Can a Socialist Really Raise US$ 150m in a Month?

Because I am not a citizen of the US, I figure that my views about the presidential elections whose outcome is due in a few days are largely irrelevant. In spite of that, one must contend with the fact that the contest has put forth a large contrast between the candidates both in terms of the demeanour of the candidates, organizational nature and the style during the debates.

And yet it is in the same race that one cannot fail to see contradictions and double speak based not on the fact, but prejudice towards one or the other leader. The one area in which the candidates are most apart is in the method and extent of their war chests. No doubt, by making the more risky choice to forgo public financing entirely, candidate Obama appears to have done very well.

Not only has the campaign run on very different principles and style, but the business approach to fund raising is one that those with a fascination for human ingenuity ought to try and understand. Deploying novel mechanisms such as placing value and charging for access to members of the team through receptions conferences, round table meetings and VIP access, there's no doubt that the candidate and his advisers understand far more about the operation of markets than their ideological detractors give them credit for.

As this story on Politico states here, to price Robert Rubin's time at to ask someone to pay US$ 28,500 shows more financial savvy than the shouts of socialism suggests. Candidate Obama may hold the view that the public sector should be in charge of more things than libertarians and conservatives may like, but a socialist he is not.

Proposal for African Person of the Year

Following up from the last blog post here, I was reminded of the dire situation and the discomfort of many African governments in confronting the question of slavery in Africa by failing to stand against social or religious convention. I heard the news story on BBC radio a couple of days ago in which Hadijatou Mani recounted her experiences after he sale as a chattel to a cruel polygamist and her determination to resist after I was "sold like a goat".

Her determination and quest to maintain her dignity makes me propose her as this blog's African person of the year.

African Slaves Fighting Back in Courts

If there is a single factor that most animates many African intellectuals and other citizens, then it is the issue of transatlantic slave trade. There is no doubt that slavery was completely inhuman even if it was altogether a great contributor to large fortunes for many traders on the African and other continents. Indeed, as confirmed in this compelling biography by Mende Nazer, slavery based on religion, race or status is still widespread in Sudan and other parts of the African continent.

However, what I find most depressing is the fact that the continent whose intellectuals and people protest most loudly about racism is still home to the most egregious forms of slavery. A story in the Guardian confirms the hypocrisy of the people in Africa regarding debates and open discussion about slavery. This brave women from Niger sued the state for failure to protect her from servitude and seems to have received deserved justice. what is most ironic about it is the fact that the state of Niger abolished slavery a mere 5 years ago. the only redeeming thing about the sad case is the acceptance of the judgment and the undertaking to comply with the courts orders.

Taxing Endowments is Looney

Most universities are dependent on charging for fees or on public and other support. Still, there are a small number of universities and colleges that have endowments that are large and growing. This situation makes some people unhappy that these universities and colleges with well-heeled alumni often collect enormous sums of money from them and spend very little of that. In effect, the endowments became an arms race for accumulation in which the principal sums continue to grow while learners have to pay fees and start their lives with substantial loans.

I agree too that the essence of college endowment funds may be lost because the accumulation means that they exist merely to provide employment for fund managers. Select universities in the US especially hold endowments that add to billions of US$ and a number have responded to this criticism by providing more scholarships and tuition waivers to more students. One cannot fail to see the slight irony when centers of learning are more liquid than some banks are.

In spite of the oddity of this situation, I am opposed to the idea that these institutions should somehow be compelled to draw on the funds until they are completely spent. George Will discusses a meeting convened by two congressmen who are intent on levying taxation on institutions unless they spend close to 5% of the fund every year. Understanding that his persuasion would lead to opposition of taxes anyway, I agree that this is not a well considered measure because of the fact that only a minority of institutions have large endowments. In addition, the annual returns on endowment funds is not guaranteed and so a pre-determined minimum expenditure simply means that where returns are negative, then the endowment will have to spend the principal sum.

Whatever the solid reasons, it is clear that taxation is not the way to ensure that colleges with large endowments give more scholarships. I think that the alumni who continue to provide contributions should be more active in demanding better application of the funds. An early blog post here argued the same points shows that the alumni are already posing those questions. Government has no business here.

Limits of High Oil Prices as a Political Tool

As crude petroleum prices climbed up over the last three years, this did not only make exporting nations richer but it also made some of them more politically aggressive. What with Iran being defiant about inspections to its uranium processing facilities, Venezuela flexing its political muscles in South America and Russia using petroleum and gas supplies as a weapon in foreign policy. Together with the use of petroleum as an instrument of foreign policy were populist measures that expanded public expenditures through subvention and direct cash transfers.

There's no doubt that this is a risky strategy predicated on a high oil price and therefore vulnerable to any downward price shocks. Since petroleum prices curves flattened and went downwards, these countries are not only compelled to review expenditure plans but may see their voices in international affairs substantially moderated.

As the IHT reports here, these countries have had to go back to the drawing board regarding their expansionist ambitions. To my mind, there is still scope for petroleum prices to rise but the important fact is the illustration that non-democracies waste resources in symbolic displays of defiance and ambition.The state of affairs for these economies will probably be worse when oil prices tank again. And for sure, those prices will come down.

Unclean Hands in North England

An article by Ian sample in the science section of the Guardian reports that a study carried out in England by the London School of Hygiene and Tropical Medicine found that the degree of bacterial infestation of hands varies with the latitude. As one moved further north, the team found that swabs taken from the hands of the men would bear a higher proportion of bacterial contamination.

I find this not only fascinating and have wondered what the connection between latitudes and hand hygiene would be. I would posit two very rough hypotheses. The first is that the occupational character of the men living in norther UK is probably a factor here. Second, my experience in the North of England during the harshest part of winter a couple of years ago confirms that because the northern cities are generally colder and experience harsher winters, the tendency to wash hands regularly may be substantially reduced. Thus the need to avoid cold water on the hands could indirectly drive the growth and retention of larger colonies of bacteria. Admittedly, the latter fails to explain the divergence in the behavior of men and women.

Quoting Nassim Taleb

"The problem of The Black Swan is that people don't understand the place in the world that we know the least about, where our knowledge is the softest, are where the most charlatans exist—and that's pretty much predicting rare events." Nassim N. Taleb

Paul Krugman Wins the Nobel

I have always expected Paul Krugman to eventually win the Bank of Sweden's Prize in Economic Sciences in memorial of Albert Nobel. What I may have missed totally was that this would happen this year and that the citation reads in part: "for his analysis of trade patterns and location of economic activity".

There's no doubt that merit has been rightly rewarded here and by a professional economist who takes the time to explain the elements of the discipline to lay audiences through lucid and popular publications. This is proof to me that the science of economics is indeed useful. Prof. Krugman is unlikely to pass by this blog but congratulations nevertheless.

A less mathematically-laden publication that would highlight the contributions mentioned in this prize are found in this book featuring the Gaston Eyskens lectures. As the citation states, Krugman provided the connection between cities and global trade through the argument of increasing returns. The study answers the question about why production and industrial activity occurs where it does.

Is China Africa's New Colonial Power?

Africa is the second largest continent in the world and together with south Asia indubitably the ones with the most indigent people. There are a number of preposterous and sensible arguments trying to explain the hopelessness in the continent. Without attempting to identify a singularly important factor, it is clear that African countries collectively and individually have been receiving very little Foreign Direct Investment. And where such FDI is available, it is often directed to select countries that are largely endowed with natural resources and therefore not sufficiently diversified.

China has attracted interest by investing quite heavily in Africa over the last decade. Indeed as argued in this piece in the Irish Times, the value of trade between China and Africa has grown nearly sevenfold from €6.75 billion to more than €47 billion between 2000 and 2007. As expected for a continent that is bereft of proper infrastructure, most of the the Chinese investment is in resource rich countries such as the Democratic Republic of Congo, Nigeria, Sudan, Angola and Zambia. There is also expansion in construction of roads and railways but it is clear that infrastructure makes it easier for the extraction to occur by connecting to the ports.

The controversy arises from the concern that China appears to be particularly friendly to some of the most corrupt and brutal regimes in the continent. Chinese investment, while it appears to take the form of mercantilism, should be welcome even if the justification from African leaders shows poor understanding of the ingredients for sustained growth. It is certainly wrong-headed to believe that China on its own will drag the entire continent into growth through its investment principally because China is itself still a lo-income nation. Secondly, the thinking that China is either a counterweight or alternative to the West is completely false because China has benefited immensely from export markets in the west and will continue to need that to maintain its growth. For all its endowment with natural resources and business opportunities, China needs Africa's markets less that it needs those in the EU and North America. Africa's best bet is to expand investment opportunities with both sides.

One must understand Africa's desperation for new investment and the benefits of trade with China. In spite of this fact,sub-Saharan African countries are well-advised to consider opening up as China did to other investors too. China is neither an African country nor is it capable of leading to Africa's economic development and diversification all on its own. The pattern of its trade and investment together suggests that these are driven by the need to expand its markets and to secure natural resources. More importantly though, African countries should recall that they are not a monolithic whole and the benefits from trade and investment with China will require domestic political and economic reform. The former of which China will not insist upon but is indispensable for sub-Saharan Africa's leap.

Starbucks Confirms that Tap Water is Cheap

Some keen person noted that Starbucks chain of coffee shops let the taps run without being turned off. The immediate claim is that this is leading to loss of precious water and one for which this story in the Guardian reports, the Starbucks chain is receiving a lot of condemnation for. While I am also concerned with the need to use resources efficiently, I am led to the belief that the Starbucks shops cannot be doing this without some thinking behind it and so the moralizing and condemnation may need to be moderated.

I think that one need not police Starbucks by demanding that all faucets within the establishment be turned off. Its behaviour merely confirms that Starbucks finds that tap water is very cheap. The solution is very simple and has been argued on this blog before. It would involve the most appropriate pricing of water so that Starbucks is compelled to dedicate its best effort in keeping costs low while ensuring that the concern for its customers health is also ensured. So what all those condemning Starbucks should do is advocate for governments to price water and ensure that all who utilize water pay the costs. Even Starbucks would not mind that.