Poverty

Soaring food prices have suddenly become a major concern for policy makers in East Asia.  The price of rice - which provides one third of the region's caloric intake - is a particular worry.  Rice prices have been moving higher since around 2004, although this was from very depressed levels in the early years of the decade.  Prices surpassed $300 a ton in early 2006 for the first time since the late 1990s, kept moving higher, and then took off at an accelerating pace from late 2007:  up 11 percent in the the fourth quarter, then 56 percent in the first quarter of 2008 and then 61 percent in April 2008 alone. Prices touched over $1000 a ton on some days in April. Domestic food price and overall consumer price inflation has accelerated in most economies and the pace of poverty reduction in East Asia  in 2008 is - at a minimum - likely to slow .

There's been much talk in recent months about the revision of the International Comparison Program and the PPP (Purchasing Power Parity) figures derived from it. The Bank's China Quarterly Update launched in early February included a special section on the implications of this revision for China, and our own David Dollar explained here that the new PPPs show poverty in China has in fact reduced more than previously calculated.

A few weeks ago I wrote that “many perceive NT2 to be a World Bank hydropower project. From my perspective, that’s inaccurate in every respect. More on that in a future posting.” Following intense pressure from my reading public (thanks, Nanda), it’s time to explain what I meant.

I see there has been some blog chatter about the World Bank's position on Thailand's rice exports. Let me take the chance here to set the record straight: Thailand is a great international trading partner, it's commited to maintaining its rice exports, and we support this action. This is very important at this time of food price hikes and it's the responsible thing to do.

(The chatter --see some examples here and here-- started with a Bloomberg story  published yesterday).

Web reporters were busy last week with news of soaring prices for grains and other agricultural commodities.  Economist.com posted an early entry with Food for Thought on March 27.  NYT.com ran this piece on March 29.  BBC.com followed on April 3, focusing on Asia with Asian states feel rice pinch.  The following day FT.com had posted an entire page titled: In depth: the rising cost of food, while Bloomberg.com’s Glenys Sim reported from Singapore.

World Bank President Robert Zoellick is calling for a New Deal for global food policy – a reference to the 1930s Great Depression-era initiatives of American president Franklin D.

Andrew  Leonard posts in his blog an interesting report from journalist Tony Cheng of Al-Jazeera:

China has banned, for environmental reasons, the free hand-out of plastic bags.  As a result, the country’s largest plastic bag factory has closed, throwing 20,000 workers out on the street.  Some see this as posing a dilemma between environment and economy, but I don’t agree that good environmental policies are bad for the economy, just the opposite.  What this case illustrates instead is the dilemma between doing something good for the whole people, but at the expense of adjustment costs borne by a small group – the 20,000 workers and the factory owner. 

Only pedestrians and bikes are allowed on Pingyao's main street.

China’s coastal areas have benefited the most from reform and opening up because they were allowed to go first and also because their geography gives them better connection to the global market.  But now some of China’s lagging interior regions are turning their disadvantages to advantages.  Developing later, some interior towns have the opportunity to preserve their ancient character and use this as an asset to attract tourists and create jobs. 

In the Bank's recent China macro quarterly we included an appendix on the implications of the new PPP estimates for poverty analysis in China (PPP or Purchasing Power Parity).  Perhaps because it was an appendix it did not receive much attention. 

A few years ago, the research department at the World Bank did an analysis of what kind of information people were searching for on its website.  It found that the single most searched-for word was "China," more than "poverty" or any other country or concept. 

It is not surprising that there is so much interest in China given its tremendous success with growth and poverty reduction.  China is now the leading source of growth in the world economy, so everyone takes interest in its progress.  But another reason why people are looking for information on China is that, until recently, the country had been quite isolated.  One of the main reasons that China is growing so well is that it is emerging from a long period of self-imposed isolation.  Even with the progress with integration made so far, there is still a lack of knowledge about China in the outside world, and a lack of knowledge about the outside world in China.