that senario but something very similar unfolded one day last May. In the same day the Fed released two different statments! They just messed up, first releasing a (slightly) wrong statment, and then a couple hours later relasing a new corrected statment. Unfortunatly the story didn't quite unfold perfectly. The corrected statement was released after the close of the major markets, but from the reporting of the incident it sounded like most people knew about the mistake by 3:15 or so. Anyway details follow:

The story:

On the 3rd of May at ~2:10 the Fed released their comment on raising interest rates then ~4:50 they said they mistakenly forgot to add a sentence that said that long term dangers of inflation were not that great. Initially I think the market took the omission to mean that long term inflation wasn't a worry at all, so the market shot up. Then after the traders realized there had been a mistake it dropped back. You can see distinctive signals in the market data. It looks like the words influenced the markets about .5%. Thus words can change market valuation on the order of $100 Billion. It would have been good to have data on volume too, but still it's facinating. (Incidently it is amazing how closely the Dow and NASDAQ track each other.)

The data:

There still are Maoists?

When King Gyanendra all busted out with the Martial Law in Nepal to fight the Maoists it got me to thinking: Hunh? There still are Maoists? Someone needs to send them on a field trip to China.

I wanted to find out the following. Surely the political heirs of Mao wouldn't be indifferent to a group of rebels fighting for Maoist principles. Anyway I wrote a reporter at the Washington Post trying to get the scoop. I even tried pleading a little to get a response -- didn't work.

Feb 4th 2005
Dear Mr. Lancaster,

I am a native of the DC area and am a longtime reader of the Post. I am writing in regards to the coverage of the royal coup in Nepal. One angle of the story that I haven't seen covered in news reports that I find particularly relevant to understanding the problem, is to what degree the Maoists are supported either militarily, financially, or ideologically by China.

I ask this because historically the ideology of communism was fundamentally expansionist embodied in the slogan 'workers of the world unite.' The support - or lack thereof - by china of the Maoist rebels would measure the degree to which modern china views the importance of exporting communist ideology and perhaps would also indicate the legitimacy that traditional communist thinking still commands among the Chinese leadership.


Change in North Korea

The following is a note I sent to a friend about North Korea. Along with Northern Uganda and Burma, there are all places where it is clear things could be so much better if just a few people weren't around to keep things all maniacal. I'm not particuarly proud of the below analysis but the letter states something that even in the face of Iraq needs to be said. Maybe I should have chosen Tanzinia invading Uganda or Dayton or something less loaded but the Civil War is just so epic:

Feb 3 2005
If I knew of a way to change the North Korean Regime without massive death and suffering, I would advocate for it. Unfortunately I don't. Do you have any ideas?

I know some people would say: "It's not your place to change Korea; change needs to come from within."

And to that I would say: "Yes that would be the ideal strategy and works in many situations." But I would also say: "I think such opinions have an overly pessimistic view of the motivations of outsiders, and their ability in extreme cases to truly act altruistically and to change things for the better (on average) in a society that is not their own."

As a historical example of an extreme case, offered as a proof of principle rather than for the clarity of the analogy, I would give the North and the South of the USA. (which probably has a lot to do with why I feel this way). And the outsider with extreme ability would be from this very state good ol' Abe.

Of course questions could be raised about what qualifies as 'extreme' and what degree of unfamiliarity the outsider can really have and still be effective; I mean Lincoln was hardly an outsider, with a southerner wife, and he was sporadically the elected president of a country that had been unified for 87+ years.

Okay, I guess this historical analogy would really be asserting that if there is really ever going to be positive change in North Korea, it wouldn't have to come from within, but at least it would have to come from South Korea.

Yet I still think this is overly pessimistic, because (though the sample size is really too small to reach such broad conclusions) something I learned while living in Namibia is that while societies are very different (though rapidly becoming more similar for better(?)
or worse(?)) I found people to be essentially the same.