Syndicate content

February 2012

Crystal gazing with McKinsey on resources for the future

Alan Miller's picture

In 1980, the biologist Paul Ehrlich and business school professor Julian Simon famously wagered on the likelihood of resource scarcity over the coming decade. Based on his expectation that population growth would lead to a rapid growth in demand for basic resources, Ehrlich bet that the prices of five commodity metals would increase; Simon, argued that rising prices incent human innovation and consequently that resource prices should be stable or declining. In the decade that followed, despite population growth of 800 million, the prices of all five commodities chosen by Ehrlich declined and he paid the bet. In July 2011, the investor Jeremy Grantham noted that if the bet had been extended to 2011, Ehrlich would have won – by a lot. 

McKinsey Global Institute, a research arm of McKinsey & Company, recently revisited the debate about economic growth and resource scarcity with the release of a major study, “Resource Revolution: Meeting the world’s energy, materials, food, and water needs”. One of the lead authors, McKinsey partner Jeremy Oppenheim, recently visited the World Bank in Washington DC to describe the report’s conclusions and discuss its implications for development strategy, particularly for the World Bank. His presentation captivated a large audience and provoked a lively discussion.

The key findings of the report can be summarized in two categories – challenges and opportunities. The former starts from the projected increase of up to 3 billion more middle class consumers in the next 20 years, driving up demand at a time when finding and extracting resources is becoming increasingly difficult and expensive, while also resulting in enormous environmental pressures.

The good news is the existence of sufficient technically and economically feasible efficiency improvements and alternative technologies to meet nearly 30 percent of predicted demand and offset much of the projected growth. Some of these measures are already identified and well understood, such as improving the efficiency of buildings and irrigation – a “resource productivity revolution”. These measures would, however, not be sufficient to alleviate poverty and avoid global warming in excess of the two degrees Centrigrade widely considered the threshold.

To meet these goals, McKinsey outlines an additional level of ambition with respect to clean energy and carbon sequestration.

A ‘Skilled’ Approach to Development

Ariel Fiszbein's picture

These days, there is a lot of talk about skills and their importance for a country’s development. Not too long ago the Indian Prime Minister Manmohan Singh called skills and knowledge “the driving forces of economic growth and social development in any country.” Last week, President Obama in his State of the Union address mentioned, once again, the critical importance of upgrading workers skills as part of his call for ‘An America Built to Last’.

The North American Urban Agriculture Experience

Rana Amirtahmasebi's picture

In a country where, in some places, a burger barely costs a dollar while a bag of baby carrots is priced nearly thrice as much, there’s plenty of work to be done to make healthy foods affordable – and accessible. There is no denying that food insecurity (of which cheap and nutritionally inadequate junk food is a major manifestation) is a concern in the US. In fact, according to the US Department of Agriculture (USDA) nearly 14.5 per cent of Americans experienced food insecurity at some point in 2010.

To fight this, many cities across the US are assessing their food production potential and creating special legislation for promoting urban agriculture. Let me clarify that “urban” agriculture does not imply turning down high-density buildings in the city centers to build farms. As an urban planner I am a supporter of higher densities. However, the leftover land around the cities or the residential open spaces with no other obvious use could be used as productive fragments of land within the cities. But more on this later - maybe another blog entry!

In the US, urban agriculture began at the grassroots level as a social justice movement to combat food insecurity among under-privileged communities. Within a couple of decades, a growing demand resulted in local governments making an active effort to support urban agriculture. Sometime ago I documented some of New Orleans’ urban farms with my video camera.

Electricity Simplified via Simpa Networks

Parvathi Menon's picture

This article was originally published on http://www.innovationalchemy.com/. Simpa Network has partned with SELCO, an India DM winner in 2011.

Simpa Networks has evolved a ‘Progressive Purchase‘ model for solar electricity, lighting up rural homes through a flexible payment option.  

The International Energy Agency estimates that about 1.5 billion people around the globe do NOT have access to electricity and 85% of these people live in rural areas.  In India, close to 40% of the country’s population still lives with limited access to grid electricity. This is not to say that rural India is in complete darkness. The up-front cost of procuring clean, affordable energy is high and so several parts of rural India rely on kerosene, charcoal and other forms of fuel that are easier to access and in local purchase terms, cheaper. The existence of these alternatives indicates that people have the ability to pay for energy, but it needs to be in a format and amount that they can access. Regular energy sources have not been able to find ways to fit this need yet. Simpa Networks leverages this insight into the rural market to find a way to fit within the ‘ability to pay’.

Customers pay up to $1000 over 8-10 years for kerosene lanterns why not capture what the customer is willing to pay and give them a cleaner alternative?”says co-founder Michael Macharg.

Based in Bangalore, Simpa Networks aims to develop affordable energy solutions for the poor. Their product makes solar electricity accessible and affordable to the rural and under served consumer through their innovative pricing system called ‘Progressive Purchase’.


Of pirates, ports and poverty!

Simon Bell's picture

A hard-scrabble, drought-prone small African country;  youth unemployment at 70 percent;  poverty rates of 40 percent;  highly dependent on the port which services much of Ethiopia’s imports and exports;  a few foreign military bases which have little connectivity with the local economy.  Pirates roaming the seas off the coast of the region (like a bad Johnny Depp movie);  illegal money suffusing through the region from illicit piracy;  neighboring Somalia in a state of war and chaos;  Yemen just across the Red Sea with its own bloody revolution;  and neighboring Eritrea causing significant problems of their own across the northern frontier.  Can such a nation ever hope to become a more dynamic, diversified, and private-sector oriented state with faster, more fairly distributed, growth and deeper poverty reduction?

Quote of the Week: Adolfo Perez Esquivel

Uwimana Basaninyenzi's picture

“The social order we seek is not a utopia. It is a world where political life is understood in terms of active participation by the governors and the governed in the realization of the common good.”

Adolfo Pérez Esquivel

1980 Nobel Peace Prize Winner

Excerpt from Nobel Peace Prize Speech

Europe: Fiscal Stimulus versus Structural Reform, or More?

Zia Qureshi's picture

The current policy debate on spurring growth is sometimes couched as a binary battle between fiscal stimulus and structural reform. In the context of the euro zone, this gives an incomplete picture. Two other issues are important. Adding these complicates the picture, but it helps point the way to a fuller policy response and a clearer hierarchy among policy actions to address the current mutually reinforcing combination of a growing sovereign debt-banking problem on the one hand and fears of a recession on the other.

The first issue is the likelihood of a credit crunch as commercial banks scramble to meet higher capital adequacy ratios even as their portfolio of sovereign bonds deteriorates. Going to the markets to raise capital is not an attractive option, and banks are more likely to deleverage to meet the new capital requirements. The second issue is that of flagging confidence. This started rearing its head in the summer of 2011 with speculative attacks on the sovereign debt of Italy and Spain in addition to the EU/IMF-supported program countries (Greece, Ireland and Portugal). This confidence problem has its roots in the botched bailout of Greece and what is perceived as a weak crisis resolution framework in the euro zone. Table 1 attempts to pull the various elements together.

Table 1: Options for spurring growth

Achieving better results from public sector institutions

Linda Van Gelder's picture

After a year of intensive consultation among development partners and with technical experts within the World Bank, I am pleased to announce that the World Bank Approach to Public Sector Management (2011-2020) has been agreed by the Public Sector Governance Board (the internal body that maintains professional standards on PSM and governance work within the Bank).

Job creation: a big role for big firms

Bob Rijkers's picture
SME promotion programs are becoming progressively more popular. While evidence on their effectiveness remains elusive, their policy prominence is predicated on the belief that small firms grow faster and generate the most jobs. Our preliminary analysis of the Tunisian registry of firms, which contains longitudinal information on all formal firms from 1996 until 2010, yields three stylized facts suggesting that large firms are far more important than small firms in generating employment and growth.

Pages