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

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…

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

Access to potable water remains one of the most enduring problems around the world. Today more than 1 billion people do not have access to improved drinking water sources. This leads to 1.6 million deaths from diarrhea each year, the vast majority occurring in children younger than 5.

Multilateral development agencies have been working for decades to improve this situation. Early water projects were well-intentioned engineering gifts. The SCANWATER project, for example, simply installed gas-powered water towers on the highest hills around Cameroon. Because these projects didn’t develop local capacity to train technicians or to collect money for expensive maintenance, most of these water towers rapidly fell into disrepair.

So the key to sustainability is access, simplicity, good design and minimal maintenance. Two promising products are the Playpump and LifeStraw. As you can probably guess from the compound names, these products combine simple existing concepts with water sanitation development goals.

PlayPump is a water pump powered by children who play on a merry-go-round. The pumps are often located near
primary schools to take advantage of abundant free “labor.” Many primary schools in Sub-Saharan Africa have more than 100 students per class, so classes are taught in shifts. During this downtime, children can play on the merry go round ensuring a regular supply of water.

The PlayPump also takes advantage of the demographics that characterize developing nations, where half the population is under the age of fifteen.

In villages where girls are most often assigned the chore of fetching water, the PlayPump has the potential to reduce the distances walked for clean water, increasing the likelihood that girls can go to school.

Playpumps cost about $5000 each and can produce up to 1400 liters (370 gallons) per hour, enough water for 2,500 people. The water towers also can accomodate up to four billboard advertisements, two of which are normally reserved for public health messages, and two for revenue generation that provides for maintenance expenses. Currently a South African company is installing them with some help from the World Bank.

The second product is LifeStraw, which is produced by the Danish company Vestergaard-Frandsen. The LifeStraw is basically a lightweight handheld filtration device that can be worn around the neck. Any time someone need a sip of water, they can use this device to automatically filter out contaminants. The LifeStraw doesn’t require any spare parts, and it lasts for about one year or 700 liters. They retail in the developing world for $6, or about 1.6 cents per day. The company that produces LifeStraw has ambitious sales goals. The creator, Torben Vestergaard-Frandsen, said that, “We will be disappointed, if we do not sell at least 10 million LifeStraw a year.”

At less than a cent per liter of water filtered, LifeStraw is competitive with other water filtration systems in the developing world. That cost should come down as they ramp up production and realize economies of scale.

And lest you get the idea of ordering a LifeStraw for your homeland security kit or for camping, it’s still being reviewed by the EPA, so it’s not yet available in the U.S. One other caveat: it does not protect against Giardia, a nasty little parasite that Statastico really recommends avoiding.

What other ideas are waiting to be combined into a life-saving innovation? How about an electrical generator powered by soccer players? A playground slide that doubles as solar power? With more than 1 billion people around the world without access to clean water, invention is indeed the mother of necessity.

Sources: Statastic research, WHO, United Nations

Yesterday, the Washington Post ran an editorial that put the estimated death toll from the war in the Democratic Republic of Congo at 3.9 million, the equivalent of the entire San Francisco Bay Area population.

The war, which has involved as many as six nations, started in 1998 and continues to this day. The International Rescue Committee and The Lancet found that 98% of the deaths were due to treatable disease and malnutrition, largely the result of displacement during conflicts in the east. The remaining 160,000 deaths were a direct result of fighting.

The quality of the data in the editorial and the reports on which it is based are very impressive; the results are not. By comparing our response to the conflict in Congo with other recent wars and natural disasters, we find a discouraging record:

• -On a per capita basis, 30 times more United Nations Peacekeepers were deployed to Kosovo, where 12,000 people died, than to Congo where 3.9 million people have died this far.
• -The dollars of international aid distributed to Aceh, Indonesia in the wake of the tsunami was almost 100 times higher than the aid that has flowed to Congo.
• -In 2005 the media reported on Darfur more than 5 times more often than on the conflict in Congo.

The lessons from the data are clear:

1. 1. The media is more likely to report on wars that have been labeled genocide.
2. 2. The media is less likely to report on festering wars with no apparent good guys and bad guys.
3. 3. Media reports drive world attention. World attention drives donation rates, the reaction of our governments, and the deployment of U.N. Peacekeepers
4. 4. Citizen donations are fickle.  Governments are ultimately responsible for addressing conflicts such as that in Congo.

To learn more about the war in Congo, visit the IRC web site. There is also a link to take action by writing your Senator (assuming you’re not a Washington, DC resident).

Sources: Statastic research, International Rescue Committee, Wikipedia, Washington Post.

Every so often, Jeffrey Sachs tries to humiliate the U.S. into increasing its foreign aid. It’s true: While we give away about $19 billion annually in foreign aid, it’s not much relative to our Gross National Income. The Dutch give away about 5 times more, and we’re usually toward the bottom of the rankings for industrialized nations.

But even our Official Development Assistance - grants that promote economic development in low income countries - doesn’t really get to the poorest countries on earth. The United Nation’s Human Development Index (HDI) helps quantify a country’s progress in areas such as health, education, and general economic welfare. One might think that this would be a pretty good guide to foreign aid benefiaries. But the five most under-developed countries on earth only receive $186 million in aid from the U.S., about 7% of what Israel receives annually.

At more than $10 billion in 2005, Iraq alone accounts for 45% of our total foreign aid. So the U.S. is spending about half of its development assistance solving a problem that we helped create. Actually, if you look at the top 4 countries that we give assistance to, it reads like a who’s who of failed U.S. foreign policies: Iraq is devolving into civil war, Israel has lost our roadmap to peace, Afghanistan cultivates poppies and terrorists, and we have outsourced Sudan’s genocide.

The bottom ten countries on the HDI index are miserable, conflict ridden places. But are they better off with or without our so-called aid?

Sources: Statastic, Wikipedia, United Nations Human Development Report

Notes: The “least developed countries on earth” is based on the 2003 United Nation’s Human Development Index.  Several countries that might have appeared near the bottom of the HDI were not ranked in 2003, many because of recent conflicts.  Statastico would like to give proper credit to the abject underdevelopment of the following countries that may have made the top 10 most miserable places to be a citizen, had they been ranked: Sudan, Iraq, Somalia, Liberia, Afghanistan, and Monaco.  Ok, maybe not Monaco.

In 1972, the year Statastico was born, a penny was worth the equivalent of a 2006 nickel. Imagine if the U.S. Mint decided in 1972 to start making new coins called Fifths (with a portrait of James Monroe, naturally) and they were worth 1/5 of a cent. Well, we have them today and we call them pennies.

As recently as 2002, the U.S. Mint pulled in $24 million in seigniorage by producing pennies. No more. The Washington Post recently reported that because of rising zinc prices, the U.S. Mint is paying about 1.2 cents for every penny produced – not a very good return on investment.

Getting rid of pennies is a contentious issue. There is a pro-penny organization and people seem to attribute more value to a penny than it’s actual worth. Americans are frugal enough to pick a penny up off the street 76% of the time, though rich folks are more than twice as likely to leave that penny on the ground.

Indeed the mighty dollar’s biggest currency rival, the euro, also has 1 cent coins. However, businesses in Finland, the Netherlands and Greece commonly round to the nearest 5 cents to avoid those coins, so maybe the Europeans are onto something.

What about the rest of the world? Comparing a country’s most humble coins is a little tricky. A penny and a centavo both divide a major unit of currency by 100, but that’s where the similarity ends. First, you have to factor in the ebb and flow of exchange rates. Then it’s important to consider what a centavo buys locally, also known as purchasing power parity (PPP). One centavo might buy a whole mango in Guatemala, but it would only get you the mango’s stem in a U.S. grocery store.

So how worthless is the penny? Only the Chinese produce a more worthless coin (and we all know that their currency is undervalued). On the other end of the scale, the Japanese 1 yen coin is worth almost six times more than a U.S. penny in local wages.

And while we’re on the subject, have a look at our largest commonly used coin, the quarter. In coin-crazy Japan, they mint the most valuable coin in the world at currect exchange rates: The 500 yen coin is worth $4.33.

But once you factor in the lower local wages, it’s the Central and West African CFA (a vestigial franc from French colonial rule) that truly stands out. The 500 CFA coin - popular and convenient for highway bribes - is worth about 80% of the local hourly wage in Cameroon, the equivalent of a coin worth $16.50 in the U.S.!

Sources: Statastic research; Wikipedia; xe.com; IMF

*Notes: These are the highest and lowest value coins that commonly used in these selected countries. Coin currency equivalent was converted to dollars using exchange rate as of 7.13.06. Average hourly wages were calculated using the PPP of GDP per capita, and assume that workers toil 50 weeks per year, 40 hours per week.

The Internet has been available in the developing world almost as long as it’s been here in the U.S. Internet cafes were popping up in Cameroon in the mid 1990s before the local Peace Corps volunteers even knew how to use them. Penetration rates, however, lag predictably behind the richer countries in the north. But the lack of telecommunications infrastructure is something of a blessing in disguise: developing nations have the potential to leapfrog technologies. Cell phones and VOIP prove easier than installing costly land lines, and there’s no need for telephone poles and copper cable if governments can create WiFi and WiMAX zones around burgeoning urban areas.

Wired Magazine recently featured a map with average prices for one hour of online access in Internet cafes around the world. Statastic used the average hourly price as a percentage of daily wages to provide a glimpse into the state of Internet access in a selection of low to middle income countries.

The chart below begs several questions. Could lowering the cost of public Internet access lead to higher usage rates? What is the demographic profile of the average Internet user in the developing world? Should multi-lateral donors subsidize the cost of public Internet access?

Among this small sample, D.R. Congo, Nigeria and Kenya are the three most expensive places for locals to access the Internet, relative to income. They also have some of the lowest usage rates. But these countries have several other characteristics in common: low literacy, high rates of corruption, and a high level of inequality. These countries may simply have a limited number of Internet cafes that cater to tourists, corrupt officials and the wealthy locals who are lucky enough to have an education and a job.

Brazil’s usage rates are surprisingly high. Perhaps Brazil’s high inequality can help explain how 14% of Brazilians have regular access to the Internet despite the fact that one hour in an Internet café costs nearly one sixth of average daily wages. Just who are those fortunate 14%?

Sources:
http://internetworldstats.com
WIRED Magazine, May 2006

Agricultural subsidies criticized in the Washington Post… but not very well

The Washington Post is running a series of articles that expose some of the true costs of agricultural price supports in the United States. Agricultural subsidies are indeed very bad. These subsidies hurt developing nations by artificially depressing global agricultural commodity prices for the crops that developing nations are desperately trying to export. Proponents who claim that such price supports help smooth price fluctuations ignore unintended consequences, and political rhetoric about “saving the family farm” is empty… as are most of the family farms.

Although the Washington Post’s first two reports are well researched, their data is often misleading, incomplete or anecdotal. An example comes from today’s article about the failure of our current system of price supports, also known as Loan Deficiency Payments (LDPs):

One who played it right last year was Michael T. Sullivan, who produces a million bushels of corn annually with his three sons in Franklin, Minn. He thrived even during the depressed post-Katrina market.

Well before the storm, Sullivan said, the family had arranged to sell three-quarters of its crop to a local grain elevator for about $2 a bushel. The practice, called “forward contracting,” is increasingly common and helps insulate farmers from the market’s routine ups and downs.

On top of their contracted price, the Sullivans got the subsidy: $292,054 for that same corn, according to payment records.

Sullivan considers the LDP a godsend, given the uncertainties of farming. “Without it, Main Street Minnesota would have no money to keep the economy rolling,” he said.

Great, lots of numbers in there. A million bushels. $2 per bushel. And the hardest hitting of all: $292,054 in subsidies. Wow, that’s a lot of subsidies American taxpayers are shelling out.

Problem #1: The numbers cited are production and income based. How much did the family actually net in 2005? $292,054 sure seems like a lot of money in government subsidies, but relative to what? It looks like the Sullivans would have earned about $2 million had they 1 million acres at the market price of $2 per bushel.

Readers would be more sympathetic to the Sullivans if the inputs to produce those 1 million bushels cost them $2.25 million, netting them only $42,054 in income, and only being cash positive because of those government price supports. But what if their costs were only $200,000? Then the Sullivans would millionaires, netting $2.09 million in 2005.

Problem #2: How does the Sullivan family’s subsidy compare to the average subsidy for a corn farmer in Minnesota? How about compared to the U.S.? Is this the average corn production for a farm in Minnesota? A million bushels sounds like a lot to me. But is it? I mean, I probably only eat 200 or 300 bushels a year. (Statastico really likes corn.) Of course this doesn’t matter, because of problem #1: we don’t know anything about their income.

Next, the Washington Post produced a colorful map that makes Iowa look like price support central for corn. Sure, most counties receive more $10 million is price supports for corn. But how much corn does Iowa produce? Well if you’ve seen Field of Dreams or Children of the Corn, you won’t be surprised that Iowa produces 18.8% of all U.S. corn. So the map is colorful, but it tells a deceptively simple story.

If you want harder hitting numbers, head to Iowa State University. Chad E. Hart reports that according to USDA projections, almost half of the market value of Iowa’s 2005 corn crop was made up of government payments. Now we can start to understand why those nations struggling to boost agricultural export walked out of WTO trade talks.

I’ll leave you with some data based in part on what the Washington Post Business section reported on Friday. If you take a look at how much the following countries pay in government support to farmers in 2005, you’ll see that every European paid $293.20 in agriculture support. Americans paid al total of $43 billion, or $145.40 per person. In contrast, the per capita GDP in Sub-Saharan Africa was only $575 in 2002. Statastico does not advocate transferring those agricultural subsidies to development. These subsidies should, however, be reduced to zero over time. Give Africa and other poor farmers around the world a chance to export, an incentive to develop, and above all, a level playing field.