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African Agriculture needs better institutions

1/29/2016

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Once farmers have secure access to land, here are four core conditions they need to participate effectively in the economy and achieve food security:


  1. Secure the natural resource base. First, water for irrigation enables farmers to produce year round in order to help them plan ahead and sell at favorable times and prices. Farmers should be supported in procuring basic rainwater harvesting systems now, while Kenya and other African countries work toward more permanent solutions to their water problems. Second, proper soil testing would tell farmers what inputs they need to improve soil health and crop productivity. This is essential. Currently, farmers have to send soil samples to the big cities for analysis. While organizations like soilcares which brings soil testing technology to the farmers’ fields have done tremendous work, such efforts need to be expanded to reach all farmers.
  1. Alternative financing options are a must for smallholder farmers who are largely cash-strapped and unbanked. Without access to finance on favorable terms, high-quality supplies—like improved seeds—will remain out of reach. One option is to store data electronically that is required to secure financing. Some farmer records, such as bio data and farm profiles already exist in paper files. Adding information on transaction histories could enable farmers to access loans. For example, last year Farmer Thuku, an M-Farm farmer, was accorded a $3,800 loan using his transaction history with M-Farm.
  1. Institutions that ensure timely payment of farmers to allow farmers to progressively access bigger and better markets. In many cases today, a group of farmers selling to a supermarket will have to wait three months to receive their payment. Delayed payments interrupt the production schedule of the farmers, who cannot invest in the next season’s planting without payment. Financial institutions like Umati Capital have come up with solutions to bridge this gap through advancing payment to farmers. But such solutions are often expensive and unavailable for farmers of fresh produce. Therefore, the cycle of selling to the middleman for reduced price to get instant cash continues.
  1. Prioritize crucial infrastructure. It’s hard to be a farmer in Africa, and it’s even harder when you live up in the mountains and your only mode of transportation is a donkey cart, or when you have no cold room to store your produce, forcing you to sell immediately at a lower price. The development of transport, cold storage, and other crucial infrastructure should be a key priority for governments.
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Research links short run weak demand with weak long run productivity (supply) growth

2/1/2014

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Presented at the 2013 CEA,

Title: Explaining Slower Productivity Growth: The Role of Weak Demand Growth

presented by Someshwar Rao S Rao Consulting Inc. and Jiang Li1 University of Victoria

Abstract:
Using panel data on Canadian industries and OECD countries, this article examines empirically the role of growth in domestic and external demand in labour productivity growth. The findings suggest that most of the post-2000 slowdown in business sector labour productivity growth was the result of weak demand growth, which impacts productivity directly by reducing economies of scale and scope and by affecting key productivity drivers such as investment and R&D. With an expected slowdown in both domestic demand growth in Canada and external demand growth for Canadian exports, the medium- to long-term outlook for productivity growth, and hence for real income growth of Canadians, is expected to be weak.


IMO, this research is important because it buttresses arguments that growing inequality, by marginal propensity to consume effects, is harmful to long term economic grow; at the margin, more redistribution is likely to be a long term positive -not negative for economic growth. 

This research is also consistent with recent research that economic development aid does in fact promote economic growth. (Also goes against conventional thinking)

IMO, the key factor in this maybe the issue of whether an economy for whatever reason has long term demand impairment.

As noted
previously on these pages, Steve Waldman summarizes the argument here:


"OK. So inequality-related MPC effects are real. But what to they have to do with growth? Nothing at all, in an unconditional sense. I’ll go further than Bernstein. It’s worse than “there is not enough concrete proof to lead objective observers to unequivocally conclude that inequality has held back growth.” There’s little reason at all to think that inequality has held back growth, in the past tense, through an MPC channel. Why not? Because we didn’t observe in the past anything that looked like an intractable insufficiency of aggregate demand!

,,,,,

Prior to 2008, we found means of supporting aggregate demand despite an almost certain drag imposed by increasing inequality. Those means included a broad mix that included fiscal policy (we ran deficits), unsustainable equity booms, the “democratization of credit” and unsustainable credit booms, and of course straightforward monetary policy.

.....
But the reality of MPC effects means that, along with all those other possibilities, broadening the distribution of income would be expansionary and narrowing that distribution would be contractionary, ceteris paribus. If, like Larry Summers, it pains you that maybe the “natural interest rate” is negative now, the reality of MPC effects means that policy which broadens the distribution of income would help push it positive, and put us back into more comfortable territory. If, like me and Pope Francis, you think that present levels of inequality are horrific for human and communitarian reasons, then among the many macro policies that might support demand, it is rational to tilt towards those more likely to engender a broad distribution. It is quite irrational, as I think some well-meaning economists do, to hold MPC effects to much higher standards of evidence than the mechanisms that justify other interventions, because “economics is not a morality play” and reducing inequality would be the moral thing. Better to err on the side of human welfare rather than reputational purity.


I happen to think that the macroeconomic case for reducing inequality is much stronger than the case I’ve made here. I think the character of growth is badly misshapen when demand is narrowly sourced, that technological stagnation is mostly a distributional problem, that institutional correlates of growth are harmed by increasing inequality. But those are all more speculative claims. You can tell me the “jury is still out” on those. But the jury is not out, it never reasonably has been out, on the reality of distribution-related MPC effects. I’ll disagree, respectfully, if you claim that for supply-side or libertarian reasons we should ignore that reality and prefer other means of supporting demand (or that we should not worry about supporting demand at all). But don’t say “it’s unclear” whether income distribution affects aggregate demand, holding other factors constant. Of course it does."












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Well I guess my life wasn't entirely wasted

9/22/2013

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"A 2011 study estimated that parenting (e.g. maternal sensitivity, reading, extracurricular activities, setting expectations) explains 40 percent of the cognitive gap between children at age four -- more than any other factor. With adopted children, researchers found parental education was a better indicator of  school performance and behavior than family income or neighborhood wealth."

"Good parenting isn't an inchoate thing to researchers. It comes from measurable  behavior. Reading time. Playtime. Time, basically. The value of a good parent  can be measured in hours, and, as you can see, it often is."

And I would like to say a big "FU" to the Electricity Trading exec who demeaned me because I told him I had given up my career and drawn out finishing my PhD because of family considerations. Both my kids have IQs in the one in ten thousand range. They win awards for citizenship, are part of the gifted school program and have won provincial debating titles (they are also good looking but that comes from their mother). Good luck with your daughter, "C".

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New Research Supports the Idea that Foreign Aid Helps Economic Growth

9/25/2012

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Vox presents research that goes against mainstream economic thinking. Aid actually helps economic growth. Chalk one up for Bono and Jeffrey Sachs. I am particularly annoyed with Dambisa Moyo, anti-aid economist, who I also disagree with on the issue of commodities. 

The Serletis - Barro text that I am teaching (intermediate macro) takes the perspective that trade is ineffective at raising growth -which is mainstream thinking on the topic. Barro even mentions his face to face conversations with Bono re:Debt Jubilee 2000 and his other initiatives. He views Bono as sincere but misguided.
 
Bono was calling for help to be accompanied my meaningful reforms which it strikes me is the standard IMF bailout rationale and the rationale used to  support transfers to the periphery in the Eurozone.
 
I would almost bet that most economists in favour of the latter would not be in favour of aid to Africa.
 
Its an interesting world.
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