Category Archives: Economics

Why Do Americans Get To Eat More… A diff take

Posted on by

Earlier this week, one-man blogging machine Amardeep put up a post on the Food Price Kerfluffle asking Why Do Americans Get to Eat More than Indians?

While I agree with Amardeep that there are a couple funny / snarky jabs in the piece, I’ve got pretty much the polar opposite opinion on the situation. So, I figured it would be worth writing up and tossing up my usual, contrarian view in part because it touches on so many of the meta-issues I’ve been writing about here for the past few years.

For example, the first paragraph in his piece highlights the classic Consequentialist vs. Intentionalist divide –

The Source of the World Food Crisis?

On May 2, George W. Bush explained that the current spike in food prices worldwide is primarily a consequence of rising demand from China and India: “when you start getting wealth, you start demanding better nutrition and better food, and so demand is high, and that causes the price to go up.” The quote was widely seen in the English-language Indian media as “blaming” Chindia for the problem, and was met with outrage.

Bush’s assessment for why food prices are higher is econ centered and consequentialist — more demand, relatively static short run supply = higher prices as an emergent property of a world where millions are making independent decisions. The process is detached, impersonal, and decentralized and perhaps most importantly, true regardless of who this basket of newly richer folks are.

The Indian Media’s (& politician’s) response, however, was dramatically intentionalist. By pointing out this relatively straightforward economic model, Bush was somehow turning the issue into a Morality Play and personally “blaming” the racial other. Same facts, different frame, different narrative. So how does this sort out?

Continue reading →

Food Price Kerfluffle: “Why Do Americans Get to Eat More than Indians?”

Posted on by

On May 2, George W. Bush explained that the current spike in food prices worldwide is primarily a consequence of rising demand from China and India: “when you start getting wealth, you start demanding better nutrition and better food, and so demand is high, and that causes the price to go up.” The quote was widely seen in the English-language Indian media as “blaming” Chindia for the problem, and was met with outrage.

Some of that outrage is collected in a recent IHT article on the President’s controversial statement. Some of the best, most snarky comments are by Pradeep Mehta, who works for a private economic research organization in India:

The food problem has “clearly” been created by Americans, who are eating 50 percent more calories than the average person in India, said Pradeep Mehta, the secretary general of CUTS Center for International Trade, Economics and Environment, a private economic research organization based in India with offices in Kenya, Zambia, Vietnam and Britain.

If Americans were to slim down to even the middle-class weight in India, “many hungry people in sub-Saharan Africa would find food on their plates,” Mehta said. The money Americans spend on liposuction to get rid of their excess fat could be funneled to famine victims instead, he added. (link)

And somewhat more measured comments, along with some more statistics on caloric consumption, are here:

Americans eat an average of 3,770 calories per capita a day, the highest amount in the world, according to data from the UN Food and Agricultural Organization, compared to 2,440 calories in India. They are also the largest per capita consumers in any major economy of beef, the most energy-intensive common food source, according to the U.S. Department of Agriculture. The United States and Canada top the world in oil consumption per person, according to the U.S. Energy Information Administration.

“George Bush has never been known for his knowledge of economics,” Jairam Ramesh, the minister of state for commerce, told The Press Trust of India after Bush’s remarks, which he said proved again how “comprehensively wrong” Bush is.

“To say that demand for food in India is causing increase in global food prices is completely wrong,” Ramesh said.

Politicians and academics in India cite various other reasons: diversion of arable land in the United States and Europe into ethanol production; trade subsidies by the United States and Europe; and the dollar’s decline. (link)

Those latter factors (ethanol production, trade subsidies, dollar’s decline) have also been cited by a number of economists in the west. Still, the President and Condoleezza Rice (who made a similar statement a couple of weeks ago) are presumably right when they say that there has been a rise in global demand, though I have a strong feeling that that demand started to rise more than a decade ago. It’s those other factors that, as I understand it, have really converged this year to drive up prices. (Does anyone really know? Is this an economics problem that can be solved?)

Consumption-wise, I admittedly look like an ordinary American: my own caloric intake is probably closer to 3000 than 2000 (though I’ve admittedly never been able to count it out… how many calories in roti? rajma-chaval? chicken biryani?). Still, on this issue, I can’t help but see things from the Indian point of view: “Why do Americans think they deserve to eat more than Indians?” Continue reading →

The end of the flying Beefeater

Posted on by

In a rather surprising move, British Airways announced this week that it will no longer be serving beef aboard its (often Hindu-filled) flights in economy (a.k.a. “cattle”) class:

What will become of me now? What will they pay me in if not in beef?

British Airways has ditched beef for economy class passengers this summer in an attempt to appeal to a more international passenger base.

The familiar cabin crew inquiry of “chicken or beef?” will not be heard in economy after the airline ditched the national dish in favour of what it calls a lighter, healthier option.

Critics will suspect that the relentless pressure to cut costs that all airlines are facing is behind the move, although BA said cost was not a factor…

“We can only serve two options and beef and pork obviously have religious restrictions,” the spokesman added. BA’s second-biggest long-haul market, after transatlantic routes, is to India. [Link]

As might be expected, many Brits were not happy about this. For one thing, what the hell are all the Beefeaters going to do?

The decision to scrap the nation’s favourite fare was described as a “great shame” by the English Beef and Lamb Executive, formerly part of the Meat and Livestock Commission.

A spokesman said: “It is regrettable that Britain’s flag carrier is not proposing to serve Britain’s national dish.

“It is a meal we are rightly proud of. Roast beef and beefeaters are symbols or Britain used to promote tourism.

“Our beef is also much in demand overseas. It is predominately grass fed and highly praised for its flavour. [Link]

Continue reading →

Fareed Zakaria’s Latest: “The Post-American World”

Posted on by

Though I’ve often disagreed with Fareed Zakaria on specific policy questions, I’ve always been challenged and interested by his way of thinking about big issues. Like some of my colleagues here at Sepia Mutiny, I found his book The Future of Freedom stimulating, if imperfect. Zakaria seems to be especially good at synthesizing complex issues under the umbrella of a signature “big idea,” without choking off qualifications or complexities. He still may a little too close to the buzzword-philia of Thomas Friedman for some readers, but in my view Zakaria’s book-length arguments are a cut above Friedman’s “gee whiz” bromides. (Zakaria’s weekly Newsweek columns do not always rise to this bar.)

Zakaria’s latest big concept is The Post-American World, a just-released book whose argument he summarizes in a substantial essay in this week’s Newsweek. The basic idea is, the world is becoming a place where the U.S. is not a solo superpower, but rather a complex competitive environment with multiple sites of power and influence. Even as China and India (“Chindia”?) rise, it’s not clear that the U.S. or Europe will fall; rather, everyone can, potentially, rise together — or at least, compete together. Zakaria argues that despite hysterical anxieties figured in the mass media regarding the threat of terrorism and economic crisis, the world has rarely been more peaceful — and that relative peace and stability has created the opportunity for the unprecedented emergence of independent and rapidly expanding market economies in formerly impoverished “Chindia.”

There’s more to it (read the article), but perhaps that is enough summary for now. There are a couple of passages I thought particularly interesting, which I might put out for discussion. First, on India:

During the 1980s, when I would visit India—where I grew up—most Indians were fascinated by the United States. Their interest, I have to confess, was not in the important power players in Washington or the great intellectuals in Cambridge.

People would often ask me about … Donald Trump. He was the very symbol of the United States—brassy, rich, and modern. He symbolized the feeling that if you wanted to find the biggest and largest anything, you had to look to America. Today, outside of entertainment figures, there is no comparable interest in American personalities. If you wonder why, read India’s newspapers or watch its television. There are dozens of Indian businessmen who are now wealthier than the Donald. Indians are obsessed by their own vulgar real estate billionaires. And that newfound interest in their own story is being replicated across much of the world. (link)

This last insight seems dead-on to me, and it’s the kind of thing I think Zakaria appreciates precisely because he was raised in India (no matter how many times he says “we” when talking about American foreign policy, he still carries that with him). This is one of the spaces where Zakaria’s status as an “Indian-American” is a real asset, as it gives him a simultaneous insider-outsider “double consciousness” — he has the ability to see things from the American/European point of view, but also know (remembers?) how the man on the street in Bombay or Shanghai is likely to see the world. [Note: I did an earlier post on Zakaria’s complex perspective here]

(As a side note — for the academics in the house, isn’t the narrative Zakaria is promoting in the passage above a “pop” version of what postcolonial theorists have been talking about for years — what Ngugi called “The Decolonization of the Mind”?)

Secondly, another passage, which I think addresses what might be the biggest hindrance to the multi-nodal global society Zakaria is interested in: Continue reading →

Abhisheks and Pujas endangered in India

Posted on by

Can you imagine a world without any boys named Abhishek or girls named Puja? I simply can’t! It is too horrible and sad to even contemplate (unless it raises the worth of existing Abhisheks and Pujas). A generation from now, that’s where we might be headed if these crazy food prices don’t start to come down and these rituals become obsolete. The Washington Post on Wednesday described the growing problem in sad detail:

Every morning, Hindu devotees haul buckets of fresh, creamy milk into this neighborhood temple, then close their eyes and bow in prayer as the milk is used to bathe a Hindu deity. At the foot of the statue, they leave small baskets of bananas, coconuts, incense sticks and marigolds… But recently, Ram Gopal Atrey, the head priest at Prachin Hanuman Mandir, noticed donations thinning for the morning prayers. He knew exactly why: inflation.

With prices soaring for staples such as cooking oils, wheat, lentils, milk and rice across the globe, priests like Atrey say they are seeing the consequences in their neighborhood temples, where even the poorest of the poor have long made donations to honor their faith.

“But today the common man is tortured by the increases in prices,” Atrey lamented during one early morning prayer, or puja, adding that donations of milk were down by as much as 50 percent. [Link]

Without milk you cannot shower the Siva Lingam properly (hence, no Abhishek). Blame it on gas prices. The main reason that milk is becoming so expensive in India is because it costs more to ship that milk around by automobile. Dudhwallas no longer carry as much straight from the local cow.

In New Delhi, the price of rice rose by 20 percent and the price of lentils by 18 percent in the past year. Cooking oil prices have climbed by 40 percent over the same period. The price of milk, which is essential in both diets and religious rituals, rose more than 11 percent in the past year.

Milk is literally the nectar of gods in India. Most temples in the south use it at least twice a day to bathe Hindu statues, since it symbolizes the eternal goodness of human beings and is seen as a generous offering to the faith. [Link]

In rough times like this you can begin to see part of the origin of vegetarianism in Hinduism. If you ate cows then the precious milk which sustains so much of the malnourished population would become even more scarce. Better to “make” beef sacrilegious lest you fall up hard times like these and be without. Now if we could have a reformation where the use of gasoline was deemed by many religions as being sacrilegious as well.

All humor aside, the food crisis is increasingly worrisome. Poor people spend a vastly greater portion of their earnings on food than people who are better off. If you squeeze them even more AND you take away their ability to pray in a traditional manner at the same time, that’s a powder keg of misery just waiting to go off, not just in India, but in many parts of this world.

Continue reading →

The Price of Rice

Posted on by

On the News Tab, KXB posted a link to an article in Time about the skyrocketing global price of rice, which has the potential to destabilize economic conditions (and governments) all over Asia. For those who haven’t been following it, the price of rice has more than doubled in the past six months, peaking recently at more than $23.00 per hundred pounds. (See this Guardian article for more detailed numbers. Incidentally, the rising price of food has already led to riots in Haiti.)

The Time article points out that the problem isn’t that rice production has fallen (though part of the reason for the tight supply in Bangladesh in particular is the destruction caused by last year’s cyclone). Rather, the global demand simply seems to be rising faster than the supply, and many individual nations have been banning rice exports, destabilizing the market.

In India, the interaction between state regulators and the recently liberalized market is particularly complex:

Take India, for example, where rice prices are rising fast, contributing to 7% inflation last month, the highest in more than three years. The country is not suffering from a classic case of tight supplies. National rice production this year should hit 94 million metric tons, up more than 2 million metric tons from last year and more than 20 million metric tons from 2003’s crop, which was devastated by a bad monsoon. Nor have shortages hit a government-run rice-distribution program that helps feed India’s poor. That program bought 20.6 million metric tons last year. This year, procurement, from both domestic growers and importers, is expected to rise to 25 million metric tons, according to Manoj Pandey, a senior government official. “It’s not a question of low production or low procurement,” says Pandey.

What has changed is that, because of economic reform, the government has gradually eased its control over the rice trade during the past 15 years. India is now more open to the world — and more exposed to global price fluctuations. Farmers and traders across India are now selling to the highest bidder. That means a lot of Indian rice that was once sold domestically is instead sold abroad for higher prices — which in turn drives up domestic prices. The government, in an effort to keep as much rice as possible at home to quell inflation, has banned exports of nonbasmati rice and adjusted price controls to discourage exports of aromatic basmati rice.

(link)

The measures aren’t working. As the article goes on to state, instead of pushing the price of rice back down, the government’s ban on exports has led to hoarding on the part of sellers, who would rather not sell than sell at reduced prices.

The question I have for those who understand these issues better than myself is this: what should the Indian government do, keeping in mind that the vast majority of Indian consumers of rice cannot afford the current price? Continue reading →

Don’t let your desi mom read this post

Posted on by

Especially if you are a smart, attractive, single desi woman. Seriously. This isn’t about desi women in particular but you’ll see how this information could be used for evil especially by desi parents. I know some of you forward posts to your parents but don’t do it with this one. You’ve been warned. NSFP=Not Safe for Parents.

Ok, now that I’ve cleared my conscience let’s get to the article at hand shall we? Slate.com recently published, The Eligible-Bachelor Paradox, which makes use of game theory to explain why the best women often end up single and alone if they wait “too long” to get married. We’ll save judgement for the end:

The shortage of appealing men is a century-plus-old commonplace of the society melodrama. The shortage–or–more exactly, the perception of a shortage–becomes evident as you hit your late 20s and more acute as you wander into the 30s. Some men explain their social fortune by believing they’ve become more attractive with age; many women prefer the far likelier explanation that male faults have become easier to overlook.

The problem of the eligible bachelor is one of the great riddles of social life. Shouldn’t there be about as many highly eligible and appealing men as there are attractive, eligible women?…

Actually, no–and here’s why. Consider the classic version of the marriage proposal: A woman makes it known that she is open to a proposal, the man proposes, and the woman chooses to say yes or no. The structure of the proposal is not, “I choose you.” It is, “Will you choose me?” A woman chooses to receive the question and chooses again once the question is asked. [Link]

So what have we learned so far? Despite the fact that men usually propose, it is the woman that typically dictates if and when a marriage will occur. In a free and modern society (meaning no forced or pressured marriages) the real power rests with the woman. Let’s go on then:

You can think of this traditional concept of the search for marriage partners as a kind of an auction. In this auction, some women will be more confident of their prospects, others less so.In game-theory terms, you would call the first group “strong bidders” and the second “weak bidders.” Your first thought might be that the “strong bidders”–women who (whether because of looks, social ability, or any other reason) are conventionally deemed more of a catch–would consistently win this kind of auction.

But this is not true. In fact, game theory predicts, and empirical studies of auctions bear out, that auctions will often be won by “weak” bidders, who know that they can be outbid and so bid more aggressively, while the “strong” bidders will hold out for a really great deal. [Link]

Continue reading →

What Microloans Miss… and then some

Posted on by

James Suroweiki of “Wisdom of the Crowds” fame has a piece that tries to reality check the current enthusiasm for micro-loans.

Mohammed Yunus. Good vibes.

Suroweiki clearly agrees that loans are a Good Thing by nearly any measure, BUT their ability to solve problems of the scale required in India is doubtful –

There’s no doubt that microfinance does a tremendous amount of good, yet there are also real limits to what it can accomplish. Microloans make poor borrowers better off. But, on their own, they often don’t do much to make poor countries richer.

This isn’t because microloans don’t work; it’s because of how they work. The idealized view of microfinance is that budding entrepreneurs use the loans to start and grow businesses–expanding operations, boosting inventory, and so on. The reality is more complicated.

The core issues are 2 fold. First, Microloans generally don’t go into job-creating ventures. Second, the ventures that really do create jobs are often far outside of micro-loan territory and subject to many other local constraints (for ex., corruption, infra, etc.)….

Suroweiki touches only a bit on a more subtle issue, however — the “meta-narrative” and lessons learned from microfinance on capitalism and charity. This last issue has sorta been nagging at me since I saw Muhammed Yunus speak in San Francisco back in January (its worth ipod-ing the MP3) and I’ve been reading up on microloans quite a bit since Yunus won his Nobel Prize. Continue reading →

What’s Holding India Back? (in this week’s Economist)

Posted on by

“The eye of the tiger” takes on new symbolism on the cover of this week’s Economist which asks the question: “What’s Holding India Back?”

Using India’s finance minister P. Chidambaram’s recent statement that the “tiger is under grave threat” as a clever segue, the Economist takes a close look at India’s “tigerish economy,” arguing that it’s 9% a year average growth is under threat “because it has failed to reform its public sector.” economist.jpg Here’s a quickie roundup of the news package to start off your week.

The lead story “India’s Civil Service: Battling the babu raj” takes a critical look at India’s hardworking “armies of clerks” (IAS officers), concluding that “India’s malfunctioning public sector (and civil service adminstration) is India’s biggest obstacle to growth”:

Indeed, all India’s administration is inefficient. According to the Congress-led government’s own estimate, most development spending fails to reach its intended recipients. Instead it is sponged up, or siphoned off, by a vast, tumorous bureaucracy.

This is not new news. Rajiv Gandhi,, as Prime Minister of India, once lamented helplessly that out of every rupee spent for development only 17 per cent actually reached the poor. But the following explanation about the ineffective reforms of India’s bureaucracy from author of an IAS history, Sanjoy Bagchi, certainly caught my attention:

“Overwhelmed by the constant feed of adulatory ambrosia, the maturing entrant tends to lose his head and balance. The diffident youngster of early idealistic years, in course of time, is transformed into an arrogant senior fond of throwing his weight around; he becomes a conceited prig.”

Continue reading →

Amit Varma on Indian Econ History

Posted on by

Regular SM favorite Amit Varma has a great, highly readable article on Econlib tracing modern Indian economic history –

‘Free’ India’s early leaders distrusted profit and free enterprise. They fought long, courageous battles to gain political freedom for their countrymen, but did not have quite the same respect for economic freedom.

India’s history of colonialism was one reason for this. Trade brought imperialism to India. First, the East India Company arrived, ostensibly as peaceful traders. Then, with just a flip of the page in a book of history, the British took over. After a long and bloody freedom struggle, who could blame Indians for being distrustful of trade?

Amit Varma recently won the Bastiat prize in economics at a ceremony in New York. Modulo the recent popularity of Freakonomics and the like, way too much economic literature tends to be PhD’s talking to other PhD’s. The Bastiat award, on the other hand, recognizes econ writers who reach out to the intelligent EveryMan with a day job rather than the Ivory Tower. And Varma’s latest piece delivers on this promise well.

For example, he captures well the underlying emotional / philosophical biases many have with market vs. government action –

Continue reading →