Chinese President Hu Jintao is visiting Moscow today to discuss increasing petroleum exports to China. That’s if he doesn’t first blow his budget on a hotel room in Moscow. The Russian oil boom has propelled Moscow to the top of the list of most expensive cities in the world. But the concentration of wealth in the former USSR capital belies the truth about the true state of the former Soviet Union.

Today the fifteen countries that once constituted this superpower stand at odds with one another in terms of economic opportunity, human rights, and development. The Baltic states of Estonia, Latvia, and Lithuania are soaring as members of the European Union and NATO. Estonia was ranked top in the World Liberty Index, with its Baltic neighbors not far behind. Meanwhile Turkmenistan’s eccentric (and recently deceased) President Niyazov spent his country’s resources cultivating world class repression, bested only by North Korea.

Elsewhere, oil resources elsewhere combined with a bungled move to private markets after the fall of communism have produced a kleptocracy across the former Soviet states. Outside of the Baltics, all of the former Soviet states now rank amongst the most corrupt countries in the world. On the bright side, communism does seem to have some positive lasting effects when it comes to equality. Five of the top ten most equal countries are from the former USSR.

Having shed the planned economy, these countries have all taken wildly different paths. But what if the USSR existed today? Statastic used several different development indicators and weighted them for each country based on population (one caveat: Russia constitutes 50% of the population of the former USSR). These statistics were combined into a new rating for USSR based on the latest survey data for various development indicators.

Taken as a whole, the USSR is not a very nice place to live 16 years after the fall of communism. Corruption in the USSR is comparable to that in Libya or Rwanda. The countries of the USSR today have less economic and individual freedom than the Democratic Republic of Congo. Even the USSR’s crumbling socialized medicine contributes to a mediocre score in the United Nations Human Development Index. Today the USSR ranks at the same level as its long-forgotten communist friend, China.
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President Bush’s recently-announced troop surge became all the more perplexing yesterday when Britain announced that they would withdraw almost a quarter of its current troops in Iraq over the coming months. South Korea also announced that it would reduce its troop levels by half by April and would completely withdraw by the end of this year. (For a full list of country troop levels in Iraq click here.)

What a contrast with U.S. policy. The administration must be dizzy from spinning this one. Condoleeza Rice found some good news noting that, “The British have done what is really the plan for the country as a whole, which is to transfer security responsibility to the Iraqis as the situation permits.” Michael O’Hanlon, of the Brookings Institution and an advisor to the bipartisan Iraq Study Group, countered that, “If the Brits really do have the ability to redeploy forces, we obviously need them in Baghdad and environs.” Of course, if you were to believe Vice President Cheney’s recent comments about House Speaker Pelosi and Congressman Murtha’s plans to withdraw troops, then apparently the Brits are just “validat(ing) the al-Qaeda strategy.”

With Bush’s planned surge of 21,500, the U.S. will be adding more than 15% to our current troop levels. Contrast this with allies such as Lithuania and Denmark in the “coalition of the just-a-little-bit willing.” They just announced their complete withdrawal by summer.

While Denmark’s 460 soldiers might not seem to be a major commitment, it is significant compared to their total population of 5.4 million (less populous than Wisconsin). In fact, Denmark ranks fourth per capita troop commitments in Iraq… at least until August. The most remarkable thing about ranking coalition partners by their per-capita troop levels is that the United States, despite its huge population, has committed by far the most soldiers per capita. Nearly one in every 2,000 U.S. citizens is deployed. So if you have an impressive Myspace network, chances are one of your virtual buddies is currently in Iraq.

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President Bush’s 2008 budget hit the Hill yesterday to a frosty reception (so much for global warming). The budget is like having an accountant hold a mirror up to American society, and that society is simultaneously warlike and childish.

Almost half of your income taxes will be spent on national defense, and that doesn’t include the interest on debt from previous defense overspending. The Pentagon will spend 6% of its budget repairing and replacing equipment (mostly for Iraq), but it’s still more than the entire foreign affairs budget for 2008. Diplomacy from the barrel of a recently-repaired gun.

The budget also reveals that we are spending money like spoiled trust fund kids - but without the trust fund. Paying for the $261 billion in interest payments on our past indulgences takes up most (83%) of the revenue collected from corporate taxes. Lest you think that we should cut taxes to spur the economy, may I remind you that tax cuts still don’t pay for themselves no matter how many times Bush insists that they do. In fact, between 2008 and 2012, the Bush tax cuts will cost the Treasury Department more than one year of unemployment and welfare benefits combined.

Gift and inheritance taxes collect enough revenue to pay for nearly all of our national science and technology budget. So if you actually are a trust fund kid and think that so-called death taxes are unjust, consider that they might help keep grandma alive for a few more years. Or was that the point of cutting them?
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Source: Washington Post

One week ago Ethiopian troops moved into the Somali capital of Mogadishu to quell the unrest. According to a U.S. State Department spokesman, the Ethiopian military did so at the request of the secular Somali government which has been battling Islamic fundamentalists in Mogadishu.

The invasion bears some striking similarities to the U.S. invasion of Iraq - perhaps even more so to the Muslim world. Ethiopia is a U.S. ally and a largely Christian nation with a history of enmity toward Muslim Somalia. Ethiopia seemed poised for a rapid military victory, yet completely unprepared for maintaining security in Mogadishu.

As we saw in Iraq, a power vacuum is fertile ground for extremists. Somalia’s secular interior minister ominously said, “We have a symbolic government. Ministries we don’t have, a military we don’t have.” Recent statements by Al Qaida spokesman Ayman al-Zawahri identify that Somalia and Iraq as prime Islamic battlegrounds in their war on the West.

The security picture in Mogadishu bears striking resemblance to that in Baghdad:

Six days after the transitional government took hold, very little security was evident beyond that which Somalis have grown accustomed to providing for themselves: roving pickup trucks filled with armed teenagers, and AK-47-toting militiamen who guard the city block by block, and clan by clan.

Despite similar conditions on the ground, there are important differences. For one, Al Qaeda was active in Somalia before the Ethiopian invasion. And unlike the United States, Ethiopia is appealing to the international community for assistance. With any luck the outcome in Somalia three years hence will also be starkly different from that in Iraq today.

Source: Wikipedia, statastic research

Paternalism and the Mirage

Professor Karnani’s primary critique of Prahalad’s The Fortune at the Bottom of the Pyramid, is that it focuses multinationals on the extreme poor as consumers. Instead Karnani offers that “…we should emphasize buying from the poor. By far the best way to alleviate poverty is to raise the income of the poor.”

This is not a new idea, nor is it at odds with the idea of marketing innovative products toward the poor. Karnani’s arguments against the poor as consumers often boil down to naked paternalism:

“Holding the poor consumer’s income constant, the only way he can purchase the newly available product is to divert expenditure from some other product. If he is a ‘rational’ consumer, this will increase his welfare. However, as a practical matter, this is unlikely to result in a significant change in his poverty situation. Additionally, if for some reason, the poor consumer is irrational in his resource allocation choice, the BOP initiative might even result in reducing his welfare.”

“The poor surely have a right to buy televisions; the issue is whether it is in their self interest to buy televisions.”

So if there is a risk that poor consumers might make irrational buying decisions, who should help guide them? The United Nations? The dictator of that poor country? A local tribal leader? Religious clerics? In an ideal market, consumer choice is best left to… the consumer.

Professor Karnani emphasizes that the government should be focused on consumer protection. But we have to remember that consumer protection laws in the West have taken a century to build. Should developing nations that can’t even deliver basic sanitation, infrastructure and public health shift their focus to developing consumer protection laws? Consumer protection is a worthy goal, but it is ultimately citizens who must hold their own governments accountable when the forces in the free market are perceived as harmful to their society or environment.

Karnanai also takes issue with Prahalad’s example of a skin whitening cream that was marketed to women in India by international giant Unilever. Karnani blames it for it entrenching women’s disempowerment, writing that:

“The BOP proposition is not satisfied with just giving the company the right to sell skin lightening cream. It goes further and commends the company for empowering women and helping eradicate poverty. This is an intellectually and morally problematic position.”

He also notes that Unilver’s marketing campaign was failure:

“The All India Democratic Women’s Association campaigned against this and another advertisement as being racist, discriminatory, and an affront to women’s dignity.

“Ravi Shankar Prasad, minister of Information and Broadcasting, said ‘Fair & Lovely cannot be supported because the advertising is demeaning to women and women’s movement’. Unilever has since discontinued these two advertisements in India.”

Karanani advocates that we preemptively limit consumer choice because the poor might make economic decisions that seem irrational from a Western perspective.  But it was by giving consumers a choice in India that they considered the role of women in Indian society, and market forces ultimately drove Unilever to pull the ads. Would Karnani consider poor customers to have been rational economic actors in that case?
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Paternalism Meets Micro-Credit

Karnani also finds harm in Prahalad’s example of Casas Bahia. This Brazilian superstore facilitates the purchase of high-quality appliances by offering credit to poor consumers who have unpredictable income streams.

Karnani argues that:

“The BOP proposition again falls prey to a fallacy: providing credit does not change the affordability of a product. The finance term for Casas Bahia ranges from four months to one year, with an average of six months. All that the financing scheme does is provide instant gratification at a price. For the privilege of this instant gratification, he pays an interest rate of over 4% per month. People with ‘low and unpredictable income’ would be well advised to save and pay in cash; this will enable them to do a better job of comparison shopping too. It is not surprising that many of Casas Bahia’s customers do not understand well how to unbundle the purchase price and the interest cost and instead focus on the monthly installment payment.”

Using credit in a developing nation is rarely about instant gratification. Village groups in West Africa without access to micro-credit schemes organized themselves and made small loans to group members for the monthly interest rate of about 10%. These loans helped fund medicine for sick children or seeds for cash crops. Poverty tends to produce desperately pragmatic people. Would Mr. Karnani advocate saving money throughout the rainy season only to buy seeds for a cash crop to be planted the next year? Doesn’t it depend on the rate of return? And who is best able to judge when to extend credit?

If a poor Brazilian consumer buys an appliance on credit, isn’t it possible that this person might become more productive as a result? Washing machines liberate people from having to spend the day washing by hand. Gas stoves are more efficient that searching for firewood.

You don’t have to question whether someone will make the right rational economic choices just because they are poor. I agree that government regulation is needed, but we should not discourage the private sector from extending credit just because poor consumers might buy something they don’t need. If someone defaults on the loan at Casas Bahia, I’m guessing they won’t be issued more credit.
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Corruption - Total instances found: 0

Unfortunately this heading applies to a search for the word “corruption” in the PDF of Professor Karnani’s paper, not to the situation the facing the world’s poor. Transparency International recognizes that this is one of the gravest problems facing the poor. Corruption hurts the poor both as consumers (by distorting prices) and producers (by discouraging investment). Neither Karnani and Prahalad offer much insight into how to remedy this.

In fact, Karnani hardly even acknowledges the difficulty hurdle that corruption presents in establishing well-functioning institutions needed to turn the poor into producers. In attacking Prahalad, he seems to lose sight of the fact that billions of the world’s poor live in countries with failed governments.

“By emphatically focusing on the private sector, the BOP proposition detracts from the imperative to correct the failure of the government to fulfill its traditional and accepted functions such as public safety, basic education, public health, and infra-structure.”

Karnani and BOP advocates both want to see improvements in governance. Both want to improve the conditions facing the poor. It’s only a question of how to reach that noble goal. Making a market at the BOP gives multinationals a stake in the improvement. Surely sophisticated market analysts at the world’s corporations would recognize that a well-educated, healthy population of consumers purchases more goods?

We could, of course, step back and try to figure out what is going wrong in the failed states of the world. We just need to fix the infrastructure, education, eliminate AIDS, and end epidemic corruption. This is not a novel idea. The World Bank, UN and countless other academics, advisors and NGOs have been trying to achieve this for decades. As soon as we have that all figured out, will Karanani let companies sell approved goods to the poor?

Karnani concludes that:

Private companies should try to pursue marketing to the poor. However, the profit opportunities are modest at best and we suggest a cautious approach. Large companies that require scale economies should be even more hesitant.

Why ward off large companies? Free market innovation is an invaluable tool. Companies should try to earn a profit in developing nations. Many will fail as thousands of companies before have failed in rich nations. Just don’t wave off the LifeStraws and PlayPumps of the world while we wait for developing nations to create consumer protection laws up to our standard.

Karnani is correct to focus on establishing institutions that will help the poor earn more income. But while we wait, why not try the BOP approach?

Yesterday I wrote about the shortcomings of Prahalad’s book, The Fortune at the Bottom of the Pyramid. We left with the question of whether there was even a market to discuss. Several factors make it difficult to estimate disposable income at the bottom of the pyramid (BOP). Even if it is not a fortune, there is likely much more than a nickel a day of disposable income amongst the world’s 4 billion poor.

Most people in extreme poverty live in rural areas and derive much of their diet from subsistence farming. This means that relatively little of their income is spent of food. In family or tribe-oriented societies, there is also an income smoothing effect. Kinship networks, for example, mean that if one person in a family has a high-paying position in the government, many in the family will benefit. In addition, income such as flows from non-governmental aid, international transfers from foreign nationals living abroad, and the grey economy may be under-reported in GNP figures.

In response to Karnani’s paper, the WRI’s NextBillion.net noted that:

BOP households collectively spend money, lots of it, on a wide variety of goods and services, and are clearly willing to pay for services such as connectivity, clean water, financial services, energy, health care, and education for their children, as well as food, housing, and consumer goods. The BOP is already an economic actor, not just a passive, dependent group, and its collective actions define a market.

So there let’s assume that there is indeed a market of billions at the bottom of the pyramid. Should companies try to reach it? Karnani cautions that viewing the BOP as a vast market of micro-consumers is “potentially a dangerous delusion.” Let’s look more closely at his argument.
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Distribution and Economies of Scale

Concerned about the apparent gullibility of multinational corporations (MNCs), Karnani warns that:

“Not only is the BOP market quite small, it is unlikely to be very profitable, especially for a large company. The costs of serving the markets at the bottom of the pyramid are very high…. This increases distribution and marketing costs and makes it difficult to exploit economies of scale. Weak infrastructure (transportation, communication, media, and legal) further increases cost of doing business.”

Two words: Coke and Guinness. Both have very deep penetration in West Africa. Granted these are not going to improve the health and well-being of the BOP (though Guinness bottles do read, “Guinness is Good for You“). Somehow these MNCs have overcome the challenge of distributing and marketing their products across a large geographic area.

Regardless of infrastructure and marketing costs, the market will help align buyers and sellers if the price is right for each.
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Reducing Prices at the Bottom of the Pyramid

Prahalad’s thesis hinges on the idea that attracting more competition to the BOP will drive down product prices, thus freeing up their disposable income for other purchases. This is basically how Wal-Mart has made low-income Americans feel richer even as real income has stagnated over the last decade. But Karnani takes issue with Prahalad’s assertion that the private sector can deliver high quality goods to the world’s desperately poor at competitive prices:

“There are only three ways to reduce prices: 1) reduce profits, 2) reduce costs without reducing quality, and 3) reduce costs by reducing quality…. the only realistic way to reduce price is to reduce cost. The BOP proposition is adamant that we should not reduce quality in this process.

“Unless all the current producers are grossly inefficient, the only way to reduce cost… without reducing quality will always require a significant improvement in technology. Good examples of this are found in the areas of computers, telecommunications and various electronic products. It is difficult to find examples of such dramatic cost reduction in other product categories. It is not surprising that the BOP proposition repeatedly uses these same examples. We should also note that the ultimate impact on the real income of the poor due to these major price reductions is quite low because the poor spend only a small part of their income on such electronic products. The poor spend over 80% of their income on food, clothing and fuel – products that have not benefited from such dramatic technological changes in a long time.”

Let’s evaluate that last statement and have a look at how technology might help deliver improved food, clothing, fuel, and public health.

Food: There are constant improvements in pest-resistant crops, hybrid seeds, or high volume animal husbandry. Many famers in Africa still till individual family farms by hand. Certainly technology could help them improve efficiency which would lead to lower prices.

And technology improvements in computers and telecommunications do not exist in a vacuum. There are numerous positive spillover effects that affect the BOP as producers. The Washington Post recently reported that cell phones in Congo have enabled farmers and fishermen to “…use text messaging to check market prices, eliminating middlemen and increasing profits — and preventing long trips to the market on days it is canceled.” So a technology unrelated to agriculture has helped farmers saved on input prices (transport to the market on days when it’s canceled) and output prices.

Clothes: Apparel prices have tumbled over the past decade. Much of this is due to reduced quotas on Chinese apparel imports in the U.S. and Europe. Thus, the assertion that “the only way to reduce cost… without reducing quality will always require a significant improvement in technology” is inaccurate. Clothing prices have dropped as a result of trade policy, not an improvement in technology. This does have a trickle-down effect for the world’s poor.

Fuel: Fuel has indeed become more expensive. Women have to scavenge farther for firewood. Oil prices lead Nigerians into the deadly practice of siphoning off crude oil from pipelines running through their villages. But technology can improve access to energy sources. Military applications such as SkyBuilt mobile solar power could find a market at the BOP helping medical centers or providing a short term power source for harvesting and processing crops.

Public Health: As patents expire on novel drugs, cheaper generic drugs will enter these markets. Playpump is an innovative approach to water delivery. LifeStraw promises to exploit economies of scale in order to drive down prices for its personal water filtration device.

Technology: Last week, the Wall Street Journal ran a front-page story about an American entrepreneur, Greg Wyler, who was building an Internet infrastructure in Rwanda. The focus of Terracom is to first focus on market access, then profits. Mr. Wyler might disagree with Karanani’s ideas about providing a quality product at reasonable prices for the poor. He is quoted as saying, “We’re on a mission here to see what happens when we drive prices down and quality up.”

And lest you think that Rwanda is an obvious market for an outside investor, have a look at the graph at the right.

As WRI writes in response to Karnani’s critique:

The pertinent development question is whether the BOP is well served by the present (often informal) markets, and whether there are unmet needs that could be better served by more competitive markets and broader participation by the legitimate private sector.

I believe that private sector innovation help can drive prices lower, maintain or increase quality, and help deliver goods that result in better livelihoods for those at the bottom of the pyramid. But what if multinationals start marketing products that the poor don’t need? Are BOP consumers rational economic actors? Or is Karnani correct when he says that, “The problem is that the poor often make choices that are not in their own self interest.”

More on that soon…

In 2004, C.K. Prahalad, a professor at University of Michigan’s Ross School of Business published the groundbreaking book “The Fortune at the Bottom of the Pyramid.” The basic thesis is that multinational corporations (MNCs) have concentrated their sales and marketing efforts on the richest citizens of the world while ignoring the 4 billion consumers who live on less than $2 per day at the Bottom of the Pyramid (BOP).

He asserts that introducing market choice to the poor will free villagers from local monopolists, creating a virtuous cycle of consumer access and improved product quality. MNCs that sell products in this enormous, underserved market stand to make hefty profit. And, as more and more companies turn their attention to the BOP, competition will drive private sector innovations that address the needs of the poor. By giving MNCs an economic stake in this market, they in turn will draw the attention to problems of governance.

Although the work is primarily empirical and draws too heavily from examples in India, the BOP argument is an intriguing one. It eschews the notion that concentrating on the poor should be relegated to a secondary “corporate social responsibility” initiative and takes an integrative approach to the private sector achieving what non-governmental institutions and multi-lateral lenders such as the World Bank have not: pulling billions out of poverty.

We should applaud the BOP adherents for their novel approach, an approach that too closely resembles the idealism typical of a first-year Peace Corps volunteer. It is only after the corruption, complacency, intestinal ailments, and constant economic opacity have wrung out the initial naiveté that the discussion becomes interesting.

And a dose of cynicism is exactly what Professor Aneel Karnani - also of the Michigan School of Business - introduces in a recently-released working paper, “Fortune at the Bottom of the Pyramid: A Mirage.” He asserts that:

“Rather than focusing on the poor as consumers, we need to view the poor as producers. The only way to alleviate poverty is to raise the real income of the poor.”

Professor Karnani’s basic thesis is that BOP de-emphasizes the role of government in providing basic services and that we must focus on building the capacity of the world’s poor by focusing on government failures in education, health, and infrastructure.

Unfortunately, non-governmental organizations have been focusing on failures of government for decades. Billions of dollars have been spent flying experts around the world to bolster child immunization rates, build water delivery systems, and advise on bankruptcy reform. As you can see from the map above, the last 27 years have been lean ones for many in the bottom of the pyramid. This is not to diminish individuals’ efforts or passion. It is only to acknowledge that it is a very difficult goal and multi-lateral institutions do not have a recipe, much less a consensus, of how to foster economic growth.

One of the positive side effects of the BOP argument is that it makes MNCs stakeholders in a new and underserved market. To be sure, there are fatal flaws in the logic and research initiated by Prahalad. But MBAs are new to development and we should embrace that wide-eyed optimism even as we critique shakey methodology.

Is there a Market at the Bottom of the Pyramid?

Karnani points out one inexcusable fallacy in Prahalad’s work: market definition.

Prahalad used the World Bank’s estimates for the number of people living on an income of $2 a day or less (poverty), and $1 a day or less (extreme poverty). Both poverty measures are at purchasing power parity (PPP).

Why is PPP important? Because no matter where in the world you spend $1 PPP it buys the exact same goods, regardless of local price. So that $1 PPP that the extreme poor earn in a day will buy you one loaf of bread in the U.S. Actual prices are much lower in developing countries, so that same loaf of bread might only cost $.10. The market at the bottom of the pyramid will not pay MNCs in PPP dollars; it will pay them in local currency, as Karnani explains:

“[Prahalad] claims that the BOP potential market is $13 trillion at PPP. This grossly over-estimates the BOP market size. The average consumption of poor people is $1.25 per day and assuming there are 2.7 billion poor people, which implies a BOP market size of $1.2 trillion, at PPP in 2002.

“From the perspective of a multi-national company from a rich country, profits will be repatriated at the financial exchange rates, not at PPP rates. In that case, the global BOP market is less than $0.3 trillion, compared to $11 trillion economy in the US alone – making the BOP a difficult place to look or a fortune.”

Another problem is that the poor spend about 80% of their income on food, clothing and fuel. Suddenly the $300 billion market at the bottom of the pyramid shrinks to $60 billion of disposable income at current exchange rates. Spread amongst 2.7 billion people, that’s about a nickel a day for disposable income.

Karnani also takes issue with the number of poor:

“Prahalad states that there are more than 4 billion people with per capita income below $2 per day at purchasing power parity (PPP) rates…. Most researchers argue that the World Bank already over-estimates the number of poor people, with some researchers estimating the poor at 600 million (The Economist, 2004).”

There’s no shortage of poor, I’m afraid. Sanjay Reddy and Thomas Pogge of Columbia University have written a persuasive paper that critiques World Bank calculation of the number of poor in the world. While they give no new estimate, it’s likely that the world’s poor have been undercounted:

“There is some reason to think that the distortion is in the direction of understating the extent of income poverty.”

So the bottom of the pyramid is left with billions of poor who have no money. Does this invalidate Prahalad’s entire thesis? More on that tomorrow.

It looks like a duck, it walks like a duck, and it really sounds like a duck.

Yesterday’s Washington Post editorial, “What Next?” gave a grim assessment of how a civil war in Iraq could explode into a regional conflict in the Middle East. Iraq has all of the necessary ingredients of a civil war: a growing tendency to identify with religious and ethnic groups rather than the Iraqi nation-state, valuable resources spread unevenly throughout the country, a growing perception that democracy does not reflect regional interests, and daily news of increasing civilian casualties.

A broader civil war would likely produce Iraqi refugees who could export the Iraqi conflict to neighboring countries. As we have seen in the recent Lebanon-Israel conflict, these neighboring states are willing to fund proxies such as Hezbollah, if not to intervene directly. The authors note that the foundation for a regional war could already be in place:

U.S. military and Iraqi sources think there are several thousand Iranian agents of all kinds already in Iraq…. Iran has set up an extensive network of safe houses, arms caches, communications channels and proxy fighters, and will be well-positioned to pursue its interests in a full-blown civil war.

Although Bush administration officials acknowledge privately that things are not going according to plan, Bush said publicly today that Americans “have to understand the consequences of leaving Iraq before the job is done.”

We’ve done a heck of a job so far. Insecurity has left the Iraqi economy in shambles making it easier for insurgents to find new recruits. One-fifth of the population is in poverty. Oil production is still 11% below pre-war production levels. Unemployment is as high as 40% in some regions, and inflation is rampant.

Iraq also has a serious brain drain that leaves little human capital with which to rebuild. According to a report by the Brookings Institution, 2,000 doctors have been murdered, and another 12,000 have fled the country. Internal displacement is also a growing problem: 200,000 Sunni Arabs have been displaced from western Iraq and up to 100,000 Shiites have fled cities to take refuge in the south.

Civilian deaths increased by nine percent from June to July, and have almost doubled since January, 2006. One of the more disturbing trends is that as violence has increased in Iraq, it has also become increasingly brutal.

When do we recognize this as a civil war? In the editorial “What Next?” Laura Stanton of the Washington Post produced a graphic that applied the percentage of deaths and displaced persons from recent civil wars to the current population of Iraq. Statastic used this data to gain further insight into the average number of deaths per month during these civil wars.

So how severe are the 3,438 civilian deaths reported in July, 2006? On a per capita basis, this is nearly 50% more deaths per month than averaged during the Croatian civil war. If violence in Iraq were to increase at the same rate that it increased between January and July of 2006, there would be more than 450 deaths per day in Iraq by July, 2007. This is about the same rate as the Kosovo war, but with one critical difference: Iraq’s population is 14 times larger. We would need as much as four times the current financial and military resources to quell a civil war, requiring as many as 450,000 soldiers. And that says nothing of how we would stop a regional conflict.

If a civil war does erupt into a regional war, Daniel L. Byman and Kenneth M. Pollack note that history is not on our side:

No country in recent history has successfully managed the spillovers from a full-blown civil war; in fact, most attempts have failed miserably.

Much as Americans may want to believe that the United States can just walk away from Iraq should it slide into all-out civil war, the threat of spillover from such a conflict throughout the Middle East means it can’t.

It’s time to acknowledge the Iraqi insurgency for what it is: a civil war. Quack.

Sources: Washington Post (primary sources cited include Amnesty International, Center for Study of Civil War, CIA World Factbook, Richard Holbrooke’s “To End a War”, World Bank); PBS Frontline map.

Notes: *The estimate for July, 2007 applies the rate of doubling in civilian deaths that occurred during the 6 months between January and July, 2006.

The average monthly deaths were calculated by applying the death rate per capita in each country’s civil war to the population of Iraq. This was then divided by the length of the each civil war. The monthly average was calculated using whole years for these conflicts. In other words if a civil was started in December of 2000 and ended in January 2001, its duration would counted as two years, not two months.

Why the lack of precision? Because using the monthly average of deaths during a civil war is an imperfect measure to begin with. Civil conflicts often hinge on a single event that may not have many civilian deaths (such as the February 22, 2006 bombing of a sacred Shiite shrine in Samarra), or a monthly average may understate the brutality of a shorter campaign (such as the 800,000 who were murdered in Rwanda over the course of 100 days).

This measure is only meant to lend an international comparison to the debate about what constitutes a civil war.

Yesterday Foreign Policy and the Center for Global Development released their 4th annual Commitment to Development Index (CDI). This index attempts to quantify how well rich countries “help poor countries build prosperity, good government, and security.” The index measures seven policy areas: aid (per capita and quality), trade, investment, migration, environment, security, and technology.

Many countries’ own policies stand in direct contradiction to one another showing, perhaps, that internal politics are primary, and policies affecting the poorest countries on earth are secondary. Andrew Natsios, the former head of the U.S. Agency for International Development (USAID), pointed out some of these contradictions before resigning in January, 2006. As Foreign Policy notes:

“Natsios criticized a law that requires the U.S. government to buy food from U.S. farmers, ship it on American boats, and deliver it to famine-stricken regions via U.S.-based organizations. The U.S. government must deliver food aid this way even when it depresses local food prices, pushing more farmers into poverty, and even when it could buy food from farmers just outside a famine zone for much less. Some nongovernmental organizations that get a large fraction of their funding from the program defended the status quo, arguing that dropping the ‘made in America’ requirement would undermine the program’s support among American farmers and shippers. Congress quickly axed Natsios’s proposal for reform. That the U.S. government must pay off American interests to feed the starving is a sad commentary on how low the commitment to development may still be.”

In an unrelated but equally interesting measure, Transparency International has for several years been publishing the Corruption Perceptions Index (CPI) in order to draw attention to the role of corruption in stifling economic development. When we look at corruption in rich countries, there appears to be a parallel between increased corruption and decreased effectiveness at helping poor countries. To be fair, the 21 rich countries ranked in the Corruptions Perceptions Index are squeaky-clean relative to the countries they are trying to help (with the exceptions of Italy and Greece).

Is there a link? Perhaps pandering at home - the constant political pressure from competing interests - creates economic inefficiencies that hurt poor countries. These policies could come in the form of unfair trade policies (e.g. Switzerland’s $987.58 per-cow subsidy) or environmental indifference (the United States’ ultra-low gas taxes).

Then again, it’s also easy to be small. The 5 countries “most committed to development” have an average population of 7.9 million whereas the bottom five have an average population 53.7 million. Similar ratios hold for corruption: the most transparent rich countries have smaller average populations.

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Sources: Statastic research; Foreign Policy; Center for Global Development; Wikipedia

It should come as no surprise that war made quick inroads into gaming. It translates well: war is a vastly simplified solution to complex problems. War is good versus evil, it has an enormous historical body of work to draw upon, and it appeals to men who make up 62% of gamers. But in 2005, “shooter” and “fighting” games only made up only 13% of total games sales. In fact, when you look at the $1 billion computer game market, strategy games outsell shooter games by 2 to 1.

As games have become more sophisticated, they have also become less black and white in interpretation of the world. The gray areas are starting to be addressed by a genre of gaming dubbed “serious gaming.” Serious games include any training and simulation games - including the games developed for the military mentioned in pt. 2 of this series - and they are an emerging resource for policymakers as well as war mongers.

The DC-based think tank Woodrow Wilson Center for International Scholars founded the Serious Games Initiative to “help usher in a new series of policy education, exploration, and management tools utilizing state of the art computer game designs, technologies, and development skills.” A growing subset of serious gaming is known as activist games. Activist games are designed to raise social awareness of issues near and dear to many non-profits - issues such as poverty, war, environmental protection, even genocide. Nonetheless, the oxymoronic genre of “serious games” has met some resistance in the world of social activism, despite good intentions:

“It’s like what Adorno said, the idea that it’s barbaric to write poetry after Auschwitz. But you saw this around film too, when it first started: ‘The medium isn’t serious enough to allow for serious discourse.’ I find it somewhat contradictory because people criticize games for saying there’s nothing good in them, nothing serious. But when games try to talk about a serious issue, they say, ‘You can’t talk about that in a game.’ ”

-Professor Ian Bogost, an assistant professor at the George Institute of Technology, whose book on serious games will be published next spring by M.I.T. Press - New York Times, July 23, 2006

So what do activist games look like? While some of the games have share war games’ complex interactivity in massively multi-player online games (MMOG), most are much simpler. These stripped-down games often reflect the limited non-profit budgets which support the development costs of activist games. And with few exceptions, activist games are significantly lower quality than commercial games, which may further limit their reach.

Activist gaming still faces an uphill battle with more mature media: video games are hard to create on the cheap. Activist leaflets are cheap, web sites and blogs for social change are almost free. But even comparing the motion picture media reveals that blockbuster independent documentaries such as Supersize Me, which was produced for a budget of $65,000, can be made for less than blockbuster games.

The game A Force More Powerful is a role-playing game that puts you in the position of planner for a nonviolent movement seeking social change, pitting you against a regimepowered by artificial intelligence. The game required $3 million in funding and sells for about $20. Whether it will break even is doubtful.

But do games that inspire social change need to be as complex and expensive as Sim City? The online game Darfur is Dying was produced with a $50,000 grant and has attracted almost a million users. And one of the most simple and effective meassages highlighted below is conveyed in the editorial game September 12. The harder you try to exterminate the terrorists with violence, the more you terrorists you create. Perhaps President Bush should have played this before he invaded Iraq.

If our president is unconvinced that his current tactics create more terrorists than they destroy, at least he can take solace in the fact that there is a virtual suicide bus simulation in development for the treatment of Post-Traumatic Stress Disorder.

Games have come full circle to reflect the complexity of the world around us. They train U.S. war fighters, inspire terrorists, rally the local activists, teach diplomacy to the next generation, and treat the victims of our wars that exist not only in virtual reality.

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A Survey and Screenshots of Activist Games

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International Aid & Development Games

Food Force

About: World Food Programme’s “Food Force” simulates a country threatened by a hunger crisis. Acting as a humanitarian aid worker, the player completes a series of missions to plan and complete a successful emergency response. Players have to complete a series of missions ranging from dropping food parcels from the air to using food aid to rebuild a country’s economy.

Developer: United Nations World Food Program

Reach: Downloaded 4 million times in its first year online, audience target is children ages 8-13

Price: Free

Download at: www.food-force.com

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3rd World Farmer

About: Players manage an African farm, and are confronted with the difficult choices caused by poverty - drought, war, and starvation.

Developers: The first prototype of the game was developed as a students’ project at the IT-University in Copenhagen, Spring 2005.
Price: Free

Play online here: http://www.heavygames.com/3rdworldfarmer/showgame.asp

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Water Alert!

About: UNICEF’s unfortunately pedantic and un-engaging game, Water Alert takes you through the minutae of collecting water sample. This is more educational than most of the games mentioned here.

Price: Free

Play online here: http://www.unicef.org/voy/explore/wes/explore_1818.html

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Activist Games

Darfur is Dying

About: Users play the role of a Darfur refugee. In the simualation, your character runs to fetch water risking rape or abduction by Janjaweed militae before returning to the refugee camp.

Developed by: University of Southern California, Reebok Human Rights Foundation and The International Crisis Group

Funding: Reebok Human Rights Foundation

Reach: 700,000 in the first seven weeks of its release

Developer: Susana Ruiz, Ashley York, Mike Stein, Noah Keating, and Kellee Santiago - all graduate student at the University of Southern California

Cost: $50,000 grant from Reebok Human Rights Foundation and the International Crisis Group in partnership with by MTVu, MTV’s online network geared toward fostering actvism amongst university students

Price: Free

Play online: www.darfurisdying.com

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A Force More Powerful (AFMP)

About: AFFMP is a strategy game that is intended to teach budding activists how to use non-violent methods to influence government policies. Non-violent resistance tactics include training, fund-raising and organizing, protests, strikes, mass action, civil disobedience, noncooperation, and even such mundane actions as leafletting.

The game was developed by Ivan Marovic, co-founder of Otpor (Resistance) the Serbian youth movement, the non-violent movement that helped topple Milosovic in Serbia. Another apparent collaborator is the International Center on Nonviolent Conflict (ICNC), which claims to have helped oust tyrants in Serbia, Georgia and most recently Ukraine.

Developer: International Center on Nonviolent Conflict allied with commercial game developer Breakaway LTD.

Funding: $3 million from International Center on Nonviolent Conflict

Price: $19.95 Order here

Web site: http://www.afmpgame.com/index.shtml

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September 12

About: Newgaming.com has created a new sub-genre of editorialized serious games that they call newsgames. September 12 is a simple, browser-based game where your apparent goal is to bomb terrorists who are wandering amongst civilians through an Arab market. When you bomb them, collateral damage kills innocent bystanders. Grief-stricken relatives are drawn to terrorism themselves and you see that bombing only produces more terrorists.

Developer: Newsgaming.com and Gonzalo Frasca, a game designer and professor at the University of Copenhagen

Price: Free

Play online: http://www.newsgaming.com/games/index12.htm

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Peace & Peacekeeping Games

Madrid

About: Produced by the creators of September 12, Madrid was designed within two days of the Madrid train bombings as a memorial to the 192 victims.

Developer: NewsGaming.com – “This new site showcases video games that editorialize on current international news. Its team gathers a group of professional game developers and artists who believe that videogames can not only entertain but also encourage critical thinking. Periodically, Newsgaming.com will launch online video games related to major international news events.”

Play online: http://www.newsgaming.com/newsgames.htm

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Foreign Ground

About: A first-person perspective training game used by the Swedish military to that simulates peacekeeping operations. Instead of focusing on combat it deals mostly with solving problems using non-violent means without relying on duels and combat. The user play the role of a UN Peacekeeper and solves various tasks while on foot or vehicle patrol.

Developer: Swedish National Defence College

Web site: http://www.defencegaming.org/foreign_ground.htm

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Diplomacy Games

Peacemaker

About: Simulates the violence and political turbulence of the Israeli-Palestinian conflict. Players choose between the role of an Israeli prime minister or a Palestinian Authority president, making policy decisions and communicating with the international community while dealing with unexpected violent events. The games teaches high school and college students about the complexities of the Israeli-Palestinian conflict by focusing on the goal of cohabitation rather than on occupation and destruction.

“It’s meant to teach people about the different perspectives. It’s just a turn-based strategy game, but we’ve inverted the war model so it’s about conflict resolution. The end goal is to create a peaceful resolution to the conflicts.” -Eric Brown of Impact Games

Developer: Impact Games

Reach: Developers are currently testing the game in limited pilots and have not yet announced a release date.

Web site: http://www.peacemakergame.com

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Global Kids Island

About: “Second Life is a 3D virtual world in which the residents are provided with the tools required to lliterally shape the world around them. Teen Second Life is a space restricted to 13-17 year olds. Beginning in February, 2006, Global Kids has been exploring how to bring a youth development model around global issues into an island within this teen grid.”

Price: First Basic Account is free. Premium: ranges from $6.00 to $9.95 per month

Second Life blog: http://www.holymeatballs.org/second_life/

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Treating Post-Traumatic Stress Disorder with Virtual Reality

Suicide Bus Bomber Virtual Reality PTSD Prototype

About: Researchers Tamar Weiss (Haifa, Israel), Azu Garcia-Palacios (Spain) and Hunter Hoffman (U.W. Seattle) are developing an immersive virtual reality simulation to help survivors or witnesses of terrorism who have developed Post-Traumatic Stress Disorder. The simulation of a terrorist bus bombing is designed to give the therapist control over the progression and intensity of the experience, including the addition of realistic visual and audio affects.

Developer: Imprint Interactive

Developer web site: http://www.imprintit.com/index.html

More info: http://seriousgamessource.com/features/feature_053006_ptsd.php

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9/11 Virtual Reality PTSD Prototype

About: A Weill Cornell Medical College therapist and a virtual reality researcher from the University of Washington HITLab are using virtual reality to treat victims of the Sept. 11 attack on the World Trade Center, and their regimen appears to be effective in helping patients cope with the severe psychological trauma of the event.

Web site: http://www.hitl.washington.edu/projects/ptsd/

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Serious and Activist Gaming News

New York Times: Saving the World, One Video Game at a Time - reprinted in full here

Business Week: Getting Activist Video Games to Market

Overview of Games for Change Conference

Newsweek: Gaming the Poor

PBS Newshour: Can “Serious Games” Improve Your Mind?

NPR: Video-Game Designers Target World Peace

Interview with Professor James Paul Gee, professor of educational psychology, UW-Madison who recently received $1.5 million from the MacArthur Foundation to support his research on learning and video games

Use of virtual reality for treating post-traumatic stress disorder

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Blogs about Serious Gaming
Blog from Games for Change Conference

Blog from Susana Ruiz, a graduate student in the School of Cinema-Television’s Interactive Media Division at the University of Southern California, part of the team behind Darfur is Dying

Good essay about the Syrian company Afkar Media that produced Under Siege

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Serious Games Web Sites
Games for Change

Serious Games Source

Social Impact Games