Monthly Archives: June 2010

The Role of Technology in Development

Mali Rice Farmers

Rice Farmers in Mali (photo courtesy Wikimedia Commons)

Discussion of international development often centers on the need to promote the use of new technologies. In this respect, technology is too often seen as a magic bullet to solve the problems of development. If there are hungry people, we need genetically modified foods to feed them. If there are people who lack access to clean water, we need improved water technologies like desalination or improvements in water pumps. If there are illiterate people, we need affordable computers. The list goes on and on.

But the emphasis on technological innovation to address the challenges of development ignore the social dynamics of the process itself. This is perhaps clearest in efforts to address hunger, as a recent post by Oxfam’s Duncan Green points out. While developing new technologies to increase agricultural output in the global south could certainly represent one component of a strategy to address global hunger, we cannot assume that technological improvements necessarily address social challenges. The Nobel Prize winning economist Amartya Sen in the 1970s articulated an entitlement theory of hunger. Using a comparative analysis of food production and hunger in famine zones around the world, Sen observed that hunger did not necessarily result from a lack of food. Often, famines occurred in areas where food production had actually increased in recent years. Rather, Sen argued that famine results when people cannot access the food that is produced. This subtle shift revolutionized our understanding of famines and hunger, but unfortunately did not fundamentally shift our policy strategy for dealing with them.

Duncan Green’s example, delivered at the Westminster Food and Nutrition Forum last week, was taken from efforts to increase food production in Mali (see the discussion beginning on page 59 here). Rather than seeking (often expensive) technological fixes such as  new seed varieties, Green argues that agricultural output was increased by 10-20% simply by providing farmers with access to reliable, appropriate seasonal weather forecasts, thereby giving farmers the information necessary to make better decisions. This approach required no new technology whatsoever. Farmers could receive the weather forecast from radios (which they already own) or by word of mouth.

In the broader context, Green’s analysis highlights the dichotomy between “nice” and “nasty” technologies in the development community. Nice technologies include information technologies and the internet, mobile phones, and vaccines. Nasty technologies are GMOs, nanotechnology, geoengineering, biofuels, and nuclear power. The distinction, Green notes, is based on the degree to which the technology centralizes or decentralizes power. Nice technologies empower people, especially the poor, while nasty technologies tend to centralize power (via patents or high costs), thereby excluding the poor.

The “nice vs. nasty” technology distinction is useful, but it is also possible to frame the debate in a slightly different way. Appropriate technologies are those technologies developed with specific consideration for the environmental, cultural, and economic context within which they will be used. Much like Sen’s analysis of famines, appropriate technologies take as their starting point the social dynamics of their use. Development based on the use of appropriate technologies would not seek to displace labor in the production process, and would be cognizant of the gender dynamics of production. Above all, appropriate technology is accessible technology. And this is something that is desparately needed in the world of development assistance.

Is BP’s Oil Spill Good for the Economy?

BP Deepwater Horizon

BP Deepwater Horizon

In a fascinating story in the Wall Street Journal yesterday, Luca Di Leo suggests that the BP Deepwater Horizons oil spill may wind up facilitating economic growth in the Gulf region. Citing chief U.S. economist Michael Feroli, who said that “The spill clearly implies a lot of economic hardship in some locations, but given what we know today, the magnitude of these setbacks looks dwarfed by the scale of the U.S. macroeconomy,” Di Leo argued that the U.S. economy may wind up growing as a result of the crisis. According to Di Leo, the six-month moratorium on deep water drilling may cut U.S. oil output by 3 percent and may result in the loss of approximately 3,000 jobs (numbers derived from JP Morgan’s energy analysis unit).  Commercial fishing will also suffer, but it represents a relatively small portion of the U.S. economy (approximately 0.005 percent of GDP). Tourism is the wildcard, but it’s likely that many employees in the tourism sector may face cuts.

Offsetting this, the cost of cleaning up the spill will likely be high. Already, JP Morgan estimates that some 4,000 people have been hired to assist in cleanup efforts, estimated to be worth between $3 and $6 billion. If cleanup costs are higher than this (certainly a possibility), and the U.S. government moves forward with plans to mandate that BP establish a $20 billion trust fund to pay for compensation and cleanup, it is likely that the net impact on the U.S. economy will be positive. Or, in the words of Feroli, “If realized, this would likely mean a near- to medium-term boost to activity that might offset the drags.”

ExxonValdez

ExxonValdez

All of this reminds us of a similar analysis conducted of the 1989 Exxon Valdez oil spill in Alaska, when an oil tanker ran aground, spilling some 250,000 barrels of crude oil into Prince William Sound. The Exxon Valdez was the most significant spill in U.S. history until the current BP Deepwater Horizon spill in the Gulf of Mexico. The Exxon Valdez spill had devastating economic and environmental consequences for some. Local fishers lost income, and the natural environment in Prince William Sound took decades to recover. But the net impact on gross domestic product [glossary] was likely positive, as the cleanup costs likely exceeded the economic cost of the spill itself.

The economics of the crisis reflect the challenge of externalities, costs associated with the production or consumption of a good, but which are not factored into the price of that good. Gross domestic product counts all economic activity as positive. Cleaning the oil spill is additive. There is no negative cost withdrawn from GDP. Car accidents, hurricane or earthquake damage, and expensive medical treatments for preventable diseases or conditions similarly add to the GDP rather than detract from it. In simple economic terms, if we wanted economic growth, more car accidents, oil spills, or earthquakes would be good for the economy!  This is clearly a counterintuitive position, as few rational people would suggest that what we really need are more oil spills.

To develop a more accurate measure of economic activity, some have argued for a rethinking of gross domestic product as a measure of progress. Already, France has moved away from using GDP alone. Some economists argue that we should use something like the genuine progress indicator, which would only include goods and services which improve the public welfare. Such a system would certainly help us think more rationally about the real costs of environmental crises like Deepwater Horizons.