Saturday, December 3, 2011

Unemployment Drops but is it Time to Celebrate?

The U.S. economy showed flickers of improvement in October and the encouraging trend continues with the latest unemployment figures released by the Labor department showing a further drop in unemployment. All in all, a net 120,000 news jobs were created last month. And the unemployment in November was 8.6%, down from 9% the previous month. True, the unemployment figure remains almost frustratingly high but it is now the lowest unemployment rate in more than two and a half years since March 2009.  

A casual reading of the latest unemployment figure might suggest a deceptively rosy picture of the economic well-being of the country. The unemployment figure on its own does not reveal that more people, a total of 315,000, left the workforce in November than the number of unemployed workers who found jobs last month. The labor participation rate, which is the ratio of people who are either employed or have been looking for a job in the past 4 weeks, plummeted to 64%. Thus the reduction in unemployment is not attributable so much to a substantial improvement in the economy leading to more jobs as to possibly a growing sense of frustration among the unemployed, inducing those who can afford to do so to cease looking for a job altogether.

The article, "U.S. shrinking workforce a worrisome sign,” directs our attention to other causes of concern. Apart from the increase in discouraged workers and consequent reduction in labor participation rate, the diffusion index for private sector jobs dropped as well to 54.7% in November from 59.6% in October, the greatest fall in a year. This means that not all sectors are experiencing job creation; although an overall reduction in the unemployment rate indicates that more jobs were created last month than the month before it, compared to October, fewer industries actually increased employment rather than slashing jobs. That is not heartening. And neither is the fact that the public sector saw a loss of 20,000 jobs. Moreover, only 2,000 new jobs was created in the manufacturing sector, a gain that is lower than expected. In the services sector though, retailers created 49,800 jobs in the run-up the holidays, propelled in part by of the increase fervor surrounding Black Friday. Whether these retail jobs remain after the holiday shopping season is over remains to be seen.

In a nut shell, although the drop in unemployment rate is a positive sign, it is not back to business as far as the economy is concerned. More than 13 million Americans are still without jobs. And the shrinking labor participation rate indicates that many of the long-term unemployed are becoming discouraged and bowing out of the race of job-search. The real unemployment is not necessarily going down significantly even as official unemployment is because not a great many people are finding a job but rather many are not looking for one and so are excluded from official employment statistics. That many are not now considered unemployed however does not mean they have a job.

Wednesday, November 30, 2011

The Conundrum of the Chinese Currency

It is becoming an annual ritual of sorts. A year after unequivocally terming China's undervalued currency, the renminbi, as an irritant, and imploring Beijing to adopt a more flexible exchange rate regime, this month, President Obama again urged China to change its monetary policy. Beijing is unlikely to respond favorably. Why should the U.S. be concerned?

It should because the undervalued renminbi is matter of great import to the U.S. economy. The trade between the two countries is immense; China is the second largest trading partner of the U.S. and the U.S. is China’s largest trading partner. In 2010, according to U.S. Foreign Trade statistic compiled by the U.S. Census Bureau, U.S. imports from China were worth a total of a whopping $ 264.2 billion while exports were much less at $63 billion. Hence, an undervalued renminbi means that Chinese consumers have to pay more for U.S. exports than would be the case if their country’s currency was allowed to move freely under a floating exchange rate system. There is consequently lower demand for U.S. exports such as automobiles. This is detrimental for U.S. exporters and for the public, who would benefit from greater employment opportunities made possible by increased exports to China.

More troubling for the U.S., however, is the country’s import bill with China. An undervalued currency, after all, also means that Chinese goods are very attractive for importers and since they are artificially cheap, there is huge demand for them in the U.S. market. Wal-Mart alone does billions of dollars worth of trade with China. While that might be good for Wal-Mart and companies which outsource production to China, that is not necessarily the case for the American people. With unemployment rate of 9.0% in November, Americans need their jobs to stay in the U.S. If China allowed its currency to naturally appreciate, Chinese goods would become dearer to Americans. Consequently domestic counterparts of  imported goods would become more attractive and demand for such goods would rise, leading to higher employment in the U.S.

Due to the high imports with China, the U.S. trade deficit with China is also ballooning. In 2010, according to the US-China Business Council (USCBC), the trade deficit with China was an immense $226.8 billion. Since 2000, that trade deficit has increased from about $100 billion by $ 143.1 billion and it shows no signs of receding. This is troubling because U.S. is spending more than it can pay all the while China is busy buying U.S. bonds. If the country continues to remain indebted to China and trade deficits continue in the direction they are going, serious problems could ensue. The U.S. might even have to face the predicament of counties like Greece, which have paid the price of their profligacy and whose inhabitants are faced with painful budget cuts under austerity programs.

China is essentially subsidizing its exports by constantly intervening in the market by buying currencies of other countries in order to keep its currency undervalued. In a way, the situation is similar to dumping in that although China is not selling its exports below the costs of production per se, in reality that might well be the case if we take into account the real value of the renminbi as opposed its artificially deflated one. What is needed thus is protectionism. The U.S. government should consider imposing tariffs on at least some categories of Chinese imports; these tariffs will generate revenue for the government so tariffs are a better option than quotas but more importantly protectionism will help rein in trade deficits with China and potentially stem the tide of the flight of jobs to Guangzhou and Shanghai.
Could protectionism trigger a “trade war?” Well, that is unlikely because other frustrated trading partners of China have also voiced concern about the renminbi, and China is too dependent on the U.S. for its exports that it can ill afford to exasperate U.S. even more and force it to retaliate in an ever stronger manner. Of course, free trade sans barriers is always more desirable than protectionism, but when one trading partner, as many critics have pointed out, is not playing by the rules then it is almost inevitable that the other partner will have to resort to protectionist measures. The U.S. government thus can and should act to change the status quo of trade with China.

Tuesday, November 29, 2011

Wall Street Facing the Pinch?

As if the nation-wide Occupy Wall Street Movement was not enough, here comes some more bad news for Wall Street: The famous year-end bonuses of Wall Street workers are expected to shrink this year.

Johnson Associates, a New York-based consulting firm, estimates that year-end bonuses at Wall Street will drop by an average of 20% to 30% this year whereas some professionals will see a drop in their bonuses by as much as 45% compared with last year. It is the first time since the 2008 Lehman Brothers bankruptcy and the financial meltdown which ensued that bonuses will go down. Alan Johnson, the MD of Johnson Associates attributes the drop to the sluggish economy, uncertainty about financial markets, and greater regulations, which are inducing financial services firms to reduce their bonus pools.

The unwelcome bonus cuts will not affect workers uniformly. Fixed income traders will see the greatest drop in their bonuses, up to 45%, according to the report, while investment bankers will see drops of about 20%. Wall Street’s “rank-and file” that is those holding lower level staff positions will see bonus declines ranging from 15% to 25%. However, some groups like high net-worth advisers and asset managers might see even a small increase in their bonuses. Moreover, Wall Street does not need to despair because Johnson Associate estimates that Wall Street will bounce back by next year and bonuses will be return to normal level. In fact, the report adds that in the absence of further economic crisis and bankruptcy of major financial institutions or European economies, bonuses at Wall Street around this time in 2012 are expected to rise by as much.

The report suggests that the regulatory regime has become more stringent for Wall Street financial intuitions since the 2008 financial meltdown. That is not necessarily a bad thing because moral hazard, to an extent, is prevalent at Wall Street. Investment bankers, for example, do not bear the full costs when risky investment decisions, such as dabbling in sub-prime mortgages that led to the housing bubble, go awry. On the other hand, when risky decisions turn out to be a success, rewards can be ample for those at Wall Street who made those decisions. This creates an incentive for making riskier decisions, whose aggregate effect can be detrimental for the economy. Hence some like Phil Angeledis argue that reasonable regulations are needed to check Wall Street's reckless risk-taking propensities and speculative investments, which can precipitate economic troubles for the nation.

The expected reduction in year-end bonuses do point out that all is not well at Wall Street. Wall Street is not an exception however as millions of Americans are also in the throes of economic troubles because of the anemic pace of the country's economic growth. Although, of late, the U.S. economy is showing some signs of recovery, it is quite possible that the Eurozone crisis could spill over to across the Atlantic and adversely impact the American economy as well should Europe fail to adequately address and contain the crisis. Here is hoping though that that does not happen.

Wednesday, November 23, 2011

One Laptop Per Child: Bridging the Digital Divide

One Laptop Per Child is an extraordinary initiative that is playing an important role in bridging the digital divide. By equipping each child with a low-cost laptop that is inexpensive and easy to use, OLPC is helping developing nations surmount some of the challenges posed by lack of widespread access to digital technology and poor quality education.

The idea behind the "XO" laptop is similar to that behind the recently lauched low-cost 'Aakash' tablet, which I discussed in an earlier blog post, but XO has been out there for quite some time so it is more advanced and comes packed with software to facilitate learning. XO is designed for early education--for kids between 6 to 12 years old--but it has a Linux processing system, word processing, games, and more. Thus it is meant to engage students while inspiring them and helping them learn as well. Moreover, as the video clip above points out, despite its cheap price tag, the laptop is meant to weather tough conditions and is durable enough so the laptop does not need to be replaced often.

Of course, it would be naive to expect these laptops to be substitute for well-trained teachers. And laptops alone are no panacea for school dropouts or bad retention of course material if the environment is not conductive to learning at schools because of, say, corporal punishment. But these potent portable tools can enhance the learning environment at school, making it more fun to discover new things. And because students get to keep their laptops, the learning process continues at home even after the school ends.

That is what is happening in Uruguay, where thanks to OLPC, every single child in elementary school has access to XO laptop! More than 362,000 students and 18,000 teachers have been involved in the "Plan Ceibal" (Education Connect) project; about 70% of  the initial recipients of XO laptops did not have a computer at home. The gulf between the digital haves and have-nots is shrinking indeed and it is happening without significant financial costs. Plan Ceibal project of Uruguay is costing just $260 per child, which includes  maintenance costs, training for teachers and Internet connection. All in all, the project's costs constitute less than 5% of Uruguay's education budget!

More then 2 million XO laptops have been distributed so far world-wide but there is a long way to go. One Laptop Per Child, a Delaware-based non-profit organization that is behind the XO laptop initiative, is the brainchild of faculty members from the Media Lab at MIT. OLPC works directly with governments of  many developing nations like Uruguay, providing them with the laptops that are later distributed in schools. Large orders and large scale operation translate into economies of scale, driving costs down but the organization needs your help. This holiday season, you can spread joy and "change the world" by donating to the organization. By doing so, you can also help One Laptop Per Child achieve its objective of empowering the world's poorest children through the power of education.

Saturday, November 19, 2011

Worldstock: A Model for Social Responsibility

American firms have always been more than just profit-maximizing ventures. In the past, companies like General Motors gave birth to the "Social Contract," an implicit understanding between employees and employers, by which employees would receive excellent remuneration packages including generous benefits like health insurance, and job security, and companies got in return the utmost commitment and loyalty of their employees. In today's globalized world when competition is stiff, imports are high, and the economy is not exactly booming, companies sometimes find it hard to persist with the so-called social contract but social responsibility is very much alive and kicking.

Worldstock, an offshoot of online retailer, is an excellent example of such social responsibility. And it is a social responsibility that transcends geographical barriers.

How is Worldstock achieving social responsibility? Most importantly, by partnering with artisans from around the world. Worldstock often finances the endeavors of these artisans through micro-credit programs so that they could source the raw-material needed to produce their output, and it pays the artisans a fair price for their efforts. The logistical support is important for these artisans, who also benefit by directly dealing with Worldstock so middlemen do not eschew much of the profits by buying from artisans at very low prices and then selling the goods to Worldstock at highly inflated ones. 

Worldstock's fair trade model is good not only for artisans but also for the environment. The company prides itself on its focus on sustainability and eco-friendly products, many of which are made from recycled, sustainable and organic materials.  Also, since Worldstock buys in bulk, it is able to reduce carbon emissions as lots of products arrive in one shipment. Moreover, Worldstock offers carbon neutral shipping thanks to its partnership with This helps offset the environmental footprint of its retail shipping.

Consumers benefit too. Thanks to Worldstock, they can choose from a wide selection of good quality handicrafts ranging from Peruvian ponchos and Polish teapots to Native American jewellery and Nepali hand-knotted rugs. The diversity of  handicrafts, sourced from around the world, is not something brick-and-mortar stores are able to offer in most places. And in the past, connoisseurs looking for such wares would inevitably have to pay more, much of the profit going to the high-end speciality stores catering to niche audiences. Worldstock in a way democratizes 'global shopping', giving its customers a wide range and relatively inexpensive prices while ensuring that the makers of the goods it sells get a fair payment as well. 

And the profits generated from Worldstock's sales? They go to Solace International to further assist underdeveloped artisan communities, creating a virtuous cycle, so to speak!

Thursday, November 17, 2011

Student Debts Soaring

One of the key issues facing college-educated workforce in today’s job market in the United States is how to pay off student loans at a time when there are not many jobs out there and the ones that are mostly are not paying very well. The declining affordability of college is also making it more difficult for people from low-income households to achieve upward social mobility.

Tamar Lewin reports in “College Graduates’ Debt Burden Grew, Yet Again, in 2010” for the New York Times that around two-thirds of the students graduating from college in 2010 had taken students loans, and the average student loan was a massive $25,250. This average was 5% higher than was the case in 2009. The figure does not, however, include loans that parents took to pay for their children’s college education. Moreover, some colleges, including most for-profit colleges, did not report the student debt of their graduating class so the figure is likely to be even higher.

Students’ troubles were compounded by the fact that the graduating class had to deal with an unemployment rate exceeding 9%. The situation for the class of 2011 was hardly likely to be better. Mr. Kantrowitz, the publisher behind, told the NYT that students graduating from college in 2011 had an average debt of $27,200 or $34,000 if we include the loans their parents took for their education. Mr. Kantrowitz warned that among students from low-income backgrounds, “the canaries in the cage that squawk first,” fewer people are enrolling in 4-years college programs.

The report notes that the prevalence of soaring student loans has become an important issue in the Occupy protests we are seeing around the country as well as a political issue of late. Last month, President Obama  spelled out plans to ease student loans payment by allowing lower monthly payments to low-income individuals and a little lower interest rate to those who consolidate their loans. The measures are important because, as the report notes, federal student loans offer more protection than private loans, and options like income-based repayment and unemployment deferment can ease the burden of student loans.

At a time of fast rising tuition fees at many universities, it is not entirely surprising that students are now taking more loans than even before. With rising tuition and student debts and a sluggish economy, the opportunity cost of college education is rising. And since an undergraduate degree no longer offers the same returns as it once did, more people now also feel compelled to get Masters degrees, which translate into more loans. College education, however, still has much value. College-educated workers, after all, earn more in their lifetime, get higher-status jobs and face lower unemployment rate than those without a college degree, and there is less variation in unemployment between periods of economic expansion and recession for college-educated workers.

Most worryingly, as Mr. Kantrowitz warned in the article, it is mainly people from low-income families who are putting off their plans for college because of the declining affordability of college. Already just 3% of the students attending the country’s 146 top ranked colleges come from families in the bottom 25% of the household income distribution. This is not good because a college degree is important for upward social mobility. Steven Greenhouse writes in his book, The Big Squeeze, that students from low-income households with high test scores have a 29% chance of graduating from college as opposed to 74% for students from high-income backgrounds with similar high-test scores (41). A college degree often acts as a signal of applicants' ability to employers but because students from low-income households face more constraints to graduating from college, many are struck with lower-paying jobs than those with a college degree of similar ability (as indicated, for example, by their similar test scores). Thus we need more generous grants and less costly loans so that students from families that are not financially well-off can have a better chance of graduating from college and becoming upwardly mobile.

Thursday, November 10, 2011

Nollywood Rising: Time for Africa?

It may indeed come as a surprise but the world's second largest film industry is not in Europe, Asia or the Americas but in Africa. The Nigerian film industry, Nollywood, is worth more than $250 million and employs over half a million people. And with more than 200 movie releases per month, Nollywood produces more movies than even the mighty Hollywood!


Quality, not quantity? Well it is true most Nollywood movies are small-budget ventures shot on digital video formats and not intended to be screened at cinemas (there are not that many in Africa!) but are sold through DVDs that cost less than two dollars each. Yet, the issues like urbanization and coexistence of the traditional and the modern that the movies deal with have much resonance in a country and a continent that are fast changing. In less than two decades since its emergence, Nollywood has spread its tentacles across Africa and is increasingly being recognized and celebrated outside the continent, such as at Film Africa festival in London this month.

Nollywood's ascent in Africa has been facilitated by using widely-spoken English as the language of films and tackling subjects, including some contentious ones like witchcraft, with pan-African appeal. But there is also a desire by Africans to watch movies made by other Africans that do not represent their continent and their issues through the Western lens. The Economist article, Lights, Camera, Africa, quotes a leading Nigerian director, Lancelot Idowu, as saying “Nollywood is the voice of Africa, the answer to CNN.” 

But it is a voice that, as it becomes more audible, is also causing some unease in Africa. As the Economist article explains, in the wake of Nollywood's growing popularity, some have expressed fears of "Nigerianisation” of Africa-- a development that interestingly echos the largely unfounded concerns of some cultural critics about "Americanization" of the world thanks to the world-wide popularity of Hollywood movies. Not surprisingly, some governments have resorted to protectionist measures to try to prevent Nollywood from making further inroads into their countries; the Democratic Republic of Congo, in fact, even tried to completely ban Nigerian films!

Yet, resistance to what some critics and governments may see as a Nollywood invasion is not so bad after all. In order to appeal to African public in the face of opposition from powers that be, Nigerian directors and producers constantly have to get their act together and strive to improve their movies rather than becoming complacent. And, in part to counter Nollywood's influence, movie industries across Africa in countries like Tanzania, Cameroon, and Ghana are taking root and, in many cases, flourishing.

As some of the better work of these emerging film industries find an audience outside Africa, the new audiences will be able to more than just appreciate pieces of art; they will also be able to appreciate narratives on Africa from the prisms of Africans themselves.

Monday, November 7, 2011

US Economy Shows Signs of Recovery

Finally some good news vis-à-vis the US economy!

The economy registered modest but encouraging growth last quarter. According to the calculations of the Commerce Department, the nation's Gross Domestic Product grew by an annual rate of 2.5% in the July-September quarter, which is almost twice as much as it grew in the previous April-June quarter. This economic growth is a significant improvement over the very feeble 0.9% growth that we saw in the first half of the year. The GDP growth also sends a good signal about the prospects of the US economy and should be reassuring as some economists had warned that the US economy was heading towards another recession.

What caused this rise in GDP growth? First and chiefly, an increase in consumer spending, and second, an increase in business spending on software and equipment. During the summer, consumers spent on everything from clothes to cars at an annual rate of 2.4 %, which is thrice what they did in the previous Spring quarter. What is more, households stepped up their spending on services by 3%, which is the highest increase in spending on services in more than 5 years. However, the increase was mostly due to rising health care costs as well as a very hot summer which necessitated higher than usual expenditure on cooling. Businesses also contributed slightly to the increase in GDP growth by increasing their investment on equipment and software, which increased 17.4% that is thrice what it did in spring.

Despite this encouraging growth however, the GDP growth is still much below what is required to generate many jobs and to drive down employment rate. Economists caution that consumer spending, which accounts for 70%  of all economic activity in the US, will not pick up until incomes start growing, which unfortunately does not seem imminent. At the moment consumers are increasing their spending by eating away their savings but that obviously cannot continue forever.

There is thus a “half full” kind of situation for workers vis-à-vis the economy. The cause of concern is that the GDP increase is not so high that it could motivate companies to hire more and the increase in consumer spending was mostly accompanied by consumers’ dipping into their savings. Such a trend is not sustainable, not least because savings tend to run out! Thus the vicious cycle of low consumer spending leading to low economic growth and thus fewer jobs and fewer jobs leading to low consumer spending and low economic growth is likely to continue. Which is not heartening.

What is encouraging, however, is that the economy picked up in the last quarter and another meltdown--which seemed to be in the offing after recent political wranglings over debt ceiling precipitated a temporary stock market crash and partly led to the downgrading of the US credit rating--does not seem imminent. As recently as in August another massive recession seemed to be hovering over the horizon so it is reassuring that an appreciable increase in GDP growth suggests that we will not see another recession soon. That is important because another economic downturn will further lead to large-scale layoffs, increasing unemployment, which is already a very high 9% at the moment.


Monday, October 31, 2011

7 Billion People: How Many Are Too Many?

The world welcomes its 7th billionth person today. This milestone is coming just a little over a decade after we welcomed the 6th billion citizen of the World in 1999!

Our global family is surely geting larger. But it is getting larger at an increasingly fast rate. And that is not a good thing.

With millions of people living in abysmal poverty, it already seems like we have too many people in the world. Access to health care facilities, education, clean water and so on is severely lacking in much of Africa, Asia and Latin America. As the ABC video clip above reminds us, one in 7 people does not have enough to eat. Yet we are adding more people into the world.

The New York Times reported in May this year that according to most recent UN estimates, the world population could exceed 10 billion by the end of this century. Worryingly, UN estimates that much of the influx in population will be in countries and regions that are the poorest; the population of Africa, for instance, could  triple to 3.6 billion from 1 billion today.

Clearly, such a trend is not sustainable. We thus need to step up our efforts to reduce infant mortality so that people in developing countries do not feel pressurized to have more children becaue of fears that they could lose their child in infancy. We also need empowerment of women and increase in access to family planning and contraceptives. And we need to make as many people in developing countries financially secure as possible so that they do not view more children as a bigger safety net, which will cover them in future.

By improving people's quality of life, although an uphill task, we can win the battle over demographics. And we need to win because when it comes to population,  more is not merrier. To make our world merrier, instead of adding more and more people to it we need to take better care of the people we already have.

Sunday, October 30, 2011

The Promise of Microfinance

Is extending credit to those who are the poorest in society a good idea? It is if with that credit, farmers can install a tube well, women not part of the formal workforce can purchase sewing machines and other paraphernalia so that they can embroider and then sell their embroidered clothes in the marketplace, and people can open small shops in their villages.

Microfinance can help us reach out to the marginalized segments of developing nations and make a difference in their lives. What is more, a little can go a long way because sometimes all it needs is a small loan to get people started on the path to self-sufficiency.
The Nobel Peace Price of 2006 in particular brought Grameen Bank of Bangladesh into limelight. Grameen bank extends credit to people who otherwise would not be eligible for it. And it does that at very low interest rates and without collateral backing the loans. There are also community-based organizations (CBOs) doing the same in Bangladesh and beyond. The video below sheds light on how one such effort, Shitu Bandan, is helping change lives in Bangladesh.


As the video shows, even a loan equivalent to just $30 can help people like Hawa Begum start a small business in poor countries like Bangladesh!

What is also heartening is that often, as the video explains, women get majority of the loans because they are seen as more responsbile and committed than men. Women, after all, are less likely to squander their loans playing cards or buying cigarettes. By making lending to women a priority, microfinance is thus not only helping families make ends meet but also empowering women in the process. This is important because many developing countries are essentially patriarchal societies where more often than not women do not enjoy a very high status.

Microfinance is helping change the status quo, empowering women and lifting people out of abject poverty. Which is why efforts like Shito Bandan need to be applauded.

Sunday, October 23, 2011

Khan Academy: The Start of a Revolution?

Bill Gates, for one, thinks so!

Sometimes serendipity can lead to great things. That is what happened with Khan Academy when one man's 'mission' to tutor his cousins who were residing in another state led to the creation of a virtual school with which its founder, Salman Khan, hopes to "educate the world."

And Khan Academy is doing just that: educating the world. With more than 2600 educational videos posted on its website, and growing fast, Khan Academy offers online lectures on subjects as diverse as algebra and art history to statistics and organic chemistry. Every day hundreds of students use the academy to get a better understanding of concepts they are learning in school and to learn new concepts.

But Khan Academy of course is not just for school students. There are videos on GMAT problem solving, brain teasers "useful for many job interviews," and, in case you were curious as to how to address the banking crisis, you can even check out videos on the Geithner Plan!

Already the academy and its founder are winning plaudits. Bill Gates, in the video posted above, hails Salman Khan as a "pioneer in an overall movement to use technology to let more and more people learn things,  know where they stand" and says that "it's the start of a revolution." The Washington Post reports that the Bill and Melinda Gates Foundation last year made $1.5 million donation to the not-for-profit academy. Last year Google also awarded it a $2 million grant for being one of the five organizations that won a crowd-sourced contest for their "world changing ideas."

But can Khan Academy really change the world? Its mission statement says that it is committed to "providing a free world-class education to anyone anywhere." And because it is free, its well-prepared online video lessons can certainly benefit millions of people in third world countries who lack access to good quality education. People without access to the Internet of course would still lose out and not everyone understands English. But the academy has been using the help of volunteers to translate its videos into other languages; dubbed and sub-titled videos are now available in more than a dozen languages.

Khan Academy has come a long way indeed in a very short span of time. Perhaps a revolution in world-wide education is in the offing!

Sunday, October 16, 2011

Global Poverty: Can Mobile Phones Come to the Rescue?

Probably not just on their own. But mobile phones are one tool among many which when used together can help us confront global poverty.

CNN reported this week on the immense transformative potential of mobile phones. Jeffrey Sachs, director of the United Nations Millennium Villages Project, in fact hailed mobile phones as "the single most transformative technology for development," not least because poverty, in many respects and in many regions, is essentially a phenomenon of isolation. As Mr. Sachs explains in the video attached below as well, lack of access to markets, education, government services and so on results in economic isolation, impeding chances for upward mobility. For people living in rural areas in many developing countries, that lack of accessibility is especially pronounced. Mobile phones and information technology, notes Mr. Sachs, are thus instrumental to overcoming the economic isolation which engenders poverty. Farmers, for example, can use their cell phones to learn about commodity prices, people can call others at a time of an emergency, and community health-care providers can carry cell phones interconnected to computers. Thanks to mobile phones and wireless technology, people are no longer as isolated as they were until just a few years ago.

Mobile phone use grew by a whopping 400% in Africa between 2005 and 2010, according to the CNN report, buoyed by declining mobile phones prices as well as the low cost of installing mobile towers. This is heartening because as the report mentions a 2006 University of Michigan study found that every 10% increase in cell phone penetration stimulates the local economy by 0.6%. That bodes well not just for people living in the margins of impoverished developing countries but for the overall economic growth of these countries. What is more? The "global village" might truly become a global village if access to mobile technology, which helps us transcend boundaries, continues to increase.

Sunday, October 9, 2011

Is 'Aakash' the Limit in Tablet Computing?

A brilliant thing happened this week. India launched its android tablet. It comes equipped, as the Associated Press video attached below illustrates, a color screen and allows word processing, web browsing and videoconferencing. But the best thing is its price: just $35.

Can it compete with the likes of iPad? Most likely not. But competing with iPad is not what the tablet named Aakash, sky in Hindi, is supposed to do. Rather it is aimed at students, not the tech-savvy ones fortunate enough to be born into well-off households but the impoverished students in rural hinterlands of India who unfortunately lack access to both good schooling and technology. As Kapil Sibal, Indian minister for Human Resource and Development, said at the launch of the tablet,  Aakash is "for all those who are marginalized."

So why is the development of a $35 tablet heartening for India? Well, it is because of Aakash's potential of aiding development of India. India, after all, is a nation of over a billion people and the majority of these 1.17 billion people are young. With a median age of just 25, the young population of India will prove pivotal in driving the economic growth of their country in the next few decades. An educated workforce will also provide India a comparative advantage vis-à-vis other emerging economies like China whose populations are relatively ageing. But India is also a poor country with a per-capita income of just about $3100. And with almost 70% of Indian population living in villages, providing quality education to those students in rural areas is especially a challenge for the Indian government.  A very low-cost tablet, Aakash can help the Indian government overcome this challenge by opening the world of the Internet to students who otherwise would not have access to it. These students will also benefit from pre-recorded lectures accessible from their tablets as well as from videoconferencing facilities that could help create virtual classrooms where a student sitting in rural India could instantly connect to a well-qualified teacher or a tutor sitting in Bangalore or Mumbai.  

And because a tablet computer is infinitely cooler than traditional books and blackboards, Aakash could also succeed where many other have failed: making students more motivated to study!