Poor Countries, Agriculture, and IMF Policies

There has been a rapid increase in food prices over the last couple of years, seen most dramatically in the recent 30% one-day rise in the price of rice worldwide.  This is putting tremendous pressure on the poor and is leading to instability in countries around the world.  There have been violent demonstrations–and equally violent government responses–to food rioting in Egypt and Haiti in the last couple of weeks.  They may be but a harbinger of the economic and political instability to come.  Here is a report from the BBC, in which an expert argues that IMF policies have contributed to the rise in food prices:

“Poor countries need to invest heavily in agriculture to feed their people.  There’s been a dearth of investment in agriculture in poor countries, mainly because of IMF and World Bank policies…”

The Bretton Woods System and the International Financial System

Anticipating the end of World War II, world leaders gathered in the New Hampshire town of Bretton Woods to create the financial architecture of the post-war global financial system.  The three main pillars were the World Bank, the IMF (both of which were created) and the International Trade Organization (this was never built but the governing philosophy behind it eventually gave rise to the General Agreement and Trade and Tariffs (GATT), which morphed into the World Trade Organization (WTO).  We’ll discuss these institutions in much more detail beginning Monday.

Here is an excerpt from a newsreel describing the meetings at Bretton Woods in 1944:

Is NAFTA good or bad for US Workers and the US Economy?

With Democratic Presidential candidates Hillary Clinton and Barack Obama tussling over the relative  merits of the North American Free Trade Agreement, this Boston Globe column, in which Canadian Trade Minister David Emerson is quoted, is useful as quick background reading.  NAFTA, signed by former President Bill Clinton and ratified by the US Congress in teh mid-1990s, sought to bring down trade barriers amongst the Mexican, Canadian, and United States’ economies.  A common lament amongst those in rust-belt states and along the Mexican border is that the agreement has sent millions of jobs formerly held by Americans to Canada and Mexico.  Emerson cautions us to be wary of this claim, parsing the logic:

I strongly believe that the growth in protectionist sentiment is somewhat misplaced and irrational. It’s people who are concerned about the loss of jobs over the last 10 years which largely — analytically — has been shown to be driven by technology,” he told reporters.

“To the degree that it’s the result of liberalized trade, it’s more to do with the Asian dynamos like China and India and Vietnam, and countries like that. It’s not NAFTA that is hurting the North American worker. It’s not,” Emerson said.

“In fact, NAFTA is probably the friend of the North American worker because it enables us to achieve a level of efficiency and competitiveness that helps us take on the real competitive threats.”

Emerson said he had urged his counterparts in Canada’s 10 provinces to stress this message in dealings with the governors of U.S. states and members of the U.S. Congress.

“When you recognize that 39 out of 50 states have Canada as their number one export market, you start to realize governors and congressmen at the local level have an awful lot at stake, and we need to make sure they understand that,” Emerson said.

“Premiers and provincial ministers are very good, they have lots of contacts. The federal government cannot do it all.”

Prime Minister Stephen Harper has expressed confidence that, despite the rhetoric, the North American Free Trade Agreement will not be reopened. Emerson was not quite as confident.

“We’ve all been hearing the comments of presidential candidates, of congressmen. Protectionist forces have been gathering steam for some years and they’re showing no signs of abating,” he said.

First, Conflict Diamonds; now, Junta Jade?

I know; the j in junta is pronounced like an h. Regardless, The Christian Science Monitor asks “Who’s buying Burma’s gems?: Laura Bush’s campaign for a global boycott is being undone by China’s appetite for Olympic souvenirs made of Burmese jade.” The US First Lady argues that those of you purchasing precious gems from Burma are indirectly supporting the rule of the brutal military dictatorship in that southeast Asian country.

burma_jade.jpgIt’s the last hour of the last day of the gems auction in Rangoon, and tired buyers are fanning themselves with worn auction catalogs, and making their final bids.

Over the past five days, jade, rubies, sapphires, and close to $150 million have passed hands here, according to the Union of Myanmar Economic Holdings Ltd., the consortium that dominates Burma’s gemstone trade and is owned by the defense ministry and a clutch of military officers.

Who’s buying? China, India, Singapore, and Thailand are scooping up Burma’s stones. US first lady Laura Bush’s efforts at a global boycott of Burma’s gems seem to have done little to reduce China’s appetite for Burmese jade to make trinkets and souvenirs to sell at the Summer Olympics.

At this recent auction, 281 foreigners attended, leaving behind much-needed foreign currency and generally turning the auction into a resounding success, according to the state-run New Light of Myanmar newspaper.

Mrs. Bush – and human rights campaigners – would not be pleased.

The first lady has taken on the military regime in Burma (Myanmar), urging jewelers not to buy gems from a country where the undemocratic rulers and their cronies amass fortunes selling off the country’s stones, as well as many of the county’s other natural resources – such as minerals, timber, gold, oil, and gas – but keep Burma’s citizens in abject poverty.

She has urged UN Secretary General Ban Ki Moon to act more forcibly on Burma and stood beside President Bush on several occasions recently as he announced the growing list of US sanctions on the country. And, on International Human Right’s Day this past December, Mrs. Bush added her voice to those seeking a global boycott on gems from Burma.

“Consumers throughout the world should consider the implications of their purchase of Burmese gems,” she said in a statement from the White House. “Every Burmese stone bought, cut, polished, and sold sustains an illegitimate, repressive regime.”

Earlier in the semester, we read an article [which he has made available to the general publilc on his web site] by Richard Snyder on the link between “lootable wealth” and political stability. In fact, the final section of his paper deals explicitly with the Burmese tropical timber trade and its role in funding rebel groups. What are the implications of Snyder’s argument for how we–as potential consumers of junta jade–should respond to Laura Bush’s plea? Of course the two phenomena are not exactly the same (Snyder is seeking to understand the link between “lootable wealth” political stability, while Laura Bush is arguing that “lootable wealth” supports dictatorial rule.) Here is the abstract to Snyder’s article:

This article proposes a political economy of extraction framework that explains political order and state collapse as alternative outcomes in the face of lootable wealth. Different types of institutions of extraction can be built around lootable resources – with divergent effects on political stability. If rulers are able to forge institutions of extraction that give them control over revenues generated by lootable resources, then these resources can contribute to political order by providing the income with which to govern. In contrast, the breakdown or absence of such institutions increases the risk of civil war by making it easier for rebels to organize. The framework is used to explain two puzzling cases that experienced sharply contrasting political trajectories in the face of lootable resources: Sierra Leone and Burma. A focus on institutions of extraction provides a stronger understanding of the wide range of political possibilities – from chaos, to dictatorship, to democracy – in resource-rich countries.

Globalization, Economic Development and Indentured Servitude

We will be addressing the topic of globalization later in the semester and will be viewing this video on the use of what amounts to slave labor in the silk industry in India.

I found this on the Human Trafficking and Modern-day Slavery website.

Human Trafficking Website 2007-2008. Country by country reports of human trafficking, modern day slavery, contemporary slavery, debt bondage, serfdom, forced labor, forced marriage, transferring of wives, inheritance of wives, and transfer of a child for purposes of exploitation.

China 2007 Trade Surplus Record $262bn

China’s rising economic and military power has caused some concern in the United States and in Europe. Just like China in the 1980s, China’s economic policies–particularly as it relates to the values of its currency and the effect that has had on China’s foreign trade and current accounts–have irked politicians and pundits (hello, Lou Dobbs) here in the US. They will not be heartened by the news that China’s trade surplus has reached a record $262 billion. Interestingly, however, the EU replaced the US as China’s largest export market.

China’s trade surplus rose by nearly 50 per cent to a record $262bn in 2007, but import growth exceeded export growth in each of the final three months of the year, suggesting that the country’s controversial trade imbalance may be peaking.

In another first, the European Union also replaced the US as China’s largest export market. Sales to the expanded EU grew by 29.2 per cent in 2007, compared to just 14 per cent to the US.