Fast Fashion: what we are not seeing

Reading time: 5 minutes

The term “fast fashion” refers to the highly profitable first world fashion industry grounded on the low-cost mass production of clothing, accessories and footwear in third world countries, which allows consumers to purchase new, trendy and readily available garments for the lowest prices. 

The word “fast” describes how quickly retailers can place new designs into the stores all around the world, keeping pace with the constant demand for more and different styles. Its origins date back to late 20th century as manufacturing became cheaper with the use of new materials like nylon and polyester. Many companies, such as Zara, H&M and Forever21, started building its business models on inexpensive labor industries in Asia, creating seasonal and trendy designs that easily pierced consumers all over the world due to its low prices. But what is the cost of this rapid turn-over of low-cost garments?  

Primarily, we must focus on the significant environmental impacts of fast fashion. Approximately 80 billion piecesof new clothing are purchased every year, leading mass production of clothing to account for 8% of worldwide carbon emissions and placing the fashion industry in the top 5 of the most polluting industries in the world. Moreover, this industry is considered to be the second-largest consumer of the world’s water supply: according to a National Geographic study, each cotton shirt takes 2700 litters of water to be made, enough water to sustain one human being for three years.  

Water needed to do a shirt 

On top of that, fast fashion uses pesticides for dyeing and production, leading to a heavy pollution of waterways in many developing countries. This happens because whilst in developed countries governments ban most of these chemicals, in the poorer ones their dependency on the clothing industry does not allow them to do so, which leads us to the main damage made by this industry: its tremendous impact on the countries in which production takes place.  

Because most multinational fashion companies set their factories in countries with inadequate labor laws and little to no government control, working conditions are dehumanising and dangerous, as many people do not have the luxury to turn down any form of work and have no choice but to work under these conditions in order to survive. 

These conditions include a 14 to 16 hours of work per day, seven days a week while facing physical and verbal abuse from their supervisors and often locked in closed spaces filled with toxic substances and no ventilation. In many countries, minimum wages range from a half to a fifth of the living wage required for a family to meet its basic needs, leading textile workers to be some of the lowest-paid employees in the world. 

However, the main issue taken by the fast fashion industry into developing countries is child exploitation. The race between companies to find the ever-cheaper sources of labor, in order to achieve the common goal of maximising profits, has led them to neglect basic human rights and cope with some of the worst forms of child labor. This happens because many employers in these countries actually prefer employing children, as much of the supply chain requires low-skilled tasks and some are even better suited to children due to their small fingers, which do not damage the crop.   

Bangladesh, India, China, Thailand and Pakistan are some of the 51 countries that use child labor in the garment industry, in which millions of children are subject to long working hours, exposure to pesticides and often paid below the minimum wage, which we have already discussed is far from being enough for living a decent life with basic needs. According to the International Labour Organisation, there are around 170 million children aged between five and seventeen years old in child labor, almost 17% of the global population of children. Of these, half are working for fashion supply chains.  

Children working on factories

But  as with most topics, there is another side to it. While the treatment and compensations of textile workers in developed countries is inhumane and a potential violation of basic human rights, there are positive effects that cannot be ignored. The choice between a life on the streets and a modest-paying job is a choice between life and death for many in developing countries. Not to mention children, without a certain commitment to a place to spend their time, tend to fall towards prostitution and drugs as a way to make ends meet. Despite all its flaws, the textile industry is, at the moment, one of the factors that plays a part in deterring the descent of the younger generation into an even worse life. 

In addition, this industry employs thousands of workers and, in an extreme scenario where people simply stop consuming, it will cause many who really needs this job, despite its atrocious conditions, to lose it and be in an even worse financial situation.  The lesser of two evils.  

Nevertheless, the fast fashion cycle isn’t limited to its production in developing countries; a piece of clothing can travel half the globe in its lifetime. Finished products are shipped and sold to Western nations – this is fast fashion’s first pipeline. In developed countries, damaged or unwanted pieces of clothing are donated to charitable organisations, which redistribute them to developing countries – this is the second pipeline.  

Therefore, the cycle of self-consuming fast fashion is perpetuated across the globe, incentivising poorer countries to keep producing clothing articles at extremely low costs, as the resulting influx of donated clothes from developed countries is a cheaper alternative to clothing than the establishment of a self-serving textile industry within the developing country.  

Let us take the African example: the continent once renowned for its fabrics and textiles, coveted by European explorers, has a dying clothing industry due to overwhelming donations from abroad. The image of an African child in a worn-down graphic tee or a Los Angeles Lakers jersey is all too common. Foreign imports of clothing intensified during the 1980s and 1990s when trade barriers were removed.  

Some East African nations, in an effort to reignite their textile industry, proposed a ban of clothing imports by 2019. This plan was swiftly rescinded due to pressures by developed countries such as the US, which stand to gain from fast fashion’s second pipeline – over 40,000 US jobs would be lost. It is important to take into account the negative effects of donating clothing towards developing countries, as they may be causing more harm than good.  

All in all, fast fashion is a contentious topic; there is no denying that our lives, as developed nations, have benefited from its fruits. Our easy clothing doesn’t come without its downfalls, however. Where do we draw the line? Many turn a blind eye to fast fashion’s vicious cycle – but we cannot keep ignoring it. Perhaps a more conscious choice of clothing is in order.  


Sources: The New York Times & The Guardian

Foto de perfil de Guilherme Barroca

Guilherme Barroca

Foto de perfil de Madalena Andrade

Madalena Andrade

Telecommunications: The next big step for Africa

Team’s note

Dear reader,
The article you’re about to read is the product of a challenge the teams Development Economics and Technology made to each other: to create a relevant article about submarine telecommunication cables. Curious about how can these cables possibly relate to Development Economics? Keep reading!

Every day, we hear about new technologic innovations and digital products and services made to boost our economy and make our lives much easier. This quick access to any sort of information at just a tap of a finger has been considered the new normal. But how is it evolving in developing countries on the African Continent?

Contrary to what you would think, Africa has been evolving quite rapidly in terms of telecommunication infrastructures. Did you know that, in 2019, the number of cell phones per 100 habitants in Botswana was 174? This comes from the fact that cell phones are way cheaper and easier to use than personal computers, for example, making the implementation of the internet in Africa mostly instigated by this.  

One of the key players in enabling Africa to connect countries both inside and outside the continent are the submarine telecommunication cables. With its establishment in some key regions alongside the coast of Africa, such as South Africa and Nigeria, this continent was exposed to a new era of globalization. The purpose of the cables is to transmit telecommunication signals across seas and oceans in order to connect continents and provide easier access to data/internet. As a result, it launched a digital economic expansion and overcame many communication boundaries.

Unfortunately, the truth is that more than 60% of the African population does not have yet access to the Internet and its perks, and there are still many difficulties regarding the adaptation to this new reality that needs to be solved.

Considering these facts, how can this connectivity benefit Africa? And what are the main challenges of it?

Travellers consult their mobile phones in Abidjan, Ivory Coast

Until 2009, only three submarine cables provided the whole African continent with internet. Besides, only one of them was located in the South, meaning that the population in Sub-Saharan Africa was limited to a single outdated cable in order to access the internet. Due to this lack of infrastructure, it was hard to broadcast data within the african continent and between continents. Fortunately, over the past decade, many more cables were installed across thirty-seven countries. Just this improvement led to a great change in Africa’s connectivity. In the regions that are online, we are already able to see the economic impact that these new infrastructures can trigger. For instance, a study from a partnership between RTI (an american nonprofit research institute) and Facebook states that in Kenya there was an increase in employment and job quality in fibre-connected areas, characterized by the creation of new jobs and the replacement of low-skilled jobs for more skilled ones (more specifically, an 8.4% increase in skilled employment). Other outcomes include the increase in foreign investment, governance quality and in the national GDP for many countries.

And yet, almost half of the countries with the capability of having a direct submarine cable connection are only connected to one or two, despite being able to withhold more. Such dependence on a few number of sources made these regions vulnerable to consistent internet outages and slow-downs. For example, it is common for these cables to become disabled by several incidents in particular cuts caused by maritime activities and natural disasters. In June of 2017, an anchor of a container ship damaged the only submarine cable that was connected to Somalia. The Internet outage transpired for more than 3 weeks, causing chaos across the country and economic losses around $10 million per day. Alternatively, digital outages may also come from cable breaks provoked by natural landslides i.e. seaquakes. These incidents tend to be more of a risk to East and Central African regions and are usually more costly to repair as it takes a longer time to reverse the damage.

Submarine cable

Furthermore, African countries also face another big challenge regarding connectivity isolation. The introduction of submarine cables in Africa only reached a small portion of its population, mainly people who lived in urban coastal regions and belonged to an educated and upper class. In contrast, most Sub-Saharan African countries are characterised by vast landlocked territories scarce in infrastructures and a predominant rural population. Although there is a need for terrestrial infrastructure, it seems to be less effective because not only is it more expensive, but also quite complex given the need to cross several borders. In addition, non coastal areas who are digitally isolated are more prone to suffer network outages and take more time to recover, incurring high economic costs. As a result, the deployment of these submarine cables contributed to a digital divide.

Evidently, the problem surrounding rural connectivity will not be solved through traditional solutions, and so some companies like Google and Facebook offered innovative ideas to tackle this issue. In Kenya, Google, through a sister company called Loon, partnered up with Telekom Kenya (Public-private telecommunications entity) and came up with a project that consisted in distributing helium filled balloons above 20km from sea level around the country’s most inaccessible regions. These balloons are powered by a solar panel and have an antenna which provides internet signals within a 5000sq km reach. Moreover, Facebook tried another approach through the usage of drones and satellites and is still to this day studying alongside Airbus various ways of high-altitude internet supply.

Other great examples of landlocked areas’ effort to overcome these boundaries are Botswana and Rwanda. Botswana’s government, alongside with 11 private companies, created a program named “Fibre to Home” with the purpose of offering boundless bandwidth for internet connection in homes. Besides, Rwanda has been partnering up with KT Rwanda Networks and GSMA in order to develop new infrastructure to increase mobile deployment in the country. As a result, between 2014 and 2016, the individual access to the internet increased from 10.6% to 20%.

As we can see, Africa has been on the eye of many private companies willing to invest and solve the problems that this continent is now facing regarding the development of telecommunications. The most ambitious project coming up is 2Africa. Facebook is working with african and global telecommunication operators to create a 37,000km long subsea cable that will connect 23 countries, spanning from Africa to Europe and the Middle East. The joint network capacity that it will offer is three times more than the one that currently exists in Africa. Despite it being expected to improve the continent’s economy and provide a more stable connectivity, it’s difficult to make more accurate predictions since the impact of Covid-19 on the African economy is yet to be analyzed, and it could greatly affect the outcomes of this new project.

Nonetheless, we must not forget that effective and precise regulation needs to be formulated to ensure an open and competitive environment. Without this, cartel agreements and monopolies may appear and thus benefit from an excessive market power and the ability to overprice services and goods. This may deeply affect the growth of the telecom sector. Additionally, we also need to consider the high digital illiteracy across the continent. As a way to combat this problem, ITU and Norway have combined forces to provide training for 14,000 Ghanaians in order to better and strengthen their digital skills, allowing them to undertake jobs in the future that work with this technology and make the most of the internet.

Students of Kibiribiri Church of Uganda Primary school during a Computer Training Meetup at their school

The Covid-19 pandemic has greatly affected our economies, and Africa is no exception. Still, it did not slow down foreign investment nor did it diminish international interests in this continent. In fact, it is anticipated that Africa will grow more than ever after this crisis comes to an end. Investments in fintech, a digitalized way of providing financial services, is among the most important matters that countries and companies are willing to develop.

All in all, Africa still has a long way to go. It will be through the combined efforts of both public and private investment that Africa will overcome the many prevalent challenges and reach its full potential. This way, we believe that the development of telecommunications in this continent will grow exponentially in the upcoming years. The future is bright.

Team’s note

Dear reader,
Having reached the end of the article, we hope you found it insightful and interesting to read. We kindly remind you that this article is the product of a partnership where both the Development Economics and Technology teams challenged each other to write a relevant article on the same topic – submarine telecommunication cables. Don’t forget to check out their article as well. Until then, stay tuned, stay aware.

Benedita Elias

Somaliland: A New Hope

The main purpose of development economics should be to give any country or community hope. Hope for a future they own and where they can grow. But no hope is seen nor given to anyone in Somalia, as the country has been a disaster since the day it gained independence in 1960. With the premise of bringing the major native ethnic group of the Somalis together, the British and Italian colonies were unified. Its government started as a failed democracy, followed by a brutal dictatorship under Siad Barre, resulting in wars and many genocides across the country. The dictatorship lasted two decades, until in 1991, the government was dismantled by rebel armed groups. Afterwards, no government successfully took control. Somalia has been in a civil war with different factions fighting for control, being the perfect hub for terrorist groups, warlords and pirates. An absolute anarchy. The years go by and there is still no hope for the Somalis.

But there is one exception – Somaliland, a region of Somalia that belonged to Britain in the north of the country. It has had relevant developments and it’s starting to have its first foreign diplomatic relations. It possesses its own currency and even its own passport. Its achievements have been considered remarkable. Even though it is not internationally recognized as a country separated from Somalia (yet), it’s developing the best it can to become one.

In this article we will focus on this small wannabe country and try to ascertain if it can indeed become a successful nation recognized by the rest of the world or if it is just another African state waiting for its decline. Is there still any hope for the Somali people?


Map of the faction division in Somalia, as of 2017

Map of the faction division in Somalia, as of 2017


A short story of tragedy

Dictator Siad Barre of Somalia

Dictator Siad Barre of Somalia

Somaliland has always been the odd one out in this unification, being always marginalized by the rest of the country. In 1978, during Barre’s dictatorship, with the goal of unifying other Somali dominated territories, the national government started a war with Ethiopia, which it lost. This defeat destroyed the economy of the country, the lives of its citizens and the image of its government. Because of this, in the mid-1980s, rebellions started rising. Somalia’s military started a brutal counteroffensive, not only against the rebels, but also against the different clans that supported them. It was in Somaliland that the national army marched to the region’s largest cities of Hargeisa and Burao. Using artillery and air strikes, they bombarded the cities, destroying 90% of Hargeisa and 70% of Burao, killing thousands of civilians. This is known as the Isaaq Genocide. Barre’s government collapsed in January 1991, and in April of the same year, Somaliland declared independence. All Somaliland militias were dismantled or incorporated into the new national army of Somaliland, providing a solid stabilization and security in the region. For the rest of Somalia, a long civil war awaited.


On the road to a better future

For Somaliland to become a successful country, there are some key points that must be assured: regional stability, an efficient government and a healthy economy.

Somaliland is considered the most stable region in the Horn of Africa. As the former militias join the national army, this army remained loyal to the new government. After the remaining of Barre’s forces were defeated, many other dangers were still present, such as Islamic terrorist organizations, pirate groups and the other numerous factions in the civil war. All were successfully expelled. Its major stability problem is still with the neighboring Puntland with whom it has some territorial disputes. As of national identity, these were the same people marginalized by the rest of Somalia and the same clans killed in the Isaaq Genocide. We can associate the loyalty of Somaliland’s troops to this strong national identity.

Its government started as a democracy that distributed all major powers between the most powerful clans. Later in 2002, it decided to substitute it for a more ideology-based democracy. This new government had a modern constitution, with full separation of powers between independent institutions. In 2003, the first president of Somaliland was elected, and the subsequent elections have been all considered fair and legitimate internationally, largely thanks to this government architecture that was built with no help from abroad. All of this made Somaliland’s government gain the recognition of most efficient democracy in East Africa.

As for its economy, despite having great potential, it’s still quite underdeveloped as it continues to be based on livestock exports, largely to Arab countries. The government is progressively looking to diversify its economy, investing in its most promising sectors. Somalia is situated in the Horn of Africa, a valuable strategic location since it’s where many trade routes pass through. Somaliland took advantage of this by investing in its ports. Berbera’s Port is one of the biggest and most developed ports in the region and is a booming site for maritime operations, providing access for maritime trade and attracting foreign investment from China and the UAE. Its territory also has an abundance of mineral resources, such as industrial ore like iron and titanium and even rare metals. Oil reserves are also present and have already started being explored in 2018.

To summarize: it’s the only stable region in Somalia, as well as one of the most efficient governments build from the ground that has a promising economy. This great potential is not officially recognized in the world, but in many ways, it is unofficially: it has trading agreements with multiple countries, such as the UK and Taiwan, and is a member of multiple international organizations such as the UN’s Unrepresented Nations and Peoples Organization.

Somaliland representative Mohammed Omar Hagi Mohamoud meeting Taiwan’s President Tsai Ing-wen

Somaliland representative Mohammed Omar Hagi Mohamoud meeting Taiwan’s President Tsai Ing-wen


Current problems

There are still many weaknesses inhibiting the self-declared country from being recognized. For instance, the ongoing civil war with the north-eastern area of Somalia – Puntland, due to the territorial dispute over eastern provinces, whose control is claimed by Somaliland based on colonial boundaries and by Puntland based on tribal affiliation. Another obstacle is that many countries and international organizations, including the African Union, don’t support a successful separatist’s movement, no matter how efficient it may be, fearing it may encourage other similar movements to seek independence. And because it has no recognition, no foreign aid can be provided to the government. Hence, the government is very dependent on private donors and investment, leaving the danger of corruption of the government wide open.

Apart from its lack of recognition, Somaliland also has many internal problems. It still presents an extremely low GDP per capita of $347 US, making it the fourth poorest country in the world, according to the World Bank. As the effects of climate change increase, it endangers the livestock industry, which is still the backbone of the current economy, resulting in income loss and famine to a part of the population. Despite Somaliland’s efforts and investments towards education, half of the children still have no access to school. Several human rights abuses are still committed, such as feminine genital mutilation, which unfortunately is still very popular in Somalia as it’s estimated that 98% of women have been submitted to it, according to ActionAid.


The Veredict

Truth is, this reality is very complicated. It takes a very long time to see improvements in a country, and failed cases of separation are the most common examples. But against all odds, this government has been achieving all the right benchmarks in the 30 years of its independence: stability in a region globally known for widespread chaos, a complex political system that disapproves and punishes corruption and a promising economy built with investments in infrastructure and education. Moreover, by granting international recognition, the resulting provision of foreign aid would alone solve many of Somaliland’s problems. But one question remains: if the international community doesn’t reward this nation, how can it expect to see more of its kind in the future?

Sources: World Bank, East African Business Week, UNICEF, UN News, The Conversation, Institute for Security Studies, Economist, Britannica, BBC, Action Aid, The Taiwan Times


The Barefoot College

“What’s the best way of communicating in the world today?
Television? No.
Telegraph? No.
Telephone? No.
Tell a woman.”

— Bunker Roy

By definition, development implies an act of change.

However, the current pandemic endangered the traditional flows of humanitarian aid between the developed and developing countries, surfacing an ever existing problem. The usual view of helping by exchanging first necessity goods was also corrupted by the lockdown and the disruption of supply chains. Companies are cutting costs and there aren’t as many supplies to give away as before, and in the unfortunate event of a ONG having to close down, even for a couple of months, the targeted community will go back to needing clothes, food and medicine shortly afterwards as they remain without some self-sustainable, independent way to get those basic products. Consequently, more and more search comes for lasting, self-growing, universally obtainable means, like education, in the hopes of creating a solid ground that can’t be as easily affected by unpredictable world-level crisis such as the present one.

The creation of a physical, usable bridge between the developing and developed worlds was a dream of Sanjit “Bunker” Roy, a young freshly graduate student that decided to make a real lasting change. As one of India’s privileged, Sanjit had a world of opportunities, he could go anywhere and do anything. Instead, he felt that what he really wanted to do was make a change and so he went to one of India’s poorest regions and began transforming it as a single man in a strange place.

One of Sanjit’s most valuable practices was to start small and local. To feed this idea of an impactful project he could not just make huge changes in the local villages of rural India from his perspective of what would benefit the community. As a literate man, he could think for himself, alone, making sole use of his knowledge, but he didn’t. He understood that the key to a measurable transformation was actually speaking with local farmers, children and women, people who could actually explain their needs and dreams.


“Listen to the people on the ground. They have all the solutions in the world.”

— Bunker Roy

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Surprisingly, he began realizing that, although without education, these people knew whatever they needed to know to sustain an impressive standard of living given the poor resources available. They possessed incredible tools, knowledge and ideas that would never be reached by the institutional, formally educated brain. In fact, “Bunker” Roy talks about an important woman that couldn’t read but worked as a dentist and had under her care more than 7.000 children. Also, a gentleman that couldn’t read, but challenged the vision of educated architects who said it was impossible to build something sustainable out of the dry “unusable” land, and gave instructions on how to build and grow life in that unfavourable environment. These people and their mentality looked past modern age obstacles and defied contemporary reasoning.


“[The Barefoot College is] the only college where the teacher is the learner and the learner is the teacher.”

— Bunker Roy

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With this, Sanjit “Bunker” Roy ended up creating The Barefoot College, a school Built by the poor, for the poor, where they teach groups of women from different, poor villages all around the country how to become solar engineers, innovators and educators. Women who afterwards return to their homes and transform their communities by harvesting solar energy for electricity and becoming teachers to those around them. In these women, Sanjit found a source of real power and lasting, self-sustainable change, so much so that he found best to provide them with all the necessary capacities to transform their realities.


“Our job is to show how it is possible to take an illiterate woman and make her into an engineer in six months and show that she can solar-electrify a village.”

— Bunker Roy

Sanjit knew that giving and installing solar panels himself would have an overwhelming impact in his community, but he chose to go further and gave more than 1,000,000 people in over 96 countries access to clean energy for heating and cooking and clean water to drink.


“We went to Ladakh … and we asked this woman, ‘What was the benefit you had from solar electricity?’ And she thought for a minute and said, ‘It’s the first time I can see my husband’s face in winter.”

— Bunker Roy

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The increased quality of life given to all these different villages and communities exceeds the power of one man and it is only possible because there is a system and a mentality already in people’s souls that goes beyond traditional education and degrees. It comes from the day to day living that a “privileged outsider” would never be able to comprehend. So, it is to people as Sanjit Roy that we have to thank every day. Sometimes it is easier to overlook this idea that we need to go out of our comfort zone to find the strategies and change lives but is necessary to confront ourselves and evaluate if whether we are making use of our knowledge to find impossible solutions.

The human race has the power and knowledge to find impossible solutions

 

If you have time, please visit https://www.barefootcollege.org/about/ and watch https://www.ted.com/talks/bunker_roy_learning_from_a_barefoot_movement?language=zh-TW.


Clara Malta - Clara Malta

Foreign Aid: are we doing it right?

Poverty, disease, famine. If we were to ask you which places would you associate with these three simple words, most likely African nations would be the first ones to come to your mind. However, these problems are not by any means limited to this group of nations, but rather to those whose economies are underdeveloped, where many people live under the poverty line. As such, significant efforts have been made in the past decades to try and overcome these issues, generally through foreign aid mechanisms aimed towards struggling nations. Nevertheless, a consensus is yet to be reached on what is the most effective way to help develop these economies.

Sachs – the foreign aid enthusiast

There is a school of thought, defended primarily by Jeffrey Sachs, an American economist, which argues that it can indeed be through Official Development Assistance (ODA) that impoverished households and developing economies can improve their economic paradigms. ODA is what is commonly referred to as Foreign Aid, which is defined as “a set of flows that are concessional in character and are administered with the promotion of economic development and welfare of developing countries as its main objective”. Sachs argues that developing nations frequently fall into a “poverty trap” where households only have enough income to cover for their basic needs, which leads to them both not increasing their household savings and not paying taxes. The absent supply of loanable funds to the loan market and the low amount of money that can be funneled into public investment lead to a situation where there is not enough invested capital to sustain economic growth. This is where ODA can play a vital role. By providing ODA to households their savings can increase and, if there are also other funds that can support public investment and microfinancing to firms, the capital per person can increase and this poverty trap can be overcome (Figure 1).

Figure 1 - The importance of ODA in breaking the poverty trap

Figure 1 – The importance of ODA in breaking the poverty trap

Now, it is easy to quote all these theoretical assumptions, but to verify their veracity in the real world is a whole different story. Fortunately, there have been examples where Sachs’ framework has proven to be effective in developing impoverished economies, the most famous of which being the Green Revolution that occurred in India between 1965 and 1990.

In 1975, 59,1% of India’s population lived in poverty and in 1970 only 18,4% of India’s agricultural area was irrigated, the other part being composed of less sophisticated agricultural technologies. As such, the Indian Government, in collaboration with its International Development partners, launched a massive investment campaign to modernise this sector of the economy and support its struggling population. The adoption and development of irrigation techniques were subsidised, which alongside the creation of new credit and microfinance mechanisms aided the lower-income population (Table 1). These policies allowed small farm owners to have access to cheap inputs that improved their financial situation and, in turn, India’s economic position: in the 1990s the percentage of population that lived in poverty fell to 43,1% and 31,8% of the agricultural area became irrigated.

Table 1 - Decrease in the number of poor people per million Rupees spent in India

Table 1 – Decrease in the number of poor people per million Rupees spent in India

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Easterly – the foreign aid skeptic

On the other end of the aid debate spectrum is William Easterly, an American economist specialized in development economics. Easterly believes that the current system to provide foreign aid is neither working efficiently nor achieving its goal, since it’s not being well structured to obtain real effects. He further states that, if not provided correctly, it can be a disincentive to the economy.

The “poverty trap”, first introduced by Sachs, predicts growth per capita of the poorest countries to be zero or negative. However, data tells us another story: according to studies (Table 2), many poor countries verify, in fact, a positive per capita growth.

Table 2 - Testing the poverty trap for long periods

Table 2 – Testing the poverty trap for long periods

Furthermore, one of the characteristics of the “poverty trap” is that savings are very low for populations, leading countries to need large receipts of aid. In fact, in 1990, more than 15% of Africa’s income was from foreign donors. However, as shown in the graph below (Graph 1), as aid increased, per capita growth didn’t necessarily increase, contrary to what would be expected. Furthermore, some infer that it is not the increase in foreign aid that causes a fall in the growth rate, but rather a fall in growth that incentivizes increases in aid.

Graph 1 - Aid and Growth in Africa (ten-year moving averages)

Graph 1 – Aid and Growth in Africa (ten-year moving averages)

Nevertheless, although one can make the case that there is no such thing as a poverty trap, since poor and undeveloped countries show small, but still positive, growth rates, it still cannot be ruled out that these same countries need external assistance in order to reach higher levels of development.

Unfortunately, it’s usually the way this assistance is provided that is the reason why providence of foreign aid isn’t accompanied by increases in growth per capita. In fact, much of the donations’ money is not effectively reaching those in poor living conditions. There exists a chain through which money must travel until it finally reaches those who it’s meant for, and it’s exactly somewhere along this chain where a lot of things can fail and prevent funds from reaching their final destination. In many cases, it’s corruption and embezzlement from political elites that will keep the foreign aid from being correctly allocated. Sierra Leone officials’ stealing of a total of 1.2 million GBP (british pounds), in 2010, and Uganda’s education ministers’ embezzling of a staggering of 16.5 million GBP are only a few of many, many examples.

One way of preventing this misallocation of fundings is to increase monitoring and evaluate the impact of foreign aid. The monitoring allows the aid donor to ensure that the aid is being correctly allocated, while the evaluation enables them to make sure that, after the aid has reached its recipient, it’s being well used.

Then… What should we do to help fight poverty?

Easterly’s answer is simple. Before all, western countries should make peace with the fact that they are not as much a part of the solution as they think they are. After accepting that fact, those who wish to help can focus on the importance of rights: only in an environment where an individual has political rights and economic freedom there is propensity to development. Hence, donors should not try to separate themselves from political questions, but rather fight for a democratic and free political environment.

An unreachable consensus

An agreement between Sachs and Easterly is highly unlikely. An absolutely correct and universal answer to world poverty is even less. But it still is a matter that should be addressed. According to the last estimates available on global poverty (from 2015), 9.9% of the population lives in extreme poverty (i.e. under the poverty line). That is 730 million people subsiding with less than $1,90 a day and without access to basic essentials that many of us take for granted, struggling to survive yet another day. If, on one hand, there is an ongoing discussion about how aid should be provided, on the other hand, whether or not we should help these countries is not up for debate.


Sources:

  • Business and Economics Journal

  • Green revolution paper

  • Reinventing Foreign Aid, William E., The MIT Press, 2008

  • The economics of international development: Foreign Aid versus Freedom for the World’s Poor,  William E., The Institute of Economic Affairs, 2016

  • The End of Poverty: Economic Possibilities for Our Time; Sachs, Jeffrey D., Penguin Press, 2005

  • The Treasury

  • The white man’s burden: Why The West’s Efforts To Aid The Rest Have Done So Much Ill And So Little Good, William E., 200633

André Rodrigues - André Rodrigues Laura Osório - Laura Osório

China at a crossroads: when will it be too late?

China will strengthen green and low-carbon policies and regulations with a view to strictly control public investment flowing into projects with high pollution and carbon emissions both domestically and internationally”. These were the words of President Xi Jinping in 2014. Later on, in July 2019, China committed to “update” its climate target “in a manner representing a progression beyond the current one”. Furthermore, it also vowed to publish a long term decarbonization strategy by next year.


But can this nation live up to the promises?

Indeed, China made an effort in promoting green development: in 2015,  it increased its wind power capacity by over 30 gigawatts, becoming the number one leader in this parameter.

In that same year, China saw a huge growth in solar power production, moving into first place, surpassing the previous solar leader, Germany.

China has been the world’s leading country in electricity production for renewable energy sources, according to Global Commission on the Geopolitics of Energy Transformation, establishing itself as a global pacemaker in driving a domestic decarbonization agenda.

On the one hand, tension arises upon the fact that the country finances clean energy, representing 11% of its budget spent on electric power generation. On the other hand, investment in coal production amounts to a total of 36% of the Belt and Road Initiative. [1]

Conflicts of interest have emerged between the promise to reduce coal production and the fact that it has been one of the biggest contributors to the growth in the power sector. In fact, China is responsible for 51% of coal’s global demand as well as 46% of its global production – if the country continues to go down this path, its reliance on coal will not fall not even close to the promised value.

  • Demand-side: China’s coal consumption has been growing at a slower rate and not necessarily declining. It could indeed be said that Chinese coal demand has been relatively flat for a few years now, but it has not been falling in the absolute sense.

  • Supply-side: Coal power generation has been rising at 6% per year and China has reached 1.76 billion tonnes of this fossil fuel in the first half of 2019 – which represents a 2.6% increase from the same period last year.

On top of that, China’s financial institutions are providing $36 billion in funding to build coal power plants outside the country.

A unit-by-unit analysis of all global coal plants under development, based in 2018, shows that Chinese investment has had a significant increasing role in supporting and funding new coal plants in international markets as shown in the image below:


Source: Global Coal Plant Tracker (July 2018) IEEF analysis

Source: Global Coal Plant Tracker (July 2018) IEEF analysis

Moreover, Chinese financial institutions and corporations have agreed to fund over one-quarter of the 399 gigawatts (GW) of coal plants currently under development outside China. This comes at a time where many financial institutions such as the World Bank are shifting away from the coal industry.

According to research organization Climate Action Tracker (CAT) China’s actions and policies are highly insufficient to meet the challenge of holding global warming below even 2ºC, let alone the Paris Agreement limit of  1.5ºC.

As the world’s leading greenhouse gas emitter, CAT also predicts that China’s emissions will rise at least until 2030, at a point which is likely to be too late to curb the country’s impact on climate change.

Nonetheless, another question arises: will China be able to successfully decrease its coal production so fast as it pledges?

With Beijing’s push to reduce coal burning, nearly 13 million households in northern China have switched to electric or gas-heating since 2016.

In 2017, when northern China experienced the biggest ever campaign to replace coal with natural gas it was reported that, in Beijing alone, 140,000 households, across 336 villages bid farewell to coal.

In addition, the toughest restrictions ever on industry were also put in place, from mid-November to mid-March: 15 key cities had to cut steel manufacturing output by 50% which was a big improvement regarding environmental changes, since over 71% of the steel produced uses coal. Also, aluminium production was cut by 30 % as the energy for its digestion plant is derived from steam raised by using coal.

Despite the major decline in atmospheric pollution in those areas and the decrease in the national coal capacity, the rushed measures caused serious problems, since China’s infrastructures were not prepared for this significant change.

Since there was not enough time to install the gas pipes underground in Shijing, they were left above ground causing safety risks for civilians.

Furthermore, widespread reports from the winter of 2016 disclosed heating problems caused by failures to complete the switch to gas on schedule. As a result, some schools in rural zones had no heating, given that coal-fired boilers had been removed before natural gas pipes were installed. Similarly, in Linfen, a village located in Shanxi, had a 155 square kilometer “no coal zone” where residents had to remove coal stoves and they were not even allowed to keep coal at home – yet no alternative heating was provided, despite sub-zero temperatures.

Also, market-wise, as many firms and industries were highly dependent on coal, these restrictions placed them on the verge of shutting down. Eventually, gas heating increased, resulting in supply shortages and causing inadequate heating for many households.

All in all, the world’s success in bringing down global warming is dependent on China’s action, the world’s largest carbon emitter.

Yet, it appears that China’s interests are ebbing as its economy slows. Combined with an ongoing trade war with the United States as well as  Trump Administration’s withdrawal from the Paris Agreement, this economic slowdown has reduced China’s enthusiasm to lead in this global battle. The aforementioned is no excuse for China to forgo a leading role in the fight against global warming. Indeed, embodying the “torchbearer” may be the country’s best bet for a sustainable transition to a stronger and low-carbon economy.

[1] The Belt and Road Initiative (BRI) development strategy aims to build connectivity and co-operation across six main economic corridors encompassing China and: Mongolia and Russia; Eurasian countries; Central and West Asia; Pakistan; other countries of the Indian sub-continent; and Indochina, quoted from  OECD Business and Finance Outlook 2018


Sources: The World Economic Forum, The New York Times, Climate Change News, The Diplomat, Forbes, Institute for Energy Economics & Financial Analysis, Reuters, Chinadialogue, OECD