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Corey Guen
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It’s particularly devastating, in a report written with the purpose of shocking its’ readers, to reach the concluding remark, “It is likely that the poor will suffer most and the global community could become more fractured, and unequal than today.” It’s cruel that the global poor we’ve studied all term, for whom day-to-day life is a struggle, will bear the fastest and most severe consequences of the developed world’s inability to acknowledge its mistakes. There is a great deal to be proud of and impressed by in humanity’s march to improvement, but too often greed and the relentless pursuit of growth have left runaway impacts, impacts which disproportionately affect those who have not induced them. That’s part of why it’s so disappointing that a report of this tone is necessary, that many people complicit in the foretold demise of the planet refuse to acknowledge the problem’s mere existence, much less raise a finger to halt it. Instead of devoting our resources to tackling a problem with near unanimous scientific consensus, we squabble over who’s at fault and the legitimacy of research. Climate change debate has made it acceptable to have an opinion of, or to believe in, a fact. A fact, by its definition, should be immutable, but fear and ignorance have dismissed this foundation. It’s difficult offer insight to such a serious piece, when the implications are so severe. I hope our innate sense of self-preservation kicks in at some point before it’s too late, but it’s certainly hard to picture that future from our current position.
Though Goff and Singh’s paper “Does trade reduce poverty? A view from Africa” obviously draws on evidence from African countries, I was struck by the applicability of the theoretical framework to China and its explosive growth in the past half century. In the conclusion, the authors wrote, “More openness results in a reduction in poverty when the financial sector is deeper, education levels higher, or governance stronger.” Africa is a continent with great variability in institutional quality and human capital investment, leading to an understandably wide range in reactions to increased trade openness. Furthermore, many African countries are rich in natural resources, which has served generally to their detriment in economic development. Beginning with colonialism and continuing to today’s globalized economy, African countries are routinely interacted with by the rest of the world in an exploitative manner; that is, the value to other countries in Africa is rarely productive capability, but rather what can be extracted with as little resistance as possible. As such, few African countries are well-equipped to reap the full benefits of globalization. China on the other hand, seems perfectly structured to do so. Before its economic boom, China was still a well-educated, stably governed state. Its value lay not it natural resources, but in its sheer manpower and productive potential, which meant free trade was not exploitative, but rather complementary. As such, when globalization began to take hold, China was ready to receive and compound the benefits, especially to its legions of poor agricultural workers and city dwellers. The authors wrote that comparative advantage is only poverty reducing when the unskilled can freely leave contracting sectors and move into expanding ones; this is exactly what happened with manufacturing, as hundreds of millions of rural Chinese made temporary or permanent moves to urban areas to work in manufacturing, a near perfect example of the Lewis Model at work. Compounding the advantages of that rural labor surplus was a reasonably well-educated population able to take advantage of economic growth, and a government fully committed to promoting growth. Though the Chinese government is well-known for being controlling, its willingness to embrace free trade and to use the growth and profits to invest in domestic productivity have allowed it to achieve unprecedented and sustained growth for many years, and with it drastic reductions in poverty. The paper provided evidence that well-developed financial sectors also promote poverty reduction, and Beijing’s active promotion of financial services as well as the construction of “Economic Development Zones” in expanding cities seem to corroborate this claim. It may be argued that the government’s planned nature may run counter to the claim made by the authors that highly regulated economies cannot translate the benefits of free trade to reductions in poverty, but the Chinese government is a functioning bureaucracy that allowed just enough economic freedom to uplift its poor. The hukou system impedes this progress to some degree by restricting the flow of labor resources, but the poor Chinese, in conjunction with governmental action have managed to harness the poverty reducing power of trade openness with a strong, mobile labor force, substantial human capital investment and functional bureaucracy.
Toggle Commented Nov 29, 2016 on Reading for Thursday at Jolly Green General
In this paper Rodrik makes a case that is difficult to argue with, that certain “higher order” economic principles underpin most development successes in the past half century, but applying them without consideration for the history, cultural and economic nuance of any particular case is foolish. A particularly salient section of this paper for me was the assessment of China’s admirable and unorthodox path to its current status. Rodrik begins by imagining a Western economist invited to pre-boom China to offer advice, and his recommendation ultimately closely resembles the “Washington Consensus”. This is not borne of economic or cultural arrogance, but based on essential action known to promote economic growth, namely correction of market inefficiencies, appropriate implementation of incentives and installing sufficient safeguards to shield against the adverse effects of major economic reform. Though the Western recommendations are proven to be generally effective, China presented a unique case, as all countries do, where circumstances open up alternative, potentially more effective routes. The key here seems to be that drawing on the universal, underlying foundations of sound policy is indispensable, but significant tailoring to the case and innovative approach is equally necessary to implementing effective and efficient reform. It’s this lesson that brought me to my major connection with this paper, my work this summer with GoPro, not coincidentally in China. The insights Rodrik offers concerning development have wider applications, and by tweaking a few words and phrases, one might easily apply these insights to business. It was fascinating to work with an American company in China, and to observe the behavior of other such firms, since the accepted knowledge of how best to conduct business is only sporadically applicable in China. Some of our strongest companies, with billions of dollars in revenue and massive multinational presence (Google and Facebook represent the two most glaring examples) have entered China only to be thrown right back out, reeling and unsure how to proceed. Even the keynote speaker for W&L’s recent Entrepreneurship Summit, a Google manager, merely shrugged and acknowledged China as an ongoing area of interest for Google, and that it was a tricky situation. That is astonishing coming from the most powerful tech company in the world, ejected from the market over 7 years ago and with no better understanding today of how to approach China. As for GoPro, it’s a small but well-known company doing its best to learn from the failures of its predecessors and mimic their successes. Instead of opting to enter with the sheer force of some peers (a costly strategy that doomed Uber this summer), GoPro has started slowly, hiring an entirely Chinese staff instead of asking an American team to learn how China works and then implement marketing and sales strategies. They still seek to build a loyal customer base through smart marketing, positioning themselves as a must-have luxury in the same vein as iPhones, and to build off previous success. These goals represent the “higher order principles” Rodrik refers to, that underpin all successes, but the approach is engineered specifically for China. For example, Americans respond well to extreme sports videos like skydives; Chinese hasn’t opened up to such sports yet, and still lacks the disposable income to make this sport popular, so that type of content won’t work in marketing to Chinese.
Toggle Commented Oct 5, 2016 on Reading for Thursday at Jolly Green General
Paul Krugman presents a compelling case for the use of simplified models in economic study, one that I wholeheartedly support. An excerpt I found exceptionally eloquent and succinct was, “You make a set of clearly untrue simplifications to get the system down to something you can handle; those simplifications are dictated partly by guesses about what is important, partly by the modeling techniques available. And the end result, if the model is a good one, is an improved insight into why the vastly more complex real system behaves the way it does.” This sentence brought several connections to mind. The first, though not pertinent to economics, is an interesting point to speak to Krugman’s overarching thesis that modeling is essential, and arguably inherent to human nature. Aldous Huxley, author of popular high school English unit “Brave New World”, once wrote that the human brain essentially spends all its time performing an analogue to modeling, in order to present us with a version of the world with can function in and interact with. He claimed our brains and nervous systems are designed to block out information and stimuli that needlessly complicate the situation at hand, much as economic models do. Another drew me back to a class with Professor Eastwood, in a course called Neighborhoods, Culture and Poverty. During discussion about the complications of addressing persistent, multi-generational poverty, the class began to despair at the web of interconnected variables that affect a child’s economic outcomes. Everything from the neighborhood the child grows up in, to the education of her parents, their proximity to community centers and the area’s capacity for collective action plays a role, and untangling the complexity seems insurmountable. Krugman and Professor Eastwood make similar points regarding this challenge, in that simplification is a necessary step, despite the outcry that may come of willfully making untrue assumptions or detaching oneself from the “deep complexities of reality”. Instead of turning away from models because they cannot represent accurately our reality, it is useful to apply them as the best alternative to glean as much information as we can, until our tools become advanced enough to “transcend those limitations”.
In Chapter 1 of Amartya Sen's "Development as Freedom", he argues that the general focus on income poverty must be expanded to account for a broader concept of capability deprivation. My classmates above have addressed similar points, so I wanted to bring in a perspective from my time in Belize with the Shepherd program. I lived and worked on Ambergris Caye, an island that has become extremely popular with tourists and expats alike. The community of Belizeans is poor, in particular a neighborhood to the north built on mangrove swamp, but the concept of capability deprivation got me thinking about another major aspect I noticed while working in the community. As an expat destination and booming tourist locale, on the surface Ambergris Caye appeared to be a model of economic development. New restaurants, hotels and tour companies open frequently, evidence of economic growth and job creation. Upon closer examination however, I found that the Belizeans for whom Ambergris is home were experiencing a unique sort of capability deprivation, in that their economic autonomy was being slowly siphoned away. Expats who move to Ambergris often open businesses and buy land to provide income, and they also feel good about providing jobs for poor locals, who face a high unemployment rate. The adverse effect of this however is that Belizeans are not the ones in control of the capital, and in turn they cannot direct their own development. Rich investors and expats have created a ceiling, denying local entrepreneurs from competing due to a relative lack of resources, and trapping many others in low paying, unstable jobs. Instead of focusing on education, the vast majority of children drop out to work for expat-owned companies to provide income to their struggling families, preventing anyone from gaining skills necessary for the expansion of social and political freedoms, as Sen might put it. This struck me as a good example of Sen’s argument for expanding our view of capability deprivation, as statistics might tell a positive story that is revealed to be more complicated and to omit other important factors than at first glance. Though this particular scenario may be uncommon, others like it are bound to exist all over the world.
Group 5: Jenny Bulley, Corey Guen, Kasey Cannon, Connor Hollenbeck, Blake Spencer Our group discussed Casey, Kahn, and Rivas' use of a choice modeling experiment to challenge the general assumption that valuing the environment is a luxury good that cannot be afforded by the poor. The experiment was designed to isolate non-use value of the environment to subsistence farmers living on the Amazon, that is the value people associate with not consuming a resource, such as the rainforest or the river itself. The experiment had to acknowledge the fact that the normal form of compensation, money, would men little to subsistence farmers who participation in the market economy is extremely limited. Rather, the experiment had to convert compensation in less quantifiable resources such as improved education and healthcare or reductions in the difficulty of labor. The study settled on education, healthcare and fuel as the main forms of barter for increased risk for oil spills on the Amazon. Our group raised several questions concerning the administering of the choice modeling experiment, primarily the difficulty in separating non-use value from "embedded value" in which the ribeirinhos do not distinguish between value attached to the fact that their livelihood directly correlates to the resource in question. Another question revolved around the nature of responses to the WTA (willingness to accept) questions posed to the subjects. Our group found it difficult to assume that the subjects would not answer with high requests for compensation were it offered to them in exchange for accepted risk. The people already assume the risk of oil spills on the Amazon, and are currently uncompensated for the risk, so naturally they would ask for as much as they thought they could get away with given the risk exists regardless of whether or not they were compensated. As the other group mentioned in their post, we were curious how education and healthcare translated into value for the subjects, and how it would be be implemented given the ultimate risk the subjects would be willing to accept.
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Feb 3, 2014