Has the global food price bubble  burst, and if so, does it matter? In the first installment of FSE's new Food and Nutrition Policy Symposium Series, Professor Thomas Hertel of Purdue University and Professor Johann Swinnen of Leuven University outlined global trends in the cost of food, and explained how a drop in prices after the food price shocks of 2007-2008 might affect global politics and economics.

What drives food prices?

As population growth and rising incomes put pressure on the global food supply, many scholars consider high food costs to be the "new normal," especially following the food price shocks of 2007-2008. Professor Thomas Hertel challenged this view, saying that "To look forward 45 years, you have to look back 45 years" at what factors actually impact food prices.

Prices for many food commodities fell between 1961 and 2006, despite strong population and income growth, because the world was able to triple crop production during the same period. Since the recent price spikes, the "food price bubble" seems to have burst, with prices falling steadily since 2009.

Although population will continue to grow over the next several decades, the rate of growth is slowing worldwide and is mostly concentrated in developing countries, where per capita purchasing power is relatively low. This minimizes the pressure that population growth puts on the global food supply.

Economic factors may be more influential. "For the first time in history," Hertel said, "income will surpass population as a driver of global food demand." As countries move up the income scale, they consume richer diets of input-intensive products like meat, dairy and processed foods.

Energy prices also influence global food costs. As oil and gas prices rise, demand grows for alternative fuels like ethanol. Half of the increase in corn production over the past several decades came from the growing demand for ethanol, which was fueled by government mandates and which drove up the global price of corn. These mandates have been rolled back in recent years, however, and demand growth for biofuels has waned.

Hertel added that issues around climate change, urbanization, water supply, food waste and deforestation may also impact global food prices in the future.

Many scholars point to crop yields as a way to close the gap between food supply and demand and keep prices low. But Hertel cautioned that scientists and policymakers may be constrained by technical and economic limits.

To further increase yields "is a bigger job than simply doing some more science in the lab," Hertel said. But he noted with optimism that new investments in research and development have risen sharply from both the public and private sector, particularly in countries like China, India and Brazil where food security is a pressing issue. 

Impacts of the food price bubble

Professor Johann Swinnen explained that if the food price bubble has in fact burst, the next several years are likely to bring a shift in the politics and economics of global food issues.

The recent bubble coincided with an increase in both policy attention and donor funding to combat food insecurity - a focus that has benefitted both farmers and consumers, but that could wane as prices fall.

While the high prices of 2007-2008 benefited farmers, they in turn hurt low-income consumers in urban areas. And because people in high-density areas find it easier to organize and voice their concerns over government policies, they are more likely to capture media attention.

This "urban bias," as Swinnen described it, influenced policymakers to respond to the heavy media coverage. His team found that after 2007, agricultural funding from the World Bank, United Nations Food and Agriculture Organization (FAO) and the International Maize and Wheat Improvement Center (CIMMYT) all rose sharply. The percentage of global development aid targeted toward agriculture also grew.

Swinnen described the social and political conditions of 2007-2008 as a "perfect storm" that shifted the attention of policymakers toward global food security investments. Paradoxically, Swinnen explained, this policy response to urban unrest over food prices ultimately benefitted both rural and urban populations, by boosting agricultural investments for food producers while also helping lower costs for consumers.

 The Food and Nutrition Policy Symposium Series will run for three years and will consist of a total of ten lectures spanning a wide range of issues around global food and nutrition policy. It is funded by Zachary Nelson, '84 and Elizabeth Horn. The series follows on the successful two-year Global Food Policy and Food Security Symposium Series which concluded in May 2013 and was funded by the Bill and Melinda Gates Foundation.

Scholars, law enforcement officials, business leaders and community activists will meet next week at Stanford to examine violence and policing in Latin American and the United States.

A two-day conference beginning April 28 will highlight the work of entrepreneurs and grassroots organizations trying to reduce violence and rebuild civil society. The gathering is hosted by the Program on Poverty and Governance (PovGov) at the Center on Democracy, Development and the Rule of Law. It is hosted in partnership with the Bill Lane Center for the American West, the Center for Latin American Studies, the ‘Mexico Initiative’ at the Freeman Spogli Institute for International Studies (FSI) and the Center for International Security and Cooperation.

"Violence linked to drug trafficking, gang wars and criminality is one of the leading barriers to development that effects the lives of millions in Latin America,” said Beatriz Magaloni, an associate professor of political science who directs PovGov, a program that studies the links between public action, goverance and poverty.

“The conference brings together people who have dealt with these problems in cities in Latin America and in the U.S. Seldom is the case that we bring to campus practitioners with first-hand experience dealing with some of the most pressing problems the hemisphere is confronting,” said Magaloni, who is also a senior fellow at FSI. 

The first day of the conference will feature a panel with Jose Galicot, the driving force of Tijuana Innovadora, a movement that helped Tijuana recover from devastating criminal activity and violence the last four years. Galicot will be joined by Jailson Silva, from Observatório of Favelas, one of the most reputable grass-roots organizations in the slums of Rio that undertakes research, consultancy and public actions focused on the city's favelas.

Many violence-plagued cities in the U.S. have implemented innovative initiatives to address the challenge that have included community policing tools and youth violence interventions. Similar initiatives are also taking place in Latin America with varying degrees of success. One of the goals of the conference is to get practitioners to share their experiences and best practices to reduce violence in major cities.

One of three featured keynote speakers, Sergio Fajardo, the current governor of Antioquia, Colombia, will speak on April 29 and help build the foundation for such dialogue. From 2003 to 2007, Fajardo implemented an effective strategy to reduce the level of violence in Medellin while he was mayor of the Colombian city.

By providing alternatives to illicit work, allocating resources to the most disadvantage areas, reclaiming public spaces and fostering dialogue among different sectors of society to create a sense of collective ownership, Fajardo transformed Medellin.

The two other keynotes include Mariano Beltrame, minister of security of Rio de Janeiro who is credited for the enactment and implementation of the Pacification Police Unites to reduce violence in the favelas of the city and Hector Robles, major of the municipality of Zapopan who has implemented various innovative policies to give better opportunities to the youth in Mexico, including an initiative called Jovenes con Porvenir (Youth with a Bright Future). 

The conference will also bring together police chiefs from Brazil and the U.S. to share their experiences and insights on grassroots implementation of initiatives designed to reduce violence. General Commander of Operations, Coronel Paulo Henrique, from the military police of Rio de Janeiro, Brazil, and Chief Eric Jones from Stockton, CA will be speaking on a panel titled, “’Pacification’ Strategies and Policing” on day two of the conference. Tony Farrar, chief of police for the city of Rialto, CA will be joined by Robert Chapman, deputy director of Community Policing Advancement and others to present on police accountability and gang violence in the U.S shortly thereafter.  

The conference will build upon a PovGov research project that is focused on the Brazilian military police in Rio de Janeiro. Targeting an important initiative in the city's favelas, the "Pacifying Police Units", the ongoing project investigates the use of lethal force by the police and reforms aimed at controlling violence.

A number of conference sessions will be led by CDDRL faculty members and affiliates, including: FSI Director Mariano-Florentino Cuéllar; Francis Fukuyama, the Olivier Nomellini Senior Fellow; FSI senior fellow and CDDRL affiliated faculty member Alberto Díaz-Cayeros; and former President of Peru and CDDRL Visiting Lecturer Alejandro Toledo. A conference report will be made available following the event.

Sessions will be held at Stanford University's Bechtel Conference room in Encina Hall on Monday, April 28 and the Alumni Center on Tuesday, April 29.  All sessions are free and open to the public. Please RSVP here to attend. A complete agenda can be found here.

For conference updates via Twitter please visit #PovGov

Zack Bonzell came to Stanford with a strong interest in human biology and political science. Last summer, the undergraduate had the chance to fuse his interests while doing field research with faculty at the university’s Freeman Spogli Institute for International Studies (FSI). 

During a two-week internship, he travelled to Guatemala with FSI senior fellows Paul Wise, Beatriz Magaloni, Alberto Díaz-Cayeros and Scott Rozelle to learn about the country’s rural health care system by shadowing doctors and interviewing mothers in an impoverished area about the issues leading to the area’s high rates of child malnutrition.

“That experience was an ideal way to blend my interests and gave me a better idea of how to craft my course of study at Stanford,” said Bonzell, who is now a junior. “One of the things that really struck me was when Paul Wise said the health outcomes we were seeing are the result of extreme material deprivation. These people are sick because they are poor. That gave me more of an interest in political economy.”

Students conduct interviews about nutrition with REAP in China. Photo Credit: Matt Boswell

FSI is now expanding its educational opportunities for students, like Bonzell, who want to do research on global issues in Asia, Latin America, Europe and Africa.

The Stanford Global Student Fellows program (SGSF) is being funded in large part through a $1.25 million anonymous gift that will help grow existing programs and create new offerings for graduates and undergraduates.

“This program deepens FSI’s commitment to its mission of educating the next generation of leaders in international affairs,” said FSI Director Mariano-Florentino Cuéllar. “It also offers outstanding opportunities for Stanford students to work closely with the leading thinkers on global policy issues.”

The program, which is part of FSI’s efforts to expand student opportunities, will build on the institute’s undergraduate mentorship programs that allow students to work on faculty research projects each quarter. Those positions will now be available during the summer. Some of the positions will be connected to projects in FSI’s new International Policy Implementation Lab, an initiative that gives students a close-up view of how academics and policy influencers can address some of the world’s thorniest issues.

PoliSci 114S students work together in a UN conflict simulation. Photo Credit: Rod Searcey

Building on FSI’s experience placing students in research opportunities, the program will create and expand summer field research internships. The two- to six-week internships this summer will give undergraduates the opportunity to work with FSI senior fellows in China, Guatemala, India and Mexico who study global health, conflict resolution, governance and poverty reduction.  In coming years, the program will likely include additional fieldwork projects in Rwanda, Tanzania and Brazil. The SGSF program covers all travel expenses for students and provides students with an opportunity to work closely with a faculty member and a team of other students on an ongoing research project addressing real-world problems in a specific region. 

“What makes FSI such an incredible institution is that it attracts faculty who have very pragmatic interests,” Bonzell said. “It seeks to wed academic work with a more direct impact, and there’s a lot of potential for more students to think along similar lines.”

The Stanford Global Student Fellows will also allow FSI to work closely with its partners, including the Program in International Relations, the Haas Center for Public Service, and Stanford in Government to provide opportunities for graduate and undergraduate students. 

Mexican Ambassador Eduardo Medina Mora and Jorge Olarte, '13, speaking with students at the US-Mex FoCUS event. Photo Credit: Rod Searcey

One of the program’s new initiatives geared toward undergraduates is the Global Policy Summer Fellowships. The fellowships help secure placement and a $6,000 stipend for students interested in interning at international policy and international affairs organizations. This summer, The Europe Center at FSI is placing students at the Center for European Policy Studies and Bruegel, two Brussels-based think tanks. Future positions will be created with six offerings abroad and two based in the United States.including the Program in International Relations, the Haas Center for Public Service, and Stanford in Government to provide opportunities for graduate and undergraduate students. 

The Stanford Global Student Fellows program will also commit $400,000 to create a Mentored Global Research Fellowship that will provide research opportunities for students to conduct their own overseas research under the close mentorship of a faculty member. The program will award stipends of $6,000 for summer undergraduate projects and $9,000 for summer graduate projects, and $1,500 for smaller projects executed during the school year.

Thomas Hendee '13 chatting with children in rural Guatemala. Photo Credit: Maria Contreras

The faculty advisory committee overseeing the development and implementation of these new programs includes Scott Rozelle, the Helen F. Farnsworth Senior Fellow and the co-director of FSI’s Rural Education Action Program; Stephen Stedman, a senior fellow at FSI and the deputy director of CDDRL; and Lisa Blaydes, assistant professor of political science.

The application deadline for all summer programs is Feb. 28, 2015. The deadline to apply for academic quarterly programs is the end of the first week of each quarter, beginning in the fall of 2014. 

For more information, students should contact Elena Cryst at ecryst@stanford.edu and watch for postings on FSI’s student program Facebook page. Students can also sign up for the program’s distribution and announcement list.

The favelas of Rio de Janeiro are some of the most dangerous places in the world. Havens for drug lords and their booming narcotics businesses, the urban slums that are home to 20 percent of the city’s population are notorious for soaring murder rates and a dearth of public services. Police often have little or no presence in most of Rio’s 800 favelas. And when they do, their conflicts with criminals frequently result in the killing of bystanders.

Brazilian officials have tried to bring order to the favelas with a set of policies and initiatives launched in 2008. A so-called pacification program has trained special teams of police to take a more targeted approach to fighting crime. The program has increased stability and reduced violence in about 30 favelas.

But Stanford researchers have found a hitch: When criminals are put out of business in one favela, they relocate to another. And that can lead to an increase in violence in the non-pacified slums.

“The cost of violence is disproportionately felt by the poor,” said Beatriz Magaloni, an associate professor of political science and senior fellow at Stanford’s Freeman Spogli Institute for International Studies. “Where there is violence, there is no investment. We are working with the government and the police and the community on ways to make these places safer and reduce that poverty by improving the quality of the police and devising ways to reduce the level of lethality they tend to use.”

To support the research she’s doing and the relationships she’s building in Brazil, Magaloni is working with FSI’s International Policy Implementation Lab, a new initiative that will bolster impact-oriented international research, problem-based teaching and long-term engagement with urgent policy implementation problems around the world.

Collaborating with a team of Stanford students, Magaloni is working with community groups, police organizations, government officials and other scholars to study existing policies and training procedures that could broaden the pacification program and make it more effective. The relationships have paid off with access to high-level government data, exclusive research findings and a pipeline between academics and policymakers that can improve living conditions for some of Rio’s poorest and most vulnerable people.

Her project is an example of the work being supported by the International Policy Implementation Lab, which recently awarded Magaloni’s project and those led by five other researchers a total of $210,000.

The lab, which is being supported in part by an initial $2 million gift from two anonymous donors, will grant another round of funding later this fiscal year to support projects led by Stanford faculty.

Recognizing that many Stanford scholars are engaged in international policy analysis, the Implementation Lab will help researchers who want to better understand policy implementation – a process often stymied by bureaucracy, politicking and budget constraints, but also often reflecting deliberation and experimentation by people across different countries, organizations, and cultures.

“The Implementation Lab will help us better understand health, security, poverty and governance challenges in an evolving world,” said FSI Director Mariano-Florentino Cuéllar.  “It will serve as a resource to foster communication across projects, so we can learn more about how implementation plays out in different settings and regions. Through the Implementation Lab, we can better engage faculty and students in understanding how policymakers and organizations change longstanding practices and actually execute policy.”

The Implementation Lab will support long-term projects grounded in policy-oriented research on a specific international topic. The projects must strive to connect scholarly research to interdisciplinary teaching, and will often involve long-term engagement with particular problems or international settings to better understand and inform the implementation of policy.

The first round of funding from the Implementation Lab will help shore up projects aimed at bolstering rural education in China, improving health care in India, curbing violence in Mexico and Brazil, and training government officials and business leaders in developing countries to improve economic growth and development.

And it will support a project led by political scientist Scott Sagan that uses online polling to better gauge the public’s tolerance for the use of nuclear weapons under certain scenarios – work that will lead to the collection of data that can inform how government officials craft military and diplomatic strategy.

“I can imagine two big benefits of the Implementation Lab,” said Sagan, a senior fellow at FSI and the institute’s Center for International Security and Cooperation.

“It will help pay for specific tasks that are sometimes not adequately funded elsewhere, especially in terms of student involvement,” he said. “And it will create a greater focus on policy implementation work that allows us to present our research results and see whether those results will have an impact on change.”

To encourage and support these ventures, the Implementation Lab will provide targeted funding, space for research projects and teaching, and a variety of support functions, including connections to on-campus resources that can assist with data visualization, locating interested students, and other tasks.  Those activities will be phased in during the next year based on the advice and feedback of faculty and others who are early participants.

The Implementation Lab is poised to be different from – but complementary to – other Stanford initiatives like the Hasso Plattner Institute of Design. FSI’s Implementation Lab is specifically focused on supporting long-term relationships and engaging students and faculty in the study of policy implementation in different national, organizational, and cultural settings.

Image

FSI Senior Fellow Grant Miller is working on improving health care in India.

“The Stanford International Policy Lab is creating an exciting new community that will catapult our ability to have meaningful and sustained policy engagement and impact through common learning and sharing of experiences with like-minded scholars from all corners of campus,” said Grant Miller, an associate professor of medicine and FSI senior fellow whose project on improving health care in India is being supported by the Implementation Lab.

Ann Arvin, Stanford’s vice provost and dean of research, said the International Policy Implementation Lab will help and encourage faculty to make their scholarship more relevant to pressing problems.

Demands for specialized resources, narrowly focused engagement of students, the ability to consider a long-term horizon, and an understanding of the often opaque processes of policy formulation and implementation pose considerable challenges for researchers seeking to enhance the potential of their policy-oriented research to achieve real impact.

“The International Policy Implementation Lab will help our faculty and students address these obstacles,” Arvin said. “We anticipate that this novel program will bring together Stanford scholars who seek solutions to different policy-related problems at various places around the world, but whose work is linked by the underlying similarities of these challenges. The Implementation Lab will give them the opportunity to learn from each other and share ideas and experiences about what succeeds and what is likely to fail when it comes to putting policy into practice.”

That’s what attracts Stephen Luby to the lab.

“The mistake that researchers often make is that they work in isolation,” said Luby, whose work on reducing pollution caused by the brick making industry in Bangladesh is being supported by the Implementation Lab. “Then they think they’re ready to engage in the implementation process, and realize they haven’t engaged with all the stakeholders. Policy implementation is an iterative process. You need feedback from all the right people along the way.”

Luby, a professor of medicine and senior fellow at FSI and the Stanford Woods Institute for the Environment, is working with brick makers and suppliers, as well as anthropologists and government regulators, to identify better ways to curb the pollution created by the coal-burning kilns throughout Bangladesh.

“Pneumonia is the leading cause of death among kids in Bangladesh,” Luby said. “And the brick kiln pollution is largely responsible for that. They’re using a 150-year-old technology to bake bricks, and there are better, cleaner ways to do it.”

But swapping coal-burning kilns for ones that are fired with cleaner natural gas is expensive, and there is little incentive for brick makers to change.

The government has passed regulations aimed at reducing pollution, but corruption, toothless laws and poor enforcement continue to undermine those policies.

"The country is caught in an equilibrium where people are getting cheap bricks but at a high cost to health and the environment,” Luby said. “We need to disrupt that equilibrium, and I look to the Implementation Lab to help us think this through. There’s a community of scholars who want to transform their work into implementation, and the lab will help convene them." 

The favelas of Rio de Janeiro are some of the most dangerous places in the world. Havens for drug lords and their booming narcotics businesses, the urban slums that are home to 20 percent of the city’s population are notorious for soaring murder rates and a dearth of public services. Police often have little or no presence in most of Rio’s 800 favelas. And when they do, their conflicts with criminals frequently result in the killing of bystanders.

Brazilian officials have tried to bring order to the favelas with a set of policies and initiatives launched in 2008. A so-called pacification program has trained special teams of police to take a more targeted approach to fighting crime. The program has increased stability and reduced violence in about 30 favelas.

But Stanford researchers have found a hitch: When criminals are put out of business in one favela, they relocate to another. And that can lead to an increase in violence in the non-pacified slums.

“The cost of violence is disproportionately felt by the poor,” said Beatriz Magaloni, an associate professor of political science and senior fellow at Stanford’s Freeman Spogli Institute for International Studies. “Where there is violence, there is no investment. We are working with the government and the police and the community on ways to make these places safer and reduce that poverty by improving the quality of the police and devising ways to reduce the level of lethality they tend to use.”

To support the research she’s doing and the relationships she’s building in Brazil, Magaloni is working with FSI’s International Policy Implementation Lab, a new initiative that will bolster impact-oriented international research, problem-based teaching and long-term engagement with urgent policy implementation problems around the world.

Collaborating with a team of Stanford students, Magaloni is working with community groups, police organizations, government officials and other scholars to study existing policies and training procedures that could broaden the pacification program and make it more effective. The relationships have paid off with access to high-level government data, exclusive research findings and a pipeline between academics and policymakers that can improve living conditions for some of Rio’s poorest and most vulnerable people.

Her project is an example of the work being supported by the International Policy Implementation Lab, which recently awarded Magaloni’s project and those led by five other researchers a total of $210,000.

The lab, which is being supported in part by an initial $2 million gift from two anonymous donors, will grant another round of funding later this fiscal year to support projects led by Stanford faculty.

Recognizing that many Stanford scholars are engaged in international policy analysis, the Implementation Lab will help researchers who want to better understand policy implementation – a process often stymied by bureaucracy, politicking and budget constraints, but also often reflecting deliberation and experimentation by people across different countries, organizations, and cultures.

“The Implementation Lab will help us better understand health, security, poverty and governance challenges in an evolving world,” said FSI Director Mariano-Florentino Cuéllar.  “It will serve as a resource to foster communication across projects, so we can learn more about how implementation plays out in different settings and regions. Through the Implementation Lab, we can better engage faculty and students in understanding how policymakers and organizations change longstanding practices and actually execute policy.”

The Implementation Lab will support long-term projects grounded in policy-oriented research on a specific international topic. The projects must strive to connect scholarly research to interdisciplinary teaching, and will often involve long-term engagement with particular problems or international settings to better understand and inform the implementation of policy.

The first round of funding from the Implementation Lab will help shore up projects aimed at bolstering rural education in China, improving health care in India, curbing violence in Mexico and Brazil, and training government officials and business leaders in developing countries to improve economic growth and development.

And it will support a project led by political scientist Scott Sagan that uses online polling to better gauge the public’s tolerance for the use of nuclear weapons under certain scenarios – work that will lead to the collection of data that can inform how government officials craft military and diplomatic strategy.

“I can imagine two big benefits of the Implementation Lab,” said Sagan, a senior fellow at FSI and the institute’s Center for International Security and Cooperation.

“It will help pay for specific tasks that are sometimes not adequately funded elsewhere, especially in terms of student involvement,” he said. “And it will create a greater focus on policy implementation work that allows us to present our research results and see whether those results will have an impact on change.”

To encourage and support these ventures, the Implementation Lab will provide targeted funding, space for research projects and teaching, and a variety of support functions, including connections to on-campus resources that can assist with data visualization, locating interested students, and other tasks.  Those activities will be phased in during the next year based on the advice and feedback of faculty and others who are early participants.

The Implementation Lab is poised to be different from – but complementary to – other Stanford initiatives like the Hasso Plattner Institute of Design. FSI’s Implementation Lab is specifically focused on supporting long-term relationships and engaging students and faculty in the study of policy implementation in different national, organizational, and cultural settings.

Image

FSI Senior Fellow Grant Miller is working on improving health care in India.

“The Stanford International Policy Lab is creating an exciting new community that will catapult our ability to have meaningful and sustained policy engagement and impact through common learning and sharing of experiences with like-minded scholars from all corners of campus,” said Grant Miller, an associate professor of medicine and FSI senior fellow whose project on improving health care in India is being supported by the Implementation Lab.

Ann Arvin, Stanford’s vice provost and dean of research, said the International Policy Implementation Lab will help and encourage faculty to make their scholarship more relevant to pressing problems.

Demands for specialized resources, narrowly focused engagement of students, the ability to consider a long-term horizon, and an understanding of the often opaque processes of policy formulation and implementation pose considerable challenges for researchers seeking to enhance the potential of their policy-oriented research to achieve real impact.

“The International Policy Implementation Lab will help our faculty and students address these obstacles,” Arvin said. “We anticipate that this novel program will bring together Stanford scholars who seek solutions to different policy-related problems at various places around the world, but whose work is linked by the underlying similarities of these challenges. The Implementation Lab will give them the opportunity to learn from each other and share ideas and experiences about what succeeds and what is likely to fail when it comes to putting policy into practice.”

That’s what attracts Stephen Luby to the lab.

“The mistake that researchers often make is that they work in isolation,” said Luby, whose work on reducing pollution caused by the brick making industry in Bangladesh is being supported by the Implementation Lab. “Then they think they’re ready to engage in the implementation process, and realize they haven’t engaged with all the stakeholders. Policy implementation is an iterative process. You need feedback from all the right people along the way.”

Luby, a professor of medicine and senior fellow at FSI and the Stanford Woods Institute for the Environment, is working with brick makers and suppliers, as well as anthropologists and government regulators, to identify better ways to curb the pollution created by the coal-burning kilns throughout Bangladesh.

“Pneumonia is the leading cause of death among kids in Bangladesh,” Luby said. “And the brick kiln pollution is largely responsible for that. They’re using a 150-year-old technology to bake bricks, and there are better, cleaner ways to do it.”

But swapping coal-burning kilns for ones that are fired with cleaner natural gas is expensive, and there is little incentive for brick makers to change.

The government has passed regulations aimed at reducing pollution, but corruption, toothless laws and poor enforcement continue to undermine those policies.

"The country is caught in an equilibrium where people are getting cheap bricks but at a high cost to health and the environment,” Luby said. “We need to disrupt that equilibrium, and I look to the Implementation Lab to help us think this through. There’s a community of scholars who want to transform their work into implementation, and the lab will help convene them.”

For more information about FSI's International Policy Implementation Lab, please refer to this Concept Note or contact Elizabeth Gardner.

REAP co-director Scott Rozelle begins a ten-part series for Caixin Magazine titled, "Inequality 2030: Glimmering Hope in China in a Future Facing Extreme Despair." Rozelle explains why continued high income inequality could spell trouble for China's future growth and stability.

REAP co-director Scott Rozelle begins a ten-part series for Caixin Magazine titled, "Inequality 2030: Glimmering Hope in China in a Future Facing Extreme Despair." Rozelle explains why continued high income inequality could spell trouble for China's future growth and stability.

To read the column in Chinese, click here.

> To read Column 2: China's Inequality Starts During the First 1,000 Days, click here. 

> To read Column 3: Behind Before They Start - The Preschool Years (Part 1), click here. 

> To read Column 4: Behind Before They Start - The Preschool Years (Part 2), click here.  

> To read Column 5: How to Cure China's Largest Epidemic, click here.

> To read Column 6: A Tale of Two Travesties, click here. 

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Inequality 2030:

Glimmering Hope in China in a Future Facing Extreme Despair

Column 1: Introduction and why we need to worry about inequality

Inequality is underrated

China’s growth slowed in 2012 and in the first half of 2013. And, the world is holding its collective breath. Can China’s once white-hot economy be re-ignited and continue to blaze ahead? Or has its economy finally begun its inevitable slow down, a braking that all countries that reach middle income levels of development experience.

While the financial pundits and economic crystal ball gazers are focused on growth rates and world economy spillovers, we are worrying about another indicator: China’s level of inequality. In fact, we believe that what happens to inequality in the future is probably more important in the long run than growth. Whether high or low, we believe the nation’s income distribution will be one of the most important determinants of the quality of life in China in the 2030s.

Why is inequality more important than growth? Of course, nominally both are important. China needs to maintain 6 to 8 percent over the next 10 years. China needs to continue to grow 4 to 6 percent until 2030. However, we believe that as China’s economy matures over the next two decades, growth will slow. The growth rates of healthy, developed economies are never more than 2 to 3 percent. This slowing is inevitable. It is a done deal. Inequality, on the other hand, could be high or low. And, if it is high: China could be in for a troubled adulthood. It could even be headed for stagnation. High inequality could even lead to collapse and the loss of all things good that have been built up over the past three decades.

Remedial learning about Inequality and the Middle Income Trap

So what allows some countries to successfully transition from middle to high income? Solid banking practices: important. Good corporate governance: a must. Competition policy: few would argue. In this part of the column we want to put forth an argument that an equitable income distribution is also a necessary ingredient for long-run, stable growth. The basis of this statement is an empirical regularity that characterizes nearly every case of successful development (during the shift from middle to high income) in the last half of the 20^th century.

Since 1945, we can divide the world into three groups of countries. The high income countries, like the US, the UK, Germany and France; the poor and chronically underdeveloped; and the new members of the OECD club. Somewhat surprisingly, over the past 70 years, there have been only 15 or so countries that have graduated from poor to middle to high income. The list includes two East Asian countries/regions (South Korea and Taiwan); four Mediterranean countries (Portugal; Spain; Greece and Israel); six Eastern European countries (Croatia; Slovenia; Slovak Republic; Hungary; Czech Republic and Estonia; and two other countries (Ireland and New Zealand).

Most salient for our column is that in the case of all of these successful countries an equitable income distribution is feature they all share. This is true goingback as early in their development paths as possible. Using a popular measure of inequality, the Gini ratio (where 0 is perfect equality and 100 is perfect inequality), it can be shown that the average Gini ratio of the new members of the OECD club is only 33, a level of the Gini that is relative low. The range of the Gini measures for these successfully graduating countries is from 26 to 39. Not one of the Gini ratios is more than 40. Such a pattern of income distributions suggests that, on average, those countries that were successful in moving from low to middle to higher income not only share a common growth path, successfully took them from middle to high income, all of the nations did so with fairy low levels of inequality.

Such low levels of inequality for the successfully developed countries can be seen to be in stark contrast to the countries in the world that grew, hit middle income status and then ultimately stagnated or collapsed. Argentina, Brazil, Iraq and Mexico are examples of countries that had rapid spurts of growth, joined the ranks of the world’s middle income countries, only to find their growth aspirations squashed. These countries all were striving to become high income, industrialized, developed countries. At some point during the past 70 years, however, each of these countries experienced either dire collapse or long and frustrating stagnation.

What is a characteristic that all of these failed-to-move-up-from-middle-income countries share? When comparing the Gini ratios of these wannabe-but-never-made-it nations with those that successfully graduated, there could not be a greater contrast. Whereas there were no successful developed countries with a Gini ratio over 40, there were no countries that experience growth and stagnation/collapse with Gini ratios under 40. The Gini ratios of Brazil and Mexico and Iraq were all around 50.

So where is China on this list? China’s level of inequality, according to one of the most complete and internationally comparable study done at Beijing Normal University by Professor Li Shi and his colleagues, is among the highest in the world. As of 2007, it was 50 (or 49.7 to be precise). Between 2003 and 2007 it rose more than any country in the world. Others say it is higher—see the work of Li Gan from Sichuan University. Hence, although China has attained middle income status in the past decade, it also is part of a group of countries that is trying to transition to high income status at levels of inequality which have not ever been associated with successful transition—at least not in the past 70 years.

What is the problem with high inequality?

So why is it that inequality is so inimical for a middle income country striving to reach high income? We believe the reason is twofold. The first has to do with the inevitability of growth slow down and expectations. When a country is growing fast (as countries can do when they are moving from poor to middle income—as China has been over the past three decades), even if there is a high level inequality, most people in society have expectations that they will be better off if they stick inside the system. In China during the past several decades, even for those at the lower end of the income distribution, their standard of living is higher now than 10 years ago. Relying on extrapolations from the past, most people believe that they will continue to become better off. At the very least they will tell you that they expect their children will be able to live a better life in the future.

High growth has made these rising expectations possible—even for the poor. There has been enough for all to “go around.” Hence, with positive expectations about being able to get better in the future, even facing long working hours, cruel living conditions and low wages, individuals have chosen to work “inside the system.” For most, working in the system mean that they get a job, save as much as possible and look forward to making even more and having more savings in the future.

This whole system, however, is predicated on growth trickling down to the poor. If growth slows, it is possible that the expectations may not be realized. We believe that it is these expectations that have produced the glue holding society together—despite the high levels of inequality.  The key question or the real fear is that when expectations are popped, individuals may decide to opt out of the system into the informal or even the gray/black economy.

The second problem with high income inequality is that it often is accompanied by high inequality in education, nutrition and health. So why is this a problem? In a high income, developed economy, by definition wages are high. Because wages are high, however, employers will demand that employees are equipped with the requisite skills—math, language, science, English, computer skills—to perform tasks that create earnings that help offset the high wages. If individuals do not have such skills, employers may take actions to layoff such employees or not hire them in the first place. Employers will look to replace labor with capital and/or move low-skilled jobs off shore. The problem with many countries that have grown fast from poor the middle income and are currently trying to push onto high income status is that there was a disconnect between what students learned in the previous decade or so and what job skills are needed. If a high enough proportion of the labor force is not equipped with the skills needed for a high wage economy, a share of the labor force might become unemployable. As before, if this polarization of the labor force occurs, the only choice of those that are unemployable by the formal labor force would be to move into the informal labor force and/or gray/black economy.

While all economies have such polarized segments of their economy, there are several problems facing middle income countries—especially those that had grown fast in recent years. Dealing with large shares of population in an informal economy requires lots of resources—for unemployment insurance, disability, retraining, health, etc. Since these countries have not yet graduated to high income status, by definition, their level of wealth might make it difficult to spend large sums of money to contain disruption out of the informal economy. If the disruption continues, it can lead to escalating violence and unrest, which will require even more resources to contain. Ironically, the very disruption that is being created by the slowing growth could very well lead to a further slowing of growth if fewer resources are spent on productive investments (instead of containment) and if the disruption itself diminishes interest in investment inside the country. In addition, many of those in the informal economy may exhibit particularly unsatisfied behavior (read anger and disaffection) since the may well feel their original expectations were undermined by the formal establishment. If the size of this part of the population is big enough, the country could find itself atop a powder keg.

In summary, then, the problem with inequality is complicated but real. Inequality in the face of slow growth can lead to unfulfilled expectations and diminished opportunities. Individuals can be polarized into two groups: those inside the system and those outside the system. If inequality is particularly great, the number of those outside the system could be large. Since middle income countries are not rich yet, resources may be insufficient to contain the anger and violence of those in the gray/black economies and/or support the needs of those in the informal economy (who are not contributing a lot to the overall economy). If the disruption is large enough, there could be negative feedback onto growth which could serve to further exacerbate the problem. An end point of stagnation or collapse is certainly plausible.

Our column’s real title: 10 ways to battle inequality; 10 ways to save China’s future

This column is going to be a series of ten articles about China’s inequality. It is a column about how managing that inequality may mean the difference between a bright and vibrant China in 2033 and a China teetering on the edge of collapse. Despite the potential doom, however, this is a column of hope because we believe inequality can be managed—given aggressive, enlightened and motivated decisions TODAY … or at least in the very near future.

However, this column is not about inequality today. We are not going to analyze the accuracy of the estimates of income inequality produced by the China National Bureau of Statistics. We are not going to vote for the higher estimate of Li Shi and his group from Beijing Normal University or the even higher one from Sichuan University’s Li Gan. We are simply going to live with the status quo, one that virtually everyone agrees with: China’s income distribution in 2013 is highly unequal.

Instead we are going to be writing about inequality tomorrow. However, one of the most basic axioms of poverty economics—especially given China’s high inequality today—means that we need to be engaged in this battle against high inequality tomorrow today. The axiom that we are talking about has been made famous both by Nobel Laureates who are spinning their advice for the global economy and by retiring economic planners-cum-policy makers as they write their memoirs. The iron rule of income distribution—lets call this Axiom 1, at some point in the future is:

Tomorrow’s income inequality = Today’s income inequality + Today’s human capital inequality.

This simple formula, above all, embodies on important lesson. Tomorrow’s income inequality is what we are interested in. The first installment of our column today has tried to motivate that this has to be low – or at least not too high – for China to enjoy long-run sustained growth and stable prosperity. We also know—by assumption or by common sense—that Today’s income inequality is high. Hence: to get to where we want to go—that is, low income inequality in the 2030s—we have one and only one degree of freedom. We need to put tremendous attention on reducing human capital inequality today.

If you are following our argument, and if you know anything about the gap between health and education in China today, this column would appear to be one of despair. In fact, this column will fuel that despair. Why? Because are going to show that the human capital gap in China today is ugly. Ugly as in wide. The gap is wide for education. The gap is wide for nutrition. The gap is wide for health. It is wide for babies, preschoolers, elementary school kids, those in middle and high school and for the college-bound. If China does not do anything—and, we mean act seriously—about this gap, and you believe in Axiom 1, it may be time for you to begin to plan for the worst in the coming years.

However, this column will also try to be a source of hope. We will discuss a large number of interventions that work. There are actions that can reduce the human capital gaps at all age levels—from infants to those in elite universities. They are proven. Many are cheap. Many are simple. Some need fundamental rethinking. But, when you add up the price tag of them all and you compare it to the possible costs in the future, we believe a War on Rural Education, Nutrition and Health Inequality is the Best Buy that the government can make.

Stay tuned, then, in the coming months—one column per month. We are going to write about inequality in baby health, nutrition and cognitive abilities between infants in the Qingling Mountains in Southern Shaanxi and China’s tiny princes and princesses in the cities in October. We are going to write about preschool inequality in November. December, January and February will examine the health, nutrition and education crises in poor rural elementary schools and in schools in China’s migrant communities. The rest of the months will talk about inequality in middle school, vocational high school, academic high school and college. There is not a lot of pretty about the gaps that exist in each of these age groups. However, as we stated above, we also will offer solutions—ones that we have evaluated; others that others have initiated. Many of them work. Others need more effort. We will try to inform you of the choices and the hope that can be created by trying. Seriously trying.

In June 2013, Beatriz Magaloni, associate professor of political science and director of the Program on Poverty and Governance (PovGov) at the Freeman Spogli Institute’s Center on Democracy, Development, and the Rule of Law led the Stanford Bing Overseas Studies Program (BOSP) to Brazil. The three-week seminar entitled, “Rio de Janeiro: A Cultural and Political Social History,” drew 15 outstanding and diverse Stanford undergraduate students eager to experience life in Latin America’s largest country. The trip allowed the group to learn more about the political and social factors that have transformed - and continue to shape - life in economically marginalized sections of Rio.

Despite recent efforts to fight poverty and accelerate income redistribution, Brazil suffers from high levels of income inequality. In Rio, one of Latin America's largest cities, the results of this inequality are even more profound. There are roughly 763 favelas – urban slums- in Rio that are home to approximately 1.5 million people. The local government has tolerated, but never incorporated favelas into the formal city, leaving residents to organize public services such as electricity, running water or garbage collection in their neighborhoods. As a result of the virtual absence of the state, favelas have long been notoriously violent areas and breeding ground for criminal organizations, specially drug trafficking.

Students at Rocinha, with Paulo Amendoim, their local guide, showed them the highlights of the neighborhood including food, dance and pipa (kite flying).

In 2008, the state of Rio de Janeiro embarked on an unprecedented effort to take back the territories in favelas controlled by criminal organizations ahead of the upcoming World Cup and Summer Olympics, as well as securing favela citizens’ rights to freely move across their own communities. The Pacifying Police Units (UPPs) is at the center of the policy, with 24-hour patrolling and community policing every day. UPP officers focus on breaking down negative police stereotypes by working closely with the population – teaching classes, coaching sport teams, hosting events and organizing forums where community members can express their needs and concerns. The “pacification” process has already involved 31 favelas, with 70 more to come by the 2016 deadline.

Aligned with the ongoing research being carried out by Magaloni and her team at PovGov, the goal of the BOSP seminar in Rio was to introduce students to this important development and analyze how it has impacted the complex social dynamics found within the city. The students explored some of the implications to favela residents in terms of security, local governance, the preservation and dissemination of culture, as well as prospects for economic and social development in “pacified” territories.

The in-country seminar included an introduction to the Portuguese language and cultural activities, including field trips and lectures by experts on a variety of fields including: criminal violence, public security, local history and culture, social entrepreneurship, local governance and public policy. Speakers that participated in the program included: representatives of non-profit organizations such as Viva Rio and the Observatory of Favelas; officials from the Military State Police, including former UPP Commander Colonel Paulo Henrique; as well as university professors from Pontifícia Universidade Católica do Rio de Janeiro and Universidade do Estado do Rio de Janeiro, including criminal violence expert and director of the Laboratory for the Analysis of Violence, Dr. Ignacio Cano.

In order to provide students with a more inclusive perspective of the pacification process on the ground, the PovGov team - working alongside local guides and community leaders - planned visits to the “pacified” favelas of Rocinha, Complexo do Alemão and Morro Dona Marta. During these visits the students had the chance to visit the UPP headquarters, talk to the UPP captain, and participate in a community work initiative with Coral Tintas - one of Brazil’s largest paint manufacturing companies committed to improving favelas by providing free paint for locals to renew the facades of houses and buildings. The students also visited the BOPE headquarters, Rio’s elite squad police unit, and Jongo da Serrinha, an NGO that seeks to preserve the tradition of Jongo - a style of music and dance - through a children’s daycare and education center. Additional day-trips and sightseeing tours included: the Rio Art Museum, the Imperial Museum of History, as well as many of Rio’s famous beaches.

According to student participant Marilyn Travis ('16), “Going to Brazil this summer was the trip of a lifetime. We were very lucky to have gifted faculty and staff who worked hard to put together such a rich program. This opportunity has literally shifted my frame of mind on many issues I was previously naive about. I have gained a more global perspective and had the opportunity to contemplate the affects of mega events on marginalized people.”

To view images from the trip please click here.  

About the Program on Poverty and Governance

The Program on Poverty and Governance at CDDRL explores factors that affect good governance and poverty alleviation in Latin America, with a focus on Brazil and Mexico. Led by Beatriz Magaloni, associate professor of political science at Stanford University, the program conducts empirical research, bringing together experts from across the disciplines of political science, economics, law, medicine and education to increase understanding of the complex causal linkages between political institutions, the quality of governance, and the capacity of developing societies to meet basic human needs. One of the research platforms, “Governance and Criminal Violence,” studies ways to rebuild the social fabric in violent places where the society does not trust law enforcement and government institutions, with the Pacification of favelas of Rio as a case study.