Sunday, 22 March 2009

A “perfect storm” of food, energy and water shortages by 2030

We are currently in the middle of a credit crunch – a crisis caused by our own risk taking trait in the economic sphere – and the effects of it are proving to be quite painful. But have you considered the possibility that we could be heading towards a different type of credit crunch, one affecting our environment, sometime in the future? This is what the UK government’s chief scientist, Prof John Beddington, warned recently at the Sustainable Development UK conference. He said the growing world population will cause a “perfect storm” of food, energy and water shortages by 2030.

The world population has tripled over the past 70 years and it is expected to reach 8.3 billion by 2030, by which time demand for food and energy will have risen by 50% and fresh water by 30%. Climate change will exacerbate matters in an unpredictable way. Prof Beddington thinks the UK will be relatively fortunate not to experience its own shortages but “we can expect prices of food and energy to rise.” In other parts of the world, particularly the developing world, the amount of fresh water available per head of the population is expected to drop significantly.

These are certainly grim predictions but not unreasonable considering current trends. Remember the spurt in food prices last year? In many countries, population growth has surpassed food production in recent years. Just because prices have eased a bit recently it does not mean that they are going to stay that way. If the world population continues to grow and we do not have the equivalent of another Green Revolution, there could be serious food shortages in the future and higher food prices are inevitable.

In the developed countries, where population growth is either negative or very small, there are no shortages of food. These countries have on average substantially higher rainfall than poorer countries; they have surpluses of food and could expand food production if they wish. This is not the case in developing countries, where populations are still growing quite fast; they do not produce enough food to feed their people and they cannot afford to import sufficient food to close the gap. Food production capabilities are deteriorating for a number of reasons:
  • Limited arable land. Not all land is good or receives sufficient rainfall. Increases in food production would have to come from existing arable land.
  • Shrinking size of family farms. In many developing countries, the size of small family farms have been cut in half over the past four decades, as plots are divided into smaller and smaller pieces for each new generation of heirs.
  • Land degradation. Overworked and exposed soils are eroded by wind and water. Faulty irrigation and drainage can make land useless through waterlogging and salinization. Misuse of fertilizers, herbicides and pesticides also contribute to soil degradation.
  • Water shortages and degradation. When water becomes short, farmers find it difficult to maintain crop production.
  • Irrigation problems. Less than half of all water meant for irrigation purposes actually reaches the crops. The rest soaks into unlined canals, leaks out of pipes or evaporates on its way to the fields.
  • Waste. A lot of food is wasted simply by rat or insect infestation, spoilage and losses that occur during transportation.
Demand for meat in developing countries is growing much faster than for cereals – close to 3% per year compared to 1.8% for cereals. For instance, in China, rising incomes and changing diets have resulted in greater demand for poultry and pigs. This means that demand for cereals to feed livestock, and in turn water, will increase significantly in developing countries, putting pressure on grain producers. It takes 4-5kg of feed to produce 1kg of meat.

Slower population growth in developing countries would allow more time to achieve sustainable food production. Results have shown that higher female literacy and better access to health care services can lower fertility rates. Therefore, the widespread provision of basic education and health care should be a priority for governments in developing countries. There is still a lot of indifference to education in many places, so it is important that initiatives encourage people to view it in a more positive way.

As populations have grown, so too have carbon dioxide emissions. More people mean more houses, cars, planes, and power stations. Developed countries still have much higher per capita emissions than developing countries, but the gap is slowly narrowing. China has recently overtaken the US as the world’s biggest producer of carbon dioxide. More needs to be done to move to a low-carbon economy, otherwise the effects of climate change we are already seeing today are going to increase.

If we do not act now, I believe the combined effects of population growth and climate change are going to lead to serious problems in the future. As human beings we have a tendency to be very complacent when things appear to be going smoothly. It’s only in a time of crisis we actually realise our folly of ignoring past warnings, but scientists have been warning us for years about the effects our behaviour is having on the environment. Without more concerted international action a “perfect storm” of food, energy and water shortages could be far more painful and far-reaching than the current economic crisis. These problems, unlike the current credit crunch, won’t be temporary; they will last much, much longer.

Sunday, 15 March 2009

Indian elections: a meaningless exercise in the machanics of democracy

It’s almost election time in the world’s largest democracy. Next month more than 700 million Indians will go to the polling booths and cast their vote, in what will be the biggest exercise in the democratic process anywhere on earth in recent years. The result will be interesting, as no single party is likely to win outright, but for many Indians, considering the state of Indian politics today, the elections will be a largely meaningless affair. Audacity of hope? Life will be the same as usual for most Indians after these elections.

Since the ‘golden era’ of Indian democracy in the first two decades following independence, Indian politics has become increasingly populist and chaotic. Today there are many, many parties at the national and regional levels, and central governments are usually coalitions. Gone are the days when India’s grand old party – Congress - ruled virtually unchallenged across the breadth and depth of the country. This broadening of democracy reflects the diverse nature of the Indian population, but along with this increased political pluralism has been a distressing corruption of the entire system.

Around a quarter of India’s politicians are facing charges of serious crime including murder, armed robbery, kidnapping and rape. Many politicians thrive on the use of muscle power, but this nexus between politics and crime only weakens the rule of law. The legal process is so slow and ineffective that it only facilitates the further criminalization of politics. How can one expect a parliamentary system infiltrated by criminals to serve the people, let alone uphold the rule of law?

Corruption is so endemic in public life that to get anything done one has to pay a bribe. A report by Transparency International India (TII) estimated that the total sum of bribes paid to access public services by poor people in India was more than 9 billon rupees. The protectors of the law, the police, topped the services accounting for the most bribes being paid, followed by housing services and land administration. Bribes are routinely paid for gaining admission to schools, to get a bed in a public hospital, or to get the electricity turned on. India is currently ranked 85 in a list of 180 countries worldwide for corruption by Transparency International.

There has been much praise for the rapid economic growth India has enjoyed in recent years. Certain sectors of the economy like IT, biotechnology, and pharmaceuticals have indeed experienced tremendous growth, but the effects of this economic growth are failing to trickle down. In the latest United Nations Development Program’s Human Development Index, India is ranked a low position of 132 out of 179 countries, falling far behind other large countries such as China (94) and Brazil (70) with similar sets of challenges, and it has not improved its position for years.

Among two of the main failings of successive Indian governments have been the inability to make basic education and health care available to all its people. When India embraced free market reform in the early 1990s, with its elitist concentration on higher education, a semi-literate population was poorly prepared for a widely shared economic expansion. The situation is not much different today. The contrast with China couldn’t be greater. Chinese governments, even before China turned to capitalism in 1979, went for massive expansion of education, and later of health care too. The result has been that China has reaped the benefits of free market reforms much better than India.

India is, of course, a very diverse country and there are large variations in living conditions across different regions. The poorer states, mainly in central and northern India, such as Uttar Pradesh, Madhya Pradesh, Orissa and Bihar, have living conditions not much different to the most deprived countries in sub-Saharan Africa. Here there are high levels of illiteracy, infant mortality and undernourishment. Meanwhile Kerala, in the southwest, has almost total universal literacy and good health care facilities. The result is that people in Kerala live longer, in smaller families, and they are less likely to suffer from acute poverty.

The Indian electorate has the uncanny ability to surprise political pundits. In the last general elections, against all odds, Italian born Sonia Gandhi led her Congress party to an unlikely victory over the incumbent right wing Hindu nationalist BJP party. Following her surprising victory, she stepped aside for the soft-spoken Oxford University educated economist, Manmohan Singh, who initiated India’s economic liberalization in the early 1990s. This year the newly formed Third Front, a grouping of secular left wing and regional parties, could possibly play the role of kingmaker.

There are huge challenges that lie ahead for the next government including poverty eradication, overpopulation, and an increasingly unstable neighbourhood. It is difficult to see how a coalition government, constrained by compulsions to please its internal partners, will be able to meet all these challenges. However, as Kerala has shown, the provision of basic education and health care, achieved without too much government expenditure, can lead to tangible social benefits in the long run. The next government must address such fundamental issues; otherwise, for many Indians, life will continue to be a misery and elections a meaningless affair.

Saturday, 7 March 2009

Cricketers become terrorist targets

Cricket will never be quite the same again, especially in the Indian sub-continent, following the attack on the Sri Lankan team in Lahore, on 3 March 2009, by suspected Islamist gunmen. For Pakistan, the incident is almost certainly bound to deter international teams from visiting the country, at least for the short to medium term, until the general security situation in the country improves. Only Sri Lanka was prepared to take the risk, to support a fellow South Asian country affected by terrorism; now even they won’t be returning in a hurry after their players narrowly escaped with their lives. It was an incident that many people, including players, commentators, and cricket officials had been dreading, especially after the Mumbai attacks in November 2008. Now that it has happened, we have passed an unprecedented psychological milestone.

The attack happened in a residential area of Lahore in Punjab. Eight people, including six policemen, were killed. Although no group has so far claimed responsibility for the attack, the likely perpetrators of the attack could be Lashkar-e-Taiba (LeT) – the same group blamed for the Mumbai attacks last year. LeT is headquartered around Lahore and under pressure from the US and India, the Pakistani military has been moving against LeT assets in the country. LeT was originally set up by the Pakistani military to fight Indian rule in Kashmir, but it has since widened its activities. The daring attack on the Sri Lankan team demonstrates the boldness with which many militant groups operate in Pakistan, and the withering writ of the Pakistani state.

Now that cricketers have become targets for terrorists, it is important that security is dramatically stepped up for them. New security arrangements must ensure their safety at hotels, city roads and cricket grounds. Perhaps the distinctive team bus may have to be abandoned, and players transported in bomb proof cars. The Lahore attacks demonstrated at least a moderate level of planning by the terrorists, so every aspect of a cricket match including transport, accommodation and the play must be reviewed. The Indian Home Minister, P Chidambaram, has been going out of his way to ensure that cricket will be safe in India. In a recent press conference he said, "I want cricket to be played in India. Nobody needs to worry about safety while playing in India."

In India cricket is more than just a sport, it is a national obsession. It is played in almost every nook and cranny, and followed by hundreds of millions of cricket fans. It is one of the few sports that Indians have actually been able to do well at the international level, relying more on guile and skill rather than sheer physical strength. The game is also a great unifying force in a large and diverse country, bringing together players from different regions and rendering insignificant the everyday divisions of language, religion, class and caste. It may have been brought to India by the British, but today India is the powerhouse of international cricket, contributing up to 80% of world cricket’s revenue.

Already questions have been raised about this year’s Indian Premier League (IPL) and the World Cup in 2011. Organisers of the IPL, who could lose up to £300 million if the tournament is cancelled, are adamant the tournament will go ahead, although the timetable may be altered so that matches do not clash with polling days in India’s upcoming general elections. Some foreign players, who are yet to sign binding contracts, may decide to pull out of the tournament. There’s no doubt security for the tournament presents a tough challenge, and so it is important that the government and the organisers work together collectively if they want the tournament to be safe.

This is not the end of cricket in the sub-continent by any means. It is far too popular for that to happen. Teams may well avoid Pakistan for the coming years but, like in the past, matches can be played in UAE, Malaysia and other places which are considered safer. For a country that has consistently denied terrorism emanating from within its borders, the only silver lining in the Lahore attack is that the humiliation of not hosting cricket matches at home may finally force the general public and establishment to recognise that they have a problem.

Sunday, 1 March 2009

Bankers face backlash

As the Credit Crunch continues to bite, there is seething public anger here in Britain against senior bankers for their apparent professional incompetence and excessive (“fat-cat”) pay. The latest banker to face intense public ire is Sir Fred Goodwin, the former chief executive of the Royal Bank of Scotland (RBS), after it was revealed that he earns a £693,000 per year pension following his early retirement last year. RBS, one of the largest banks in UK, came near to collapse in October 2008 in the wake of the credit crisis, and it has since been effectively nationalised, with the government holding 84% of the shareholding. It seems totally unfair to many people that bankers, such as Sir Goodwin, can be so lavishly rewarded for their seemingly poor performance.

Actually, there is nothing illegal at all with Sir Goodwin’s pension, and bankers have been enjoying fat-cat pay for decades. This thirst for vengeance against bankers is really just a symptom of the current economic situation and the public’s desire to apportion the blame. Senior executives like Sir Goodwin should rightfully take a greater proportion of the blame, for they were responsible for making the decisions that got the banks into this mess, but while the public indulges in a hatred towards a few senior bankers, there are some serious lessons to be learned about the way many companies, in particular banks, have done and how they could perform better.

Dressed in dark suits, white shirts, and red ties, bankers generally give the impression of being extremely dull, conservative characters, but this is all for show. Even before the current banking crisis, there have been a number of instances in which the lending strategies of banks have caused major problems. In 1982, big American banks lost almost everything they had previously made because Latin American countries, to whom they had been lending to, all defaulted on their loans at the same. Then a decade later, these banks again came close to bankruptcy after the property market collapsed, which required a taxpayer-funded bailout of half a trillion US dollars.

Paul Moore, former head of Group Regulatory Risk at HBOS, had warned the board that they were taking undue risk by basing their growth on “excessive consumer credit based on massively increasing property prices which were caused by the very same excessively easy credit”. He was dismissed from his job in 2005 by the CEO, and he was replaced by someone who had no experience of carrying out a risk manager position of any type. In a statement, he compared the CEO of HBOS to an emperor who was blinded by “money, power and pride”, and anyone who stood in his way was labelled a “trouble maker” or “spoil sport”. People who did notice that the emperor was “naked” were too scared to speak up and point out the fact.

The current banking crisis shows what happens when CEOs are driven by just one thing: greed. A certain amount of greed in necessary, but it should not be the overriding concern for a business. Neither should a firm be dominated by a single voice, something which is deeply ingrained in the British civil service. Jack Welch, the former CEO of General Electric (GE), described this single voice as “superficial congeniality”. As CEO of GE, from 1981 to 2001, he went about dismantling this culture of “superficial congeniality” and replacing it with a culture of debate, argument and decentralized authority. GE was the most successful company of the twentieth century, and continues to be the world’s tenth largest company.

Unfortunately, today we are paying for the mistakes of greedy, short-sighted, domineering CEOs of large banks, and the government is yet again using our money to bail them out. This is not the first time this has happened, and it probably won’t be the last. Bankers, after all, are humans and we all have a tendency to increase risk taking when things seem stable, while ignoring the possibility of a crisis that that kind of attitude could produce.