Tuesday, December 22, 2009

Bad policy: short-term handouts trumping long-term growth

How would you go about entrenching poverty in a primarily rural, formerly agriculture-dominated tropical island economy?

Your land is blessed with two monsoons that almost split the year perfectly in two, interspersed with inter-monsoonal rains. You have diverse agro-ecological zones, and what's more those two monsoons approach your island from diametrically opposite compass points, spreading the water wealth. Your people are inheritors of centuries of vast public irrigation works that have conquered any imbalance in water availability, bringing liquid gold to the most fertile and agriculture-friendly parts of the island.

Let's assume you already have highly fragmented landholdings due to weak land markets, previous cock-eyed land reforms and a lot of inertia around more meaningful reforms. People with handkerchief sized sub-scale plots can't sell their lands due to unclear title or worse, arcane regulations. Rational land allocation is distorted by regulations that forbid any use but agriculture, sometimes of specific crops (ref. self-sufficiency) - you can't even  grow something the market might actually want.

Coddle local producers to the point of inefficiency with populist import protections, price controls and astronomical, unsustainable input subsidies (which by one of my calculations almost completely wipe out the GDP contribution from paddy); then cut them loose and bring in cheap imports when prices spike just ahead of the local harvests (or near elections) - depressing prices for everyone and killing incentives in local agriculture. Once in a while try to bring in a guaranteed-price centralized purchase scheme to repeat dramatic failures of the past. Big farmers want to cut their losses, small farmers just revert to subsistence, turning away from the vagaries of the market. Value-adders lock up their expensive (imported) machines whose output cannot be sold at a fair price thanks to the controls.

Self-sufficiency is one double-edged sword to swing around too much. The food shocks of 2008 provide an easy stalking horse for all kinds of protectionism taken too far. All kinds of marginal lands start coming back under cultivation, some of it just for subsistence, all competing with the "high-potential" zones that should be left to cultivate commodities efficiently - and cheaply - without specializing into higher-value crops or away from agriculture altogether.

There's no easy fix of course. Most of today's marginal lands were the agricultural heartlands of yore, sometimes by accident, sometimes reflecting the changing state of the art in technology. Like in Japan, agriculture, particularly rice, is embedded deep in our souls, and can't be turned away from easily. Few other alternatives exist - development in held back by isolation in its many forms; roads, technology and education have taken the longest to penetrate - and make an impression - in those same areas.

With an end to conflict, the clock is winding down on inefficient land allocations - if we don't get smarter about what we grow, where, farmers around the island will be faced with harvests they can't sell. Can we get markets working in time to keep the right farmers growing the crops best suited to their lands (and all the handicaps we can't dispense with overnight) - and to the market opportunities out there?

Don't like your score? Change the rules (again)

Sri Lanka's rejiggering the main price index less than two years after the last blatant wool-pulling exercise. This time they're even dropping alcohol and tobacco from the basket, clearly choosing to believe their own fairytale that temperance can be enforced - and apparently has been achieved - with the help of a few TV spots and millions of posters.

I heard that an old journalist (maybe too old to care anymore) had interrupted a Buddhist monk trotted out to sing the government's praises in decidedly non-secular areas, asking what exactly the reverend was celebrating, given that the reporter had just been to one of the lavish vote-buying parties at the Palace where the drinks flow freely.

Another little birdie tells me His Highness had nudged and winked away the concerns of a delegation from the meat industry about the similar blanket ban on slaughtering with "don't worry about all that, we also must have something to eat no!"

Finally, an unintended consequence of a blanket ban on animal slaughter (keeping in mind that I am personally against the taking of lives but also willing to step back and think of wider consequences): Apparently a commercially viable dairy operation needs to cull 20% of its herd annually, something one large operator has already had problems doing thanks to enthusiastic preemptive rent-seeking despite the anti-slaughter bill only being in proposal stage. So, overnight blanket ban on slaughter --> further reduced local milk production --> more imports --> less foreign exchange, and more reasons for the propagandists to squeal about foreign conspiracies - except in this case too, the problem is local, not foreign.

Dud bridges? Check. Private Presidential Palaces? Check.

I saw some TV coverage of this talk a while back - which also shows how long my backlog is(!)

Small groups pushing policy without evidence - sound familiar? Where are our median voters? How come they don't push for the kind of sensible reforms for which "a fair amount of consensus" apparently already exists, in "education, labour markets, land markets, and achieving macro-economic stability and better public spending?"

I suspect the median voter has had to rush wholesale to hang on to the Satakaya-tails just to survive, maybe angling for whatever infrastructure contracts the Chinese didn't bother with, or hoping for scraps from such long-term empire-building as the Deniyaya Raja-pasa-plex (new definition for PPP: Private Presidential Palace?)

A friend on holiday from the original home of the Land Rover observed over the weekend that one has to come to Sri Lanka to see tricked-out Land Rovers of every flavour hammering around - mostly on Colombo's streets of course, rather than the moonscapes all the ostentatious accessorizing implies they're meant for. I even saw an LR3 sporting a snorkel and winch - and the requisite garage plates - the other day. The cheap-and-cheerful Mahindras and Tatas seem long forgotten - good thing Land Rover is nominally Indian now - more than enough for Comrade Vimal to spin another set of rationalizations (wait - didn't he hate the Indians? Or was that last week?). Even the bald-headed, aisle-crossing Minister who pretentiously went around in a Hindustan Ambassador when he was in the last government came away from launching his own political party (better than admit defeat and go back whence he came) dispensing Justice in a shiny silver Jaguar.

Has the median voter evolved, throwing in the towel and joining the mad scramble to feed on the carcass? If the median voter has in fact had to become a opportunistic, carrion-feeding pragmatist in a ridiculously politicized society, what hope does that hold out for a "brighter future" that we all apparently still hope for, the past four years apparently not having been bright enough?

Do we really have a silent majority that might, juuust might, this time actually make the trip to the voting booth and send the Scamtastic Four and their friends and family back to their upgraded or brand-new homes to try and get by on the fortunes built up over the last four years? Tough ask, I would say, given the stranglehold on the state machinery and the scale on which it is being mis-used - why risk one's neck to put pen to paper when there are many goons happy to do it for you?

If we as voters do in fact come out of our stupor and topple the four-headed beast (wrong part of the anatomy? Many-pocketed, for sure) it's not like the journey's over. Better almost anyone than this clan, the past four years should tell us that. But we voters must keep the pressure up for the vital promises to be followed-through, for once. We must get up off our welfare-softened backsides and maintain a firmer hold on our elected servants (with less prostrating before them for a start) with clearer causality between good or bad policies and the political outcomes we voters alone should be able to decide.

It's time to step up to the plate.

Monday, December 21, 2009

New music video business model?

Has the music industry stumbled upon a new model to finance music video productions?

Over the last few months (hey, I don't watch much TV) I've noticed some pretty sly product placements in Sri Lankan music videos, to the extent that there is clearly some money changing hands here. Not a bad thing, considering how small the local market is, and that most of the music is pretty good, and pretty creative too. Here are just a couple; check out the related ones too:

  • a womens' health supplement (? the pills in the purple box)
  • a new fizzy drink being heavily promoted
  • Mercedes might be a long shot, and Hummer an even longer one - I'll chalk those up to de rigeur rap-video props [later update - turns out the Hummer may have been a product placement too; I love how Sri Lankan companies brashly crown themselves "#1," "world's leading," etc with doubtless no evidence whatsoever]
  • just to editorialize, I thought the little laptop face-off between Ashanthi and the rapper (DeLon?) was cleverly done

  • An European three-wheeler competing with the Indian brand
  • another fizzy drink promoted as an essential accompaniment to any meal (perfect as this song is about food!)
  • Other videos by Iraj have featured cellphone operators, fizzy drinks from the same manufacturer, and, not sure about this one, match manufacturers?

A while after I'd started on and forgotten this post, I noticed quite a bit of product placement in a Pussy Cat Dolls video too, and, in the interest of science, watched a few more to turn up some more such as

Politics and Rent-seeking

Departing from more mainstream (and mostly pretty good) rap in Sinhala, Tamil (with the help of friends), English and combinations thereof, Iraj has come up with an interesting commentary on the the local political marketplace.

Out of jail with no place to go? Go to work as the local politician's enforcer, putting up posters, stuffing ballot boxes and impersonating dead voters. Need protection from the few cops actually doing their jobs? Foot the politician's bills and see your problems evaporate. And the politician's take: I got here the hard way, and I ain't going back, whoever I have to kill.

Naturally one needs money to beat all the other low-lifes fighting to get a toe-hold on the elevator to power and rent-seeking heaven. Money in amounts one doesn't have, hence the need for even more rent-seeking, just to pay pipers, before one can set up one's empire, and, I don't know, say,

  • make one's brothers one's personal advisors,
  • employ one's family members, classmates and neighbours in key positions in the state machinery, ridiculously politicizing every institution as well as state-owned businesses
  • educate (or try to, anyway) one's sons on taxpayers' money, take over - almost at gunpoint where necessary - all the reasonably profitable-looking businesses that are unfortunate to catch one's eye with their success
  • or just start a competitor - say, a security service head-quartered on state property (seen it with my own eyes), and issue circulars "strongly advising" all state institutions to start employing one's own firm
  • wine and dine just about every sector of society (which only the tax-evaders must really enjoy, since the taxpayer is after all footing those bills too)
Of course you can't take it with you, but who cares in a land of short memories and short-term thinking, particularly as your most potent infliction upon your country - your family - can hang around to fight over the carcass for years to come

Queueing Theory

Has anyone analysed the basic ability to form and honour a queue as an indicator of a country's level of development - or just plain education?

We Sri Lankans can't queue for toffee (in fact, if you plan to offer a toffee, stand back and be ready to call for ambulances and riot police), which, taken as a proxy for "education," would clearly show the difference between literacy (oh what wonderful - declining? - literacy rates we have!) and education.

"The trouble with markets is..." unintended consequences in slum resettlement

The last para of this article is a sobering reminder that markets don't always behave as we expect them to. I've heard of similar experiences in Sri Lanka too. Nothing wrong with it in principle, right, with individually profit-maximizing actors/families. Just doesn't move people out of the slums for long. Maybe some of them are used to conditions well enough to much prefer tolerating the slum while enjoying an additional (year-round, stable) stream of income. I'd even guess (there must be research on this) that many slums spring up because they're the cheapest accommodation close to certain labour markets.

I remember driving past Kibera while working on the automation of the Nairobi Stock Exchange's Depository & Settlement System. I also remember wordlessly watching from my electric-fence-and-guard-dog -protected flat window the silent flood of humanity that begins at the crack of dawn as low-wage workers start their sometimes hours-long treks in to work, too poor even to afford a matatu bus/minivan.

Saturday, December 19, 2009

Postcards from the Base of the Pyramid

Snapped this on my phone in October, found lying in a pile of rubbish (not cool) in Magam-Tissa, between Kirinde and Bundala/Hambantota.

Technical digression: Two-stroke three-wheeler/autorickshaw/tuk-tuk engines need the right amount of 2T engine oil mixed into their petrol/gasoline tanks (no separate lubrication cycle etc). Hence the extra pollutants spewed into the atmosphere too.

Back to BoP stuff: In urban petrol/gasoline sheds you see a "buddy" Coke bottle sitting on an engine oil dispenser next to the petrol pump. This is precisely to measure out the amount of 2T engine oil needed when a three-wheeler/autorickshaw/tuk-tuk driver pulls in to pump some gas.

Well someone at the state-owned Ceylon Petroleum Company has either used his brain (hooray) or stumbled upon a clever BoP marketing strategy (ok, not so great for the environment, like the sachets etc the soap companies sell). The sachet holds 40ml of 2T engine oil, apparently, according to the packaging, the right amount to per 1 liter of petrol when topping up your cheap-and-cheerful three-wheeler - the BoP's ubiquitous, do-everything, go-almost-everywhere workhorse.

Digression on sachets and BoP marketing - I keep asking people I know at Unilever whether anyone has figured out the environmental impacts of all those Lifebuoy river-baths and Sunlight laundry days in our nation's waterways, lakes and tanks/reservoirs.

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