TWC - Week 3 discussion

Week 3 session of TWC focused on development and sustainable growth, a topic which I have a great interest in. Coming from a developing country myself (Indonesia), I can see that much of the discussion is actually relevant to issues a developing country is facing. My thought on several of the issues discussed in class:

1. Human's dependency on oil
Oil, dubbed the black gold in the world, is the main driver of our modern economy. A thought experiment on a world without oil. Cars would break down and become useless. There will be energy shortages in many country. Infrastructure won't be able to be built, and could not be repaired without chemicals extracted from oil. Some country will lose their main export commodity, causing imbalances. People would start using renewable resources, albeit too late. There will scarcity of uranium for nuclear power and rare metals for renewable resources. (efficient solar panel and wind turbines need rare metal), driving up the cost of those resources... and developing country will once again be poor. The world will be once again divided between the have and have-not.

That is how important oil is to our economy. It is the cheapest driver of economy. All industries use oil in varying amount, and without oil, people will be hard-pressed to find alternative energy and resource.

From history, America had taken extreme political measures in securing oil (From John Perkin's The Economic Hitman), and there is no telling what superpowers will do in order to secure the rare resources which could generate renewable energy. I foresee a dark future if we do not prepare ourselves for the incoming oil depletion.

2. Renewable energy VS nuclear power
Many arguments have been offered for each one of the sides.. I personally would like to embrace both energy sources. I find that there are many conflicting studies and statistics to support proponents of each side. I find those numbers misleading, because sometimes the two sides could produce studies which produce opposing statistics/numbers. Then, we are thrown into the discussion of the validity of the studies they used. That is absurd... They are not expert on the studies, the debaters just cite them to support their views. Those studies are purportedly peer-reviewed and scientifically rigorous enough to be published in famous and credible journals - so the question is - What is happening here?

So, now, I think that rather than stopping research on nuclear energy because they are dangerous - politically (militarily, e.g. North Korea) and technologically (e.g. Chernobyl's accident) , we should put all our resources to solve the problem caused by nuclear power. /For example, designing a low cost nuclear waste recycling centre at the power plant complex - or something like that. Then, rather than stopping researches on renewable energy just because they are costly, inefficient and taking up too much space area is not a reasonable argument. We are researching exactly because we want to improve its efficiency, decrease the cost and creating a solar panel/film which can be attached anywhere (just check en.wikipedia.com) and thereby reducing the area used by solar panel (because we can attach it almost anywhere, e.g. buildings, cars, etc). Why are we stopping researches on these renewable sources of energy which might be the only way humans could survive (other than returning to dark age)? Thus said, I am a proponent of both energy sources - wanting the best of the two sources while eliminating the drawbacks. I don't think it is an impossible feat to accomplish - we just need a new paradigm on the problem.

3. GDP VS HDI (or other index) as a measuring tool of growth and development
Joseph Stiglitz, an economic noble laureate, himself has said that GDP is an outdated measuring tool for economy and development.

See here for more info:
http://www.scribd.com/doc/19784660/Happiness-and-Measuring-Economic-Progress-by-Joseph-Stiglitz

I say focusing on GDP is a really dangerous paradigm. GDP, even GDP per capita, does not reflect the true condition of the economy.

For example, high GDP per capita does not ensure that there is low income inequality, instead trickle down economy might not have happened here. Economists/bloggers now are debating on whether income inequality itself is the cause of the crisis:

http://www.nakedcapitalism.com/2010/08/does-income-inequality-help-cause-financial-crises.html

This is not an academic research, but it still proves something: Income inequality itself is something which must not be ignored to ensure stability, and GDP could not measure that. Moreover, I personally think that there are many accounting loopholes that GDP can use to inflate the number. Many people have reported that China is reporting false statistics in order to gain more investments.

http://economictimes.indiatimes.com/news/international-business/False-Shanghai-data-muddies-China-property-picture/articleshow/6420079.cms

How reliable are the agencies measuring those numbers? Do you still have faith in those agencies when there are frauds such as these? Is the resultant number reliable, then?
This question must be kept in mind because we are measuring and projecting economic growth and modeling based on these numbers. If they are wrong, future projections are wrong too.

So, should we change to another index? Who will make sure that the number is an approximately better indicator of economies and citizen's welfare? Will there be any change without international consensus on such matters? I surely do not know the answer, but I know one thing for sure: Numbers can't lie, but whoever makes up the numbers can. How skeptical should we be when looking at those numbers? What kind of analysis could validate and re-validate those indexes? I challenge future economists to do this.

4. Globalization, increasing international trade and poverty.
So, has the advent of internet and globalization alleviated poverty in developing country? Have increased international trade and movement of capital benefited the developing countries? Have increased knowledge, technology and know-hows improved the economy and lifestyle of the people in the countries?

I come from Indonesia, hence I could give an account of what really happened. Indonesia is a rich country, rich in resources and culture. That much is a fact. However, the government's "red tape" causes many businesses to avoid the country. Moreover, there is no sufficient supply of skilled labour to work for the companies investing there. I think that globalization helped to alleviate this particular problem .It helps to educate people more about many things. However, most of the people misuse the technology due to the lack of basic education. Hence, the problem still persist in a vicious cycle. Only a small minority really benefited from internet. Many became addicted to online gaming, chatting and other non-productive activities. While it is good that Indonesia is #1 in the number of twitters (check time.com), but it proves that the citizens are not productive enough in their works and use of technology. Basic educations such as critical thinking must be drilled into citizens. Only with that could a developing country used technology to kick-start its economy and production - and attracting more projects and investment which would benefit the country (not just take the resources and go)

All right, with that, I give the week's presentations a 8/10 due to its breadth of information and provoking questions asked in class.