Tag: aid

Categories
Conflict & disaster Economics

[2150] Of aid and logistical challenges for Haitian earthquake victims

When the gods battle in Malaysia, the gods forgot Haiti.

As always, the affairs of men are too important to be left in the hands of the gods. Christian conservative Pat Robertson may disagree. Instead, he thinks god wants Haiti to suffer because Haitians made a pact with the devil.[1] Ah, the glory of god.

Thank goodness for the reasonable and capable Bill Clinton!

Former President Bill Clinton yesterday spoke of the need to send cash to Haiti instead of items like food and blankets.

He reasoned that in Haiti now, there is simply no logistical capability to handle various items from abroad in huge quantity. Haiti’s principle airport inability to cope with the volume of aid material is one evidence of that.[2] With an earthquake that devastating, it is probably a prudent to assume that transportation infrastructure in the country’s capital — a major population center located too close to the epicenter of a major earthquake  — is unreliable now.

In economics, cash aid is the best kind of aid because only the persons on the ground know how the money should be spent, especially when compared to some kind-hearted donors living abroad. It is a case of imperfect information.

That statement is made barring the issue of corruption, which is a major motivation behind the need of material aid.

The probability of abuse of material aid is lower than the likelihood of cash aid abuse. This does not mean that there can be no abuse with material aid — somebody may get all the material aid and start selling them when it should be free— but in comparison, material aid does better than cash aid in terms of abuse prevention. Due to this as well as the horrible record of the government of Myanmar, I advocated material aid to the victims of Nargis back in 2008.

I am ignorant of Haitian politics but Haiti is located not so far away from Myanmar in Transparency International’s 2009 Corruption Perception Index.[3] It is classified as above Myanmar but really but comparison to Myanmar is not much of a comparison. Corruption is a serious there.

I have a lot of respect of former President Bill Clinton. He is the US President I respect the most out of Obama, the Bushes and him. When he said something, I would think twice before disagreeing with him. Indeed, as a libertarian, I should be agreeing with Clinton on his assertion of the superiority of cash aid. And sending money is definitely easier than sending material aid. Yet, I have trouble accepting his advice that cash aid is better.

Perhaps, as an UN envoy to Haiti, as well as a person that has been to Haiti, he knows more than me. His knowledge might not be as good as the victims themselves but it is likely better than mine who lives two oceans across from Haiti.

Still, what good is cash when everything is destroyed?

The economy may rebuild and spontaneous order will establish itself during this chaos but as Clinton said himself, there is no logistical capability to handle the kind of volume of aid material in Haiti at the moment. Okay but will local production be able to match the heightened demand for food, blanket, etc.?

I doubt so.

Even if local production is able to do so, would the logistics be able to cope to the traffic of goods? Would local production be able to produce everything autarkically?

Clinton is right. There is no logistical capability in Haiti. But I think that problem adversely affects the effectiveness of both cash and material aids. I am not saying aid should not be sent at all. What I am saying is that the problem with logistics might not impact the relative desirability between both types of aid by too much.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

[1] — American televangelist Pat Robertson has blamed the devastating earthquake in Haiti on a pact between the impoverished nation’s founders and the devil.

It is feared that up to 100,000 people may have lost their lives when the magnitude 7.0 earthquake flattened massive areas of the capital Port-au-Prince yesterday.

Speaking on his television program The 700 Club, Mr Robertson said the pact happened “a long time ago in Haiti”. [Haiti disaster blamed on pact with devil. ABC News. January 14 2010]

[2] — International relief to quake-devastated Haiti was reduced to a trickle this morning after the capital’s airport was overwhelmed by a sudden influx of aid planes, as the country’s President said 7,000 victims had already been buried in a mass grave. [Bottleneck paralyses Haiti relief efforts. Kim Landers. Craig McMurtrie. et al. ABC News. January 15 2010]

[3] — See [Corruption Perception Index at Wikipedia. Accessed January 15 2010]

Categories
ASEAN Conflict & disaster Economics

[1669] Of no cash aid for Myanmar

Money may not be the only thing in this world but it does make a lot of people happy, including the junta of Myanmar. But keeping the junta happy is not what I have in mind when I want to help the people of Myanmar.

We may have forgotten that Cyclone Nargis took tens of thousand of lives in the Irrawaddy Delta just weeks ago. With the season finale of American Idol, Akademi Fantasi and the loss of sovereignty over a rock or two to Singapore a few days ago, who can blame us? There are far more important things going on with our lives than anything that happens in the delta.

But if we actually cared a little about the victims of Nargis, we would remember that the junta placed restrictions on foreign aid. The junta even refused aid from relief groups, stating that they preferred government-to-government transactions.

The junta of Myanmar must be the luckiest government in the world because it can afford to become a chooser in a time when it really should be a beggar. Unbelievably, it took some coaxing by governments of other countries before the junta actually relented. Even then, aid workers were barred from entering the country. To think that other governments cared more about a person than the person’s government really reflects badly on a government.

Aid eventually crept in but as the blankets, medicine, food and cash got into Myanmar, there were reports that the junta repackaged the aid as if it were provided by the junta. But I suppose, if the aid gets to the victims, it does not matter. Black cat, white cat: whichever catches the mouse is a good cat.[1]

There were also reports that some of the aid was redirected away from the victims of the cyclone.[2] The French had foreseen this by initially offering a small amount of aid and said they did not believe the junta had the trustworthiness to manage the aid. I share the skepticism of the French government.

In many cases, money transfer is a superior method of giving aid when compared to transfer in kind. Money transfer has the potential of improving the receivers’ welfare much more than what material goods can ever do. This is especially so when the receivers know exactly what they need while donors are unfamiliar with the local environment.

Money, after all, is the most generally accepted medium of exchange. It is usually harder for a person to barter blanket for food because the double coincidence of wants has to occur first before that transaction can take place. This is true for many situations, including the one involving fuel subsidy in Malaysia. Money transferred to those the authority wishes to help is a better policy in enhancing welfare than material transfer.

Money or cash transfer, however, does suffer from a problem called moral hazard. In the case of Myanmar, the donors may want to help cyclone victims buy food, blanket and rebuild their livelihood. But with little ability to oversee how it is actually spent, the victims may use the money to buy cigarettes or something less useful in improving their welfare.

Money transfer may also not be as useful in Myanmar as in other places in peaceful times. Disasters, especially the major ones, tend to push prices up as distribution channels suffer damage, causing supply problems. Add to the increased demand, prices will rocket, hence reducing its purchasing power.

Prices shot up in Florida in the aftermath of Hurricane Katrina and it surely is happening in the Irrawaddy. Some people derisively called it scalping but I call it economics. Regardless, donation in kind overcomes the problem of weaker purchasing power that any money donation under that scenario suffers.

Thirdly, just as how the French had expressed their skepticism, the junta cannot be trusted with money.

Now, there are caring Malaysian organizations out there that seek to alleviate the suffering of those in Myanmar by sending money over directly. Noble but their actions could prove unhelpful.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

[1] — YANGON, Burma — Burma’s military regime distributed international aid Saturday but plastered the boxes with the names of top generals in an apparent effort to turn the relief effort for last week’s devastating cyclone into a propaganda exercise. [Burma Junta Turns International Aid Into Form of Propaganda. Associated Press via FoxNews. May 11 2008]

[2] — The British ambassador to the United Nations, John Sawers, said Britain had also received unconfirmed reports that aid was being redirected away from disaster victims. [Myanmar Government Still Blocking Relief. New York Times. May 14 2008]

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

p/s — a version of this article was first published at The Malaysian Insider.

Categories
Economics

[1020] Of flood, aid and economics

While relief effort is underway amid criticism, the government announced yesterday that flood victims are to get monetary aid:

Fair use. The Star. December 24 2006. Scanned by Mohd Hafiz Noor Shams.

Between food or other typical aid — henceforth, I shall refer to as commodity — and cash, which actually is the best to offer?

First, assume that there’s a constant amount of amount of cash and commodity for aid throughout this blog entry.

In circumstances where commodity supply is relatively stable, aid in cash might be the best. The reason is, every person has his or her (for simplicity’s sake, let me use the pronoun “he”. For all the feminists out there, I still love you guys! Or rather, girls) own preference. A person most of the time knows what he wants or needs the best. In economics, a person’s well-being could be measured by utility function. A utility function according to Wikipedia is “a measure of the relative happiness or satisfaction (gratification) gained by consuming different bundles of goods and services“. While utility is a basic concept in economics, it’s something hard to measure by a third person and usually, the person himself knows his utility own function the best. Through the person’s own preference, he, assuming rationality and complete information, will maximize his own consumption under relevant constrictions accordingly.

In emergency where shortage is widespread however, cash aid might not be the better mean of relieving victims of any disaster. This is especially so if the cash value isn’t large enough to purchase sufficient food and other necessary survival materials such as blanket, clothes, etc. During severe shortage period, prices will be higher than during peaceful times and with a specific amount of cash, a person will be able to buy less amount of food and other things that matter vis-a-vis during stable time.

A commodity-type aid is superior to cash-type aid if and only if the cash value of commodities is greater than cash value. Cash-type aid is superior to commodity-type aid if and only if the value of cash is greater than the value of the commodities. In short, the superiority order of the two kinds of aid depends on the value of the an aid relative to the other.

It must be noted that this comparison ignores the fact that monetary aid has considerably less logistical problem attached to it compared to the other aid type.

Regardless the two scenarios, an aid beneficiary could achieve higher welfare given any aid endowment if the beneficiary could trade with, of course, other people.