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The Economics of Ebola

August 20, 2014

The US-Africa Leaders Summit in Washington, DC, ended the first week of August, and brought together more than 50 African leaders to discuss Africa’s growing influence on the global stage. The summit came at a crucial time, in light of the recent Ebola outbreak in West Africa.

Ebola has infected more than 1,700 people in Guinea, Liberia Nigeria, and Sierra Leone – half of whom have died. The current Ebola outbreak is the largest on record and is expanding, despite great efforts to contain and combat it. Liberia’s president has officially declared a state of emergency. In response, the World Health Organization announced a $100 million plan to combat the disease.

West Africa, the epicenter of the  outbreak, is one of the poorest regions in the world. GNI Per Capita as of 2012 (current USD) in Guinea was $493.50, $413.80 in Liberia, and $633.50 in Sierra Leone. Such extreme poverty leads to unsuitable living conditions, a lack of sanitation, unreliable healthcare, and the consequential spread of lethal diseases. It is unsurprising to find such a vicious feedback loop in West Africa where poverty, economic volatility, and disease is the norm.

Beyond taking innocent lives, the Ebola outbreak may have severe consequences for the region’s economic growth and progress. Since the outbreak began, borders in West Africa have been closed, hotels are empty, and flights have been cancelled. Rio de Janeiro-based Vale SA (VALE5), the world’s biggest iron-ore producer, sent all foreign workers home and cut all operations by half, following the example of many other foreign companies in the region. Previous economic progress made in the region is sure to take a major hit. Such a devastating outbreak comes after years of relative peace among these three countries. Not long ago, all were involved in years of interconnected wars and civil strife. Today, they are working together to battle the Ebola outbreak.

Liberian Finance Minister Amara Konneh recently stated that the current outbreak has already cost his country’s economy $12 million USD. Liberia has shut down schools and many local markets in response to the outbreak. The finance minister also noted that GDP will expand 6.8% this year, a 2.5% drop from last year. Similarly in Guinea, the World Bank and IMF estimate that the countries GDP will fall from 4.5% to 3.5%. To add to the misery, economists agree that food prices will rise as staples and other supplies in the region become scarce. Sando Johnson, a senator in the province of Bomi, northwest of the Liberian capital Monrovia, stated, “the restrictions were ‘severe’ and warned that people would die of starvation if they are not relaxed.” In Liberia, a bag of rice selling for 1,300 LD ($15.76 USD) now goes for around 1,800 LD ($21.8 USD).

West African countries have deployed thousands of soldiers and policemen to enforce the quarantines at borders. These officials are tasked with conducting intensive searches of individuals and vehicles, only allowing essential goods to cross. This level of enforcement is believed to be necessary to contain the virus, or else we could be dealing with the next “bubonic plague” of our time. Such circumstances demonstrate the far-reaching effects of the current Ebola outbreak, and the need to end it.

Limited education, skyrocketing food prices, and closed borders, all byproducts of the outbreak, are becoming problematic. iF the virus spreads beyond West Africa, so will its negative consequences. It is now clear that Africa is at a critical point, and the response from global and African leaders will be essential in controlling the disease and limiting its effects on the worldwide economy.













Breaking the Development Banks: How They Can Help and Hinder Development

August 8, 2014


Awkward Family Photo













Haven “Of the People, For the People, By the People”

August 4, 2014

It sounds reasonable to assume that a high crime rate correlates with political, economical, and social turbulence. But Nicaragua, a country lying in the center of Central America, defies this apparent logic. Despite its reputation as the second poorest country in the western hemisphere, Nicaragua has made remarkable strides in public security compared to its regional neighbors, the Northern Triangle– El Salvador, Guatemala, and Honduras. In 2012, the homicide rate in Nicaragua was 11.3 per 100,000 persons, less than one-third of the rates seen for its three northern neighbors.

From CentralAmericanPolitics

Nicaragua’s public safety profile is an even bigger surprise once you consider its economic, political, and geographical reality. As mentioned, Nicaragua’s living standard is one of the lowest among its regional neighbors with almost half the population in unemployment and homelessness. The wage rate for police officers, set at $120 a month, as well as their availability, 18 per 10,000 persons, is just as bad as the country’s poverty level. Politically, it has only been forty years since the revolutionary knock-over of the Somoza family dictatorship, and the foreign-intervened guerilla war against the subsequent authoritarian Sandinista regime. Such a short history of recovery is a fair enough excuse for Nicaragua to have security irregularities as past remains. What takes people aback the most is probably that Nicaragua has eschewed violence by drug traffickers and youth gangs like the MARAS or BARRIOS that have defined Central and South America for centuries. While Nicaragua shares a border with Honduras, a country pegged as one of the most dangerous areas in the world with the largest presence of the Maras, it has little identified indigenous terrorism and organized crimes.

It is neither stellar sociopolitical stability nor geographic prerogative that undergirds Nicaragua’s peace-mongering environment. Then, what? The most sounding answer lies in “preventive, proactive, community-oriented police model.”

Four decades of civil war the in Northern Triangle occurred at the end of the twentieth century, though they all differed in intensity, nature, and longevity. These conflicts caused these nations to develop national security policies that engagee the military in reactionary and repressive fashion. In contrast to their iron-fist policies, Nicaragua’s police system, while still retaining the pattern of military engagement in public security, proactively seeks to create a safe social environment. For example, the Nicaragua National Police (PNN) has created specialist bodies for youth violence and intra-family and sexual violence, which take up 20% of the national crime rate. These bodies carry out comprehensive three stage responses – transforming local environments, cooperating with local NGOs and health centers for victim support, and vocational training and education.

Even more telling of the country’s success, is the community-oriented aspect of the police model. A 1995 Constitutional Reform has given the PNN its own General Directorate and greater independence, which allows it freedom from political games. Under the centralized leadership, its operation is enrooted in a strong police-society partnership in a decentralized manner. There are usually broad channels of communication with local residents such as community assemblies and direct linkages with the people. In each district, there is a sector police chief, responsible for paying door-to-door visits to residents, building close ties with them, and inviting them for neighborhood watch activities. Among 100,000 volunteers nationwide assisting the PNN in both crime detection and victim support are some professionals like law and psychology students, as well as some experienced former gang members and victims of violence, and NGOs. The fact that Nicaragua has social culture of parochialism and small-township, resulting in close community ties, complements the picture.

Aminta Granera Sacasa

Nicaragua is not completely spared from the threats of violence. There are still 25,000 or so youth gangs. They are small in scale and often do not have foreign connections. But it is a logical sequence that the Mara gangs, contained in the North for now, may move south and reach these youths, especially at the wake of the Central America border control agreement which allows free movement of citizens between Nicaragua, El Salvador, Guatemala, and Honduras. Threats from a Mexican Mob, the Zetas cannot be ignored, as well. The persistence of low income, high poverty level further “legitimizes” participation in cocaine smuggling and investments. Above all, fraud in 2008 municipal elections, and the Police Directorate’s neglect of the limit on a five-year term, a writ-large departure from democratic order, pose a greatest disturbance to the philosophy of the country’s legal system.

Nicaragua has done a fair job so far, fair enough for the neighboring countries to learn from, though not replicate, its police model. Whether it will continue to be exemplary depends first on the collective effort by its regional partners to contain and ultimately eradicate organized crime groups. What remains of greater importance is to strive to live by a pillar that ensures equality of all people both politically and economically.

Overpromise and Under-Deliver: Growth in Mexico

July 24, 2014


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Matatus and Mobile Money: Bridging the Gaps in Kenya

July 14, 2014

In the United States, there are some planes, a few trains, and many automobiles. In Kenya, it is all about the matatu.

Though there are other forms of transport, Kenya is best know for the omnipresent and chaotic mass transit system. Larger than vans and smaller than full-size buses, matatus are known to be one of the most utilized and certainly most colorful of Kenya’s transportation systems.


While concentrated around the capital, Nairobi, matatus operate throughout the country, linking urban and rural settlements across a complex network of poorly-maintained roads. In Kenya, such convenience comes at a price, or in the case of matatus, a severe safety risk. In 2010, the World Health Organization estimated over 8,400 traffic-related deaths. And while data from Kenya’s National Transport and Safety Authority (NTSA) indicates that traffic-related fatalities have declined since 2010, Nairobi still ranks as the world’s fourth worst commute according to IBM’s Commuter Pain Index. With over 5,000 matatus serving the greater Nairobi area, it is likely the mini-buses are part of the problem, not the solution.

In June, as part of a series of reforms, the NTSA decided to modernize the matatu system by mandating cashless payment methods for the country’s estimated 20,000 privately owned matatus. Prior to the NTSA mandate, matatu drivers relied on cash transactions. This allowed drivers to set their own fares, negotiate with customers, and keep their own loose records of the number of passengers. As a result, matatu owners may not know how much profit their vehicles make. Matatu drivers, with no incentive to report the proceeds often pay a flat fee to the owners and keep the remaining revenue for themselves.

In an effort to provide a uniform system NTSA is calling for a payment system similar to London’s Oyster card. Matatu patrons have the option of filling cards at various locations throughout Nairobi or using a mobile banking service such as  M-Pesa. With a multitude of payment options, government officials anticipate a streamlining of transportation payments, a decline in corruption, and an increase in tax revenue.


Despite some concerns about cashless payments, the NTSA’s system is tried and true. Last year, Beba Pay, a joint venture between East Africa’s largest bank and Google, announced a cashless payment system that would work for select bus fares throughout Nairobi. With prepaid fare cards, passengers simply tap their card to an onboard card reader, the first system of its kind in Kenya. Though many commuters enjoy the convenience of going cashless, not all bus lines accept the prepaid cards.

While the United Nations still classifies Kenya as “developing,”the country is poised to be Africa’s economic powerhouse. Perhaps the greatest indicator of Kenya’s progress lies in widely available technology. In 2013, a record 70% of Kenyans used cellphones, the fastest cellphone use growth rate in all of Sub-Saharan Africa. With the lowest phone tariffs on the continent and continued deregulation of the telecommunications industry, mobile phone use is expected to continue to grow, perhaps becoming on par with 91% user rate in the United States.

The popularity of mobile phones has also encouraged the growth of mobile banking. Popular programs like M-Pesa allows Kenyans to manage their finances without actually having a bank account. M-Pesa users can transfer money to and from individual accounts with a simple text message, making the service easy to use and more convenient than visiting an actual bank. The program is so widely used that 25% of the country’s GNP is filtered through the service and 60% of Kenyans use their M-Pesa accounts to shop, pay bills, and transfer money to relatives or friends, especially in rural areas where banks are unavailable.

With a cashless payment scheme, the NTSA expects increased tax revenue. In a cash-dominated payment structure, drivers arenot held accountable for reporting the number of passengers or making due payments to matatu owners. . In a cashless payment system, governed by prepaid cards, tax revenue is bound to increase as records become more transparent and more accessible. Currently, matatus and similar mass transit vehicles are taxed by whichever is more of their maximum passenger capacity or a flat fee of 2,400 KES (27.35 USD). With increased tax revenue, the Kenyan government hopes to meet its 2030 plan to build more roads and improve its mass transit system.

Ideally, all of Kenya’s estimated 20,000 matatus will adopt the cashless payment scheme, though the transition will not be simple. Cashless payment methods were supposed to be fully implemented by early July, but only 2,000 matatus have forgone cash-only payments. This is due to the Matatu Owners Association’s calls for extension of the deadline to implement the new payment systems. Further criticism from matatu drivers asserts that new cashless systems will deprive drivers of their “fair share” of wages by forbidding them to adjust prices and negotiate at their own discretion.

Mobile banking and matatus have something in common: they connect people and goods across Kenya. Whether urban or rural, within Nairobi or to its sprawling suburbs, both signify Kenya’s progress as a developing country and regional leader of development. Though the matatu is met with government demands and some backlash from the public, one thing is certain: the matatu is here to stay.

Into the Twilight

July 11, 2014



Source: The Economist






What Narendra Modi Can Do for Development

June 26, 2014





But how?

The answer is simple: subsidy reform.











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