Did monetary expansion cause the Arab Spring?

South Africa's top economic and financial daily, Business Day, ran an article yesterday referring to research conducted in part by my old school friend and occasional commentator on this blog, Chris Becker.

Proof that high inflation leads to more public violence 

NEW research appears to show a direct link between inflation and social violence. In the months before the Marikana massacre, in which more than 30 miners died, there was a spike in nondiscretionary inflation — the inflation the poor experience — from 3% to more than 10%. The same is true of the xenophobic attacks in 2008. Just before these attacks, nondiscretionary inflation surged to 20%. The recent violence in Sasolburg was also preceded by an acceleration in inflation.

One might blanch at the definitive description (i.e. "proof") given to an in-house research document that, as far as I can tell, is unscrutinised by outside review. Certainly, I can immediately think of a host of problems that would need to be accounted for before we even begin to talk about proper causation.

That said, I don't doubt that food shortages and price hikes can, and do, trigger civil unrest and social upheaval. The idea is eminently plausible and there have been many attempts to quantify this relationship (more on this below). I commend Chris for trying to establish a more systematic understanding of the issue in the South African context.

However, I find it striking that this particular article makes no mention whatsoever of the real factors that have been driving high food prices in recent years. You know, massive crop failures due to historic droughts in the former Soviet Union, North America, and elsewhere... That kind of thing. In fact, here's a timely case study on South Africa that pinpoints these exact issues, which is itself part of a broader research programme linking food riots and political instability to agricultural supply-side shocks (in particular, those related to climate).

In contrast, the singular premise of the above BD article seems to be that food hikes -- and subsequent violence -- are entirely the fault of "delinquent" monetary policy.[*] I'm certainly not suggesting that loose monetary policy can't lead to inflation. Rather, the failure to acknowledge these severe real shocks makes any kind of simple analysis very misleading. (I should say that I am going strictly on the article here; Chris and his co-authors may well try to account for real factors in their actual research. At least, I sincerely hope so.) 

However, my faith in journalistic competence is somewhat shaken by the inevitable reference to -- you guessed it -- Shadowstats, the preferred purveyor of hyperinflation statistics for conspiracy theorists freedom lovers everywhere!™ Furthermore, statements like "The conclusion[...] is inescapable: inflation leads to violence" are more or less misleading in the same sense as the suggestion that increasing the temperature of your bath water will lead to you being boiled alive. There may may a kernel of truth therein, but it is clearly important to recognise that this is a matter of degree.

The passage that really caught my eye, however, was the following.

Becker conducted similar research internationally and found that countries experiencing the highest levels of social upheaval, such as Syria, Tunisia, Egypt and Algeria, embarked on huge monetary expansion in the months before the outbreak of violence. This monetary expansion translated into sharp increases in inflation just before the outbreak of violence. In Egypt and Tunisia, the violence culminated in the overthrow of the previous governments.

Woah. Let's just back up there a bit. We are now treading very dangerous territory as far as correctly identifying causation goes. It strikes me as as borderline irresponsible to intimate that the proximate cause of the "Arab Spring" was loose monetary policy. There are a myriad, interwoven factors at play and it would take a highly skilled statistician, armed with reams of data, to tease out the underlying drivers from concurrent symptoms. The fact is I've yet to see a paper on this subject make it through the peer-review process to journal publication... and I'm pretty certain that this is precisely due to the difficulties in attributing causation. With respect to my friend, I'm not convinced that he has managed to crack the problem that has stymied so many others.

I'll leave you with a final thought on this question of monetary expansion and the Arab Spring. A quick Google search on the topic throws up an article by Andrew Lilico that appeared in The Telegraph: How the Fed triggered the Arab Spring uprisings in two easy graphs (4 May 2011).  After demurely suggesting that most analysts are simply too afraid or short-sighted to "join the dots between the Federal Reserve’s second phase of quantitative easing and these revolutions [in the Middle East and North Africa]", Lilico bravely plunges forth to do exactly that. True to his word, he also produces two graphs, the most important of which appears below.

Now, I don't know about you, but that graph seems to show a rise in food prices that precedes the Fed's sharp increase in asset purchases... by several months. I am glad to report that this discrepancy wasn't lost on readers at the time. One commentator sardonically observes: "In my experience causes occur before effects."

It is a matter of some debate among economists how inflation manifests itself in the economy during times of monetary expansion. (E.g. Some of you may recall the rather heated discussions on Cantillon Effects that occurred in the blogosphere only recently.)  Well, it is a relief to know that the issue has been resolved thanks to the careful work of Mr Lilico. It turns out that expansionary U.S. monetary policy is so potent that it can positively impact the price of global commodities with a negative lag of several months!

Note (13/02/13): Follow-up here.

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[*] To be clear, South Africans have also experienced sharp increases in the cost of amenities like electricity and water provision due to some boneheaded policy decisions and as a legacy of inefficient parastatal monopolies. I've covered these issues numerous times before on this blog and elsewhere.

Unintended consequences

During the last year, South Africa has been in the throes of violent upheaval in the mining industry. Most prominently the "Marikana massacre", which received widespread coverage in the international press. The story is a complex one involving increased tension between mining companies and their employees, warring trade union factions, and growing political dissent in the ANC's so-called Tripartite Alliance with the SACP and COSATU. Of course, the stuttering global economy provides a backdrop to all of this as profitability margins have been inexorably squeezed.

The strike action has also spilled over into the farming sector. While the mining industry is located in the far north of the country, the farm strikes have been concentrated in the Western Cape and are therefore much closer to home. The town where my parents live is in the heart of the Cape winelands and the bulk of local industry is very closely linked to farming activity. As I have mentioned previously on this blog, my father is an agronomist and has spent his working life involved in the agricultural sector.

The farm strikes have been much less violent than those in the mining sector, but have still  incurred dramatic economic costs. Stock worth hundreds of millions of Rands has been burned and lost to malicious action. Local trade union leaders have called on international consumers to boycott South African produce until their demands on are met. Quite how all of this is supposed to benefit farm workers and alleviate unemployment is beyond me. (I fear it is beyond the people calling for the boycott.)

One of the most frustrating aspects of these events is that the strikers themselves are not permanent farm staff. They are predominantly seasonal workers and, in even worse cases, simply unemployed people that have been bused in from the cities by venal and opportunistic political leaders. (As some important background, the Western Cape is the only province governed by the opposition DA. The ever gracious and democratically-minded ANC Youth League has responded to this situation not by improving its own service delivery or reconsidering its political manifesto, but by promising to make the province "ungovernable".)

Speaking to some farming friends during my recent trip home, I was left with the distinct impression that they have had enough and will be looking to move into full mechanisation. The ongoing labour issues impose not only higher costs, but also a unnerving atmosphere of unpredictability and uncertainty. Nature waits for no man and an unreliable workforce is one thing that farmers can ill afford; a missed irrigation or spraying session can significantly alter your chances of enjoying a good harvest. One farmer told me that he believes the only way forward for the region is to follow the "Californian model" of grape and wine production, which relies on very little human labour in bringing goods to market.

Going back to mining, the platinum giant Amplats this week announced that it would impose severe cost cutting and restructuring measures to maintain to the profitability of its local operations. Government officials were reportedly "shocked" by the move. Doubtless they are the only ones taken by surprise. With the exception, of course, of our myopic friends in the trade unions.

I'll leave the final word to another friend, also a farmer as it happens, who writes on Facebook:

After months of costly strikes, Amplats will close four shafts and cut 14000 jobs. Massive victory for the labour movement against the forces of imperialism and capitalism. Have no doubt that AMCU and NUM will now provide financial assistance to those 14000 workers and their families, after having pawned them for their blood, union fees and finally, their entire source of income.

The real reason to be wary of Kony 2012

With the internet abuzz about Invisible Children's "Kony 2012" viral campaign, it was predictable that there would be some blow-back from critics. The most compelling criticism from my perspective is that Kony 2012 offers an extremely simplified message that is largely disconnected from the problems that presently plague Uganda.

In its own small way, I believe that such issues are laid bare by IC's vocal endorsement from James Inhofe, the Oklahoma senator who features prominently in the viral video.[*] Call me crazy, but I don't think that someone who has campaigned on the discriminatory platform of "God, gays and guns" is particularly well suited to act as spokesman for Uganda's current problems... Which -- more than the unspeakable acts of the now exiled Joseph Kony -- include massive discrimination and violence perpetrated against gay people.

Non-partisan support is something that we should almost always strive for. However, I am troubled by the fact that IC have unquestionably accepted and advertised Inhofe's endorsement, even though he has a record of overt bigotry. I suggest that IC might want to think a little more critically about the signals that they are sending to the Ugandan people, given the country's struggles against rabid homophobia.

UPDATE: Well, it seems that the case against James Inhofe's moral leadership on Ugandan issues is even stronger than I first guessed. A group of evangelical US politicians and lobbyists -- Inhofe foremost among them -- have been documented as providing advice to David Bahati, and implicitly inspiring him to introduce Uganda's infamous anti-Homosexual Bill (aka "Kill the Gays Bill") that I linked to above. Disturbing stuff.

[*] I've previously discussed Inhofe here if you are interested. Notably, his demanding role as the US Senate's climate change denier-in-chief... a hotly contested title if ever there was one. (A sadly amusing postscript to that saga here.)

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Disclaimer -- I wrote this post, and especially the title, with my tongue pressed angrily against my cheek. Joseph Kony undoubtedly deserves to face justice for his crimes. If this Kony 2012 campaign achieves nothing else, it's still good to know that millions of people around the world have now learnt who he is and understand the nature of his barbarism. Still, I think that this illustrates how simplified messages can distract from the real issues in development; a sadly recurring theme in field. For a nice, short summary, see Chris Blattman.

Finally...

The academic paper that you've been waiting for! Zombie guru, George A. Romero, teams up with Columbia statistician, Andrew Gelman, as they seek to answer the question that plagues us all:

How many zombies do you know?

Using indirect survey methods to measure alien attacks and outbreaks of the undead.

Abstract:

The zombie menace has so far been studied only qualitatively or through the use of mathematical models without empirical content. We propose to use a new tool in survey research to allow zombies to be studied indirectly without risk to the interviewers.

The text is actually funnier than the abstract, including some great lines. ("But mathematical models [of zombie outbreaks] are not enough. We need data.")

The first zombie film that really hooked me wasn't actually a Romero original, but Zack Snyder's "remake" of Dawn of the Dead. Perhaps the best opening 15 minutes of a film you're likely to see. And if we're talking zombie humour (though I suppose all of Romero's films are tinged with dark laughs throughout), then I'm scoring Shaun of the Dead way above Zombieland.

The Winchester

Perspectives

That the Oslo-Utøya killings were a heinous, monstrous act is beyond question. However, the sheer scale of shock cannot be separated from the fact that they occurred in Norway.

Idyllic, secure and wealthy, Norway is not without reason a model nation for the rest of the world. Certainly, it has felt by far felt the safest place that I have ever lived. And, as has been repeated many times over the last few days, it is also composed of a small population (4.9 million). All these factors have surely had some impact in magnifying the shock felt by the country and the rest of the world.

According to revised figures, Breivik's actions have resulted in the deaths of 76 people. That more than doubles the number of homicides that Norway typically expects in any given year. Over the five-year period 2004-2008, official statistics show that an average of only 33 people were murdered in the country per annum.

In comparison, South Africa averaged an astonishing 18,635 annual homicides over roughly the same period.  In other words, the daily murder figure in SA is one and a half times the Norwegian yearly figure. Another way of looking at it, is that Breivik's tally of 76 lives is lost every 34 hours in SA.

Granted, South Africa has a much bigger population (49.3 million). However, even adjusted for population differences, the difference remains fairly staggering. The murder ratio per 100,000 people in SA is approximately 38, versus a mere 0.7 in Norway. In other words, someone is 50+ times more likely to be the victim of a homicide attack in South Africa than Norway.[*]

And then there are natural afflictions. At this very moment, the Horn of Africa is battling the worst drought in 60 years. Exact figures are hard to determine, but UNICEF estimates that nearly 500,000 children in the region are suffering from life-threatening, severe acute malnutrition. It is believed that as many as 10 million people stand to be affected by the drought (although not all will face life-and-death circumstances). While I maintain that there are strict limitations to adaptation in a world characterised by increased climate extremes, economic development and freedom -- as well as robust political institutions -- are the fundamental pillars towards unchaining human suffering from natural disasters.

This should go without saying, but in no way do I wish to underplay the impact of Friday's events. Further, and while it may still be too early to make sweeping statements, my sense is that the Norwegian people have done themselves eternal credit in the immediate wake of this tragedy. Almost every interview, camera shot or news editorial has depicted a nation coming to grips with devastation in a unified dignity. Norway has only reinforced its qualities as a model for inspiration.

However, these figures do serve to illustrate the stark differences by which we continue to measure life and death in wealthy countries versus the rest of the world. Economic development may be the most humane -- and humanising -- pursuit ever undertaken.

[*] And now... having written the above, I'm struck by an immediate sense of patriotic regret. I don't wish to convey the sense that South Africa is a dangerous hell-hole. It certainly isn't. The disparity between the two countries has as much to do with Norway's exceptionally peaceful environment, as the fact that certain areas in South Africa are beset by crime. SA has its problems, but still offers wonderful lifestyle opportunities for those fortunate to enjoy them. I hope to return after my studies are completed and truly believe that it is a must-see for anyone wishing to do some travelling... And very safe provided you don't take unnecessary risks.

Quote of the day - Terrorism

"You don't protect civilization by dismantling its civilizing achievements." 

- Tom Arnold, former member of the British Parliament.

Oslo

Man oh man...

Apart from the immediate concerns for the injured and dead, I dread some of the reverberations from the bomb attack in Oslo. Thankfully, it appears that my many friends in in the city are all okay. Some personal relief amidst the broader social tragedy.

It's obviously very early days and no precise suspect(s) at the moment -- even though the signs over the last year point towards some Islamic extremist group. I hope that these actions by the few don't lead to heightened xenophobia and fewer civil liberties for the many. However, I fear the big loser over the coming months (and possibly years) will be social integration and immigration reform.

UPDATE: Wow. I wrote this before knowing about the senseless massacre on Utøya island. The  tragedy has now been magnified in infamous scale and the main presupposition turned on its heads. It now appears that a lone (ethnic) Norwegian madman was acting on an unfathomable and incendiary hatred. The bomb blast in Oslo now seems to me to have been a terrible diversion of sorts; it does seem to have been timed to minimise the loss of human life... Before the targeted bloodbath that followed.

Hard to know what to say in times like these, but my thoughts go out to the country and especially all those that have lost loved ones.

Exploitation and Industrialisation

In the comments thread of the Meat and Veg(etarianism) post, I drew a parallel between the ethical treatment of animals and the banning of child labour. That is both involved society making a collective decision about the appropriate regulations rather than simply leaving it up to individuals to decide upon the standards themselves. The exact quote, if you're interested, was: "[L]ike many cases, I actually think that the decent treatment of living creatures is a social good deserving the requisite levels of public discourse and debate. Similarly, we have not outlawed child labour in modernised countries because it is unprofitable to firm owners, but because it is morally repugnant."

By coincidence then, here is something I happened to read last night in David Landes' masterful The Wealth and Poverty of Nations. Providing some afterthought on the industrialization of Japan and other countries (pp 381-383), Landes writes:

  The traditional account of Japan's successful and rapid industrialization rings with praise[...] It is a good, even edifying story. Yet one aspect of the Japanese achievement has not caught the attention of celebratory historians: the pain and labor that made it possible. The record of early industrialization is invariably one of hard work for low pay, to say nothing of exploitation. I use this last word, not in the Marxist sense of paying labor less than its product (how else would capital receive its reward?), but in the meaningful sense of compelling labor from people who cannot say no; so, from women and children, slaves and quasi-slaves (involuntary indentured labor). The literature of the British Industrial Revolution, for example, is full of tales of abuse[...]

  The most common ailment of these wretchedly unhappy children  [sent to work in the textile mills, coal mines and so on] was a nervous stomach. Small wonder that many fell victim to sexual predators and went on to prostitution. It seemed a promotion. 

  The high social costs of British industrialization reflect the shock of unpreparedness and the strange notion that wages and conditions of labor came from a voluntary agreement between free agents. Not until the British got over these illusions, in regard first to children, then to women, did they intervene in the work place and introduce protected labor legislation. [...]

  The European countries that followed England on the path of modern industry had their own labor problems and scandals, though less serious, largely because they had had warning and were able to introduce protections by anticipation.

Remember, this from arguably the foremost economic historian of recent times and in a book that was, among other things, praised for "unashamedly bang[ing] the drum for the liberal ideals of freedom, hard work and open markets" by the FT and a score of other reviewers. Your dyed-in-red, protectionist, trade-unionist Landes is not. (His snipe at the Marxist conception of "exploitation" direct evidence of this.) Yet his views on the dangers of unfettered industrialism (capitalism?) are laid out quite succinctly above. Like him, I believe that history clearly shows there to be asymmetries of power and information in economic relationships which warrant the protection of certain parts of our society.

"But the one on the left looks happy!"

As an afterthought on the paragraph highlighted above ("the strange notion that wages and the conditions of labor came from a voluntary agreement between free agents"), this is surely analogous to cases of domestic violence. We don't stand idly by while women (or men) suffer abuse at the hands of their partners on the flimsy defense that they are engaged in a relationship of their own accord. Instead, we actively support them through protective structures (legal and police enforcement) that are decided upon and borne by society as a whole because that is the only morally just course of action.

Passage of the day - Of Columbus, Conquistadors and Cruelty

So I'm a few days late, but Monday was Columbus Day for our friends over States' side. I know this because Aguanomics mentioned it at the time, offering the following aphorism:

The Europeans brought technology and used resources for population growth. The locals would have preferred to use the technology for themselves, but they didn't have the guns.

Anyway, the above reminded me of a great passage I read a while ago in David Landes' The Wealth and Poverty of Nations:

The scarcity of gold was a disappointment, but [Columbus] made the best of things and assured that these islands could be an abundant source of slaves[...] Caribbean history after the coming of the white man was in large part the replacement of people by cattle, followed by a repeopling with black slaves to work the sugar plantations. 

The process of depopulation was hastened by massacre, barbarous cruelty, deep despair. The natives committed suicide , abstained from sex, aborted their fetuses, killed their babies. They also fell by the tens and hundreds and thousands to Old World pathogens (smallpox, influenza). The Spanish debated whether the savages they encountered had a soul and were human; but the record makes clear where the savagery lay. When Columbus met his first Indians, he could not get over their friendliness; to this the Spaniards, frustrated for gold, returned bestialities unworthy of beasts. (p. 71)

You can read the whole chapter here. (The most graphic bit actually follows directly from the quoted section. Among other acts of savagery, there is a particularly gruesome sentence involving the treatment of pregnant women...)

On the subject of brutal Spanish incursions into the Americas, it would be rude not to include the following Neil Young classic:

Young does, of course, rather play down the violence that was endemic in some parts of South America prior to the Europeans arriving. Landes actually has a very good line on this issue in a later chapter when discussing a question posed by another eminent scholar, Jared Diamond: Why did the Incas behave so naively (stupidly?) in their dealings with the Spanish, when the latter were so consistently treacherous? Diamond suggested that it was a matter of innocence: The Spanish were well versed in the devious history of man and empires, while the Incas had "no personal experience of any other invaders from overseas... had not even heard (or read) of similar threats to anyone else, anywhere else, anytime previously in history". However, having listed some of the stark cruelties which had characterised the pre-European Inca Empire, Landes reasonably counters: "But the Incas should have known themselves." (p. 108)

PS - If you're into covers... well, I am. The Dave Matthews Band and Warren Hayes do a very respectable version of "Cortez the Killer" live in Central Park here.

Story of the day - Man gang-raped by three women

Africa. Where men are men.

And so, it seems, are certain women...

The following link was posted on my facebook profile by an Italian friend:

Man gang-raped by three women

Johannesburg - A 30-year-old man was off to play pool when three women asked him to direct them to a hotel and he claims they raped him in turn after they had had drinks.

[snip]

"On the way to the hotel, the driver suddenly changed direction and drove to an open piece of veld near the Durban Roodepoort Deep mine.

Kept gun on him all the time

"One of the women pulled out a gun and held up the man while the other two undressed.

"Then all three of them raped him in turn, with one of them keeping the gun pointed at him," said Nothnagel.

This elicited various comments about the proclivities of South African women and my personal motivations for studying abroad. My response (which will not endear me to counselling centres around the world) was: "Hey, the only men I've heard about being raped in SA were the Italian football team back in June... Seriously though, I'm not even sure how this would 'work'?"

To which a Norwegian (female) friend responded: "Raped? Really? At gunpoint!... Scared stiff?" 

Harsh.

But fair.

(Again, more chirp of the day, but I don't see the point in creating a new label just yet...)