Inequality in India

By 2011 the BRIC economies had some of the highest rates of income inequality adjusted to the Human Development Index among developing nations. At the same time, the BRIC countries had consistently had the highest GNP growth versus the previous 10 years among developing nations. How is it that there is not a parallel growth of the Human Development of its citizens? The answer and one of the biggest challenges for the BRIC countries is the fact that a large amount of the GNP is distributed among small elites that control their market economies.

Economists and investors such as O’Neill, Krugman and others largely emphasize the expected growth of the BRIC economies as indicators of where to invest their money. Unfortunately, they have not paid the same interest to what many other economists consider important: the human development of the people. Fortunately, there are still some economists who since the decade of 1970 paid a lot of attention to the issues of freedom and equality. Economists leaded by Milton Friedman, the Economics Nobel Prize of 1976, argued that economic policies should be focused in the freedom of its citizens as a primary value. To them, stressing equality per se could lead to economic inefficiency as well as it would put in risk Freedom itself. However, the same economist argued that it was necessary for developing economies that the government took a central role in poverty alleviation in order to keep the pace with the economic growth of its economies. Unfortunately, this poverty alleviation is not being done in the BRIC countries and the economic difference between the poorest and the richest continues to grow. Since the 60s, a large group of economists emphasized the negative effects of not paying attention to a free and equal development in emerging markets; economists like Friedman and Hayek wrote a lot in this regard and even recently Elinor Ostrom’s ideas, who won the Nobel Prize in Economics in 2009, are still not listened by those who have forgotten the importance of good governance economic policies.

India is the country in which this income inequality versus human development is more pronounced. Currently, India occupies the position #93 with an IHDI of 0.392 and the country has descended in the rank many positions since the last decade. Inequality in the earnings among Indians has doubled over the last two decades, making it one of the worst performers among developing economies. Why? This is again the result of the failed attempts by the Indian government to combat corruption, bad administration and under-payments and also of the unawareness of foreign investors.

The fact that foreign investors have no interest in securing the welfare of the Indian people is a problem. To them, the investment opportunities of this specific BRIC country are of value until they find a better economy to move their money to. However, the real stakeholders are not the foreign investors but the Indian Government and its groups of interest who should aim to secure the welfare of all of its citizens now that they have a chance. While the growth of this economies will continue the effect it will have in such unequal societies will result in some of the worst rates of poverty and hunger ever seen in history. By 2025 India will be the most populous country in the world but also, it will have 268 million people (20.3%) living still with less than US$1.25 a day as reported by economists in the World Bank. The Indian government should go aligned with the current trade liberalization in order to support higher productivity in the private sector and to exploit its comparative advantage of having a labor-intensive industry to foster the production of goods and services.

China & Global Oil

I am currently enrolled in the course “Oil, Power and Climate – A Global Perspective” with Dr. habil. Peter Gärtner who is an specialist in Global Studies, North-South relations, democratization, development theory and policy, law and globalization with a regional focus in Latin America.

As part of our initial discussions we were required to present a review of the current status of the main importers and exporters of oil. My selection was China and its raising demand of energy resources in order to continue providing for the world the largest amount of goods ever made in history. Indeed, the numbers I found of China were astounding and the forecast of its increase for the next ten years is even more astonishing. As forecasts show, the United States is soon to lose its hegemonic position in the world as the largest economy due to the fact that since 2010 it was China the world’s largest energy consumer (and its growth continues to further grow).

For the last six months I have been paying much attention to literature in the Asia region and I have started to draw a new world map that has South East Asia and the Pacific at its core. I foresee a semester full of Asia related topics and I will most certainly enjoy focusing in that area.

I share with you the handout with the latest figures and updates on China that I prepared for a discussion. The file is accessible online and can be downloaded as a PDF: http://issuu.com/condottiero/docs/oil-china-lgpr

Global Balance Of Power: The Shifting Contours – Analysis (eurasiareview.com)
Oil falls to near $103 after China growth slows (sfgate.com)
China’s Domestic Consumption Ambitions (wallstreetpit.com)

Global integration of trade

National Geographic is running a wonderful website on Globalization, the international exchange of goods, services, cultures, ideas, has brought increased wealth for many and transformed forever the way humans interact. But while its roots may be in commerce, globalization‘s effects can be very personal.

Advances in communication and transportation have created a rich, unprecedented mixing of cultures throughout the world. But there is a drawback. As international travel, economic migration, and the global spread of music, films, and literature bring more people than ever into intimate contact, human diversity is vanishing.

A shared language is perhaps the most profound expression of group identity and a critical tool for passing cultural knowledge from one generation to the next. But globalization is about integration. Whether by choice, by circumstance, or under duress, thousands of cultural and linguistic traditions are disappearing as their new generations adopt dominant national and global languages.

Workers, from wealthy consultants to unskilled laborers, are also on the move as never before. Some migrants are encouraged by host countries or regional agreements; others avoid official avenues and often live a shadowy, parallel existence once they arrive. Immigration is high, but it is economic migrants—seeking work more than a new homeland—who define our age.

Read more from them here: EarthPulse by National Geographic

New Blog: Laissez Faire by Don Watkins and Yaron Brook

A new blog has been born for those of you interested in learning and discussing the principles of Capitalism. The title of the blog is “Laissez Faire: The Uncompromised Case for Capitalism” and is going to be written by Don Watkins and Yaron Brook from the Ayn Rand Institute. The blog aims to discuss the philosophic ideas that shape economic policy.

I invite you start following it and to start commenting their articles. Indeed, this is great news for the spread of Objectivism, the Philosophy of Ayn Rand!

Social Media of Laissez Faire

Drugs: A Legal Market is not a Free Market

A couple days ago, Otto Perez Molina, recently elected as President of Guatemala; announced that he was willing to decriminalize the commercialization of drugs. According to U.S. authorities, Guatemala has became the transshipment point for more than 75 percent of the cocaine smuggled into the United States since 2005. Along with this, the Opium poppy cultivation is already done in large parts of the countryside making the production of Guatemalan heroin a greater and the newest worry for the United States. The country’s elites are already part of this business and the paranoia of crimes that used be a remembrance from Colombia‘s 1990s history seems to be repeating in these Central American countries.

What impresses me the most now is how this news has started spreading around my Facebook contacts (mostly libertarians and liberals). Both groups seem to be happy to hear this announcement by Guatemala’s President. However, both groups applaud the news for different reasons. The legalization/decriminalization of drugs will not be the panacea we all are hoping for. Specially not if started by any of the Central American governments. The reasons are many and I will begin by listing some of them to open the discussion,

Corruption, lax enforcement, and judicial impunity levels in Central America are among the highest of the world.
Drug lords and their new and powerful money have been mentioned by many analysts to be already part of the politic and economic elites of these countries.
The Central American countries in which this drugs are produced and transported are inhabited by a large majority of people living in the lowest leves of Human Development.
If legalized, the trade, production and commercialization of drugs (cocaine and heroine mainly) will be regulated by these governments.
Without any doubt, this regulations will enable and create legalized monopolies ruled with the partnership of previous drug lords and government officials.
It has not been advocated by any of the political leaders which road would take the legalization of drugs. This is important, because under current legalization procedures it is not the same to get the approval for a new medicine in the market as to get the approval for a new liquor, a new energizing drink or of a new edible product.

The history of the legalization (production, trade and commercialization) of items considered by many as drugs and for others as commodities has shown that for as long as a government elite hold the power to legalize it; it was in their power to take the first steps into the acquisition of a monopoly of its trade and production.

If legalized, the emergence of a coercive monopoly would be inevitable. As noted by Ayn Rand, the governments and their partners in these coercive monopolies “will be able of setting the initial prices and production policies independently of the market, with immunity from competition, from the law of supply and demand. An economy dominated by such monopolies would be rigid and stagnant.”

If we support the complete and absolute free trade of all commodities it is necessary that we do not grant to government an intrinsic right to regulate it. No compromise should ever be done with a government that requires regulation in order to give us legalization. Legalization should result in freedom and not in regulation. The drug trade should be opened to businessmen and entrepreneurs in the freest way possible. The freest way is that of requiring the traders to inform their buyers about all the necessary information about the products they are offering.

We may be taking part in a historical moment in which the most important thing are principles. Let us remember that one of the most valuable principles of trade is Freedom; and that one of the most valuable principles of government is to seek that i will Protect Individual Rights and not to regulate their lives.

Note: To understand more which are the principles that really matter in this discussion, I invite you to take a look to the video titled: The Drug War in Guatemala: A Conversation with Giancarlo Ibarguen.