Aid vs Trade

Obama made a recent comment regarding Financial Aid and its failure to alleviate the poverty around the world. For a long time financial infusions have been considered at least useful in lifting poor economies. But, as goes the popular Chinese proverb "Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime."

Poor economies are poor because they have little to trade or are prevented from doing so. Skewed political and social structure can lead to economic imbalances while education, skill enhancement and political empowerment tend to reverse it. So long as an economy holds something that is sought after by the rest of the world, it has an insurance against poverty. It will still be at threat by substitutes and alternatives that may develop if the resource becomes too scarce.

Skills and technology are becoming the new global capital. They can be used to leverage ordinary resources like raw material and information into something more useful like products and services. At core for this transformation is the system for education and innovation. The structure of this core determines whether an economy can sustain and improve its status without wasting itself or will it have to exploit whatever natural resources exist and deplete them to extinction.

The real aid that the developed world can provide to the developing is to educate the masses. Not just to read and write but also the skills to pursue a useful profession or trade. This will be the key to global prosperity and should remain to be a strong focus of any Development Program. Allowing free trade will be the icing on the cake.

Evolution

Survival of the fittest and evolution of myself and the world.

The world has evloved since I last blogged. Economic imbalances have gone through corrective times. It is hard to see the world around you fall apart especially if it was someone else's fault. How do you survive in a system which has blatantly rewarded reckless risk-taking? How do you verify that you are not throwing away your hard earned money into a black hole? It is easy to find out a mathematical model to explain historical phenomena. It is much more difficult to really be sure of the future.

With greater linking and leveraging, the world economy is now more unstable than ever before. Economists have been pursuing efficiency of markets as the holy grail. What we have failed to realise is that actions which allow the market to react fast are also the actions which make it unstable.

The second and more interesting question to ask is do we understand the economics of the world in an integrated manner or are we just trying to make do with parts and live on the faith that they will all fit together. My guess is that even though we use very complex statistical methods to analyze how the world economy shakes and moves, we only use them because we do not know the basic fundamental behaviour.

This gives me hope that there is still a lot to discover out there and a few Nobel Prizes just waiting to be grabbed if one can figure out even a part of the puzzle called the global economy.