Saturday, July 16, 2005

Talk about your fun accession negotiations!

In The Lexus and the Olive Tree, Thomas Friedman argued that globalization forced states into the Golden Straitjacket, choosing between "free market vanilla and North Korea." This is one of those classic Friedmanisms that is simultaneously overexaggerated and yet tugs at some gut sense that there's a truth embedded in somewhere in that statement.

Anyway, I bring this up because apparently North Korea has called and apparently wants vanilla. Anna Fifield explains for the Financial Times:

North Korea, the world’s most reclusive state and one that prides itself on its communist ideals, plans to apply to the World Trade Organisation for observer status, according to a European Parliament delegation that visited Pyongyang this week.

News of the plan, the first step down the long road to joining the free trade body, is likely to be met by the outside world with bewilderment, optimism and opposition in equal measure....

“North Korea says it has been in contact with the WTO secretariat about observer status,” Glyn Ford, a British member of the European Parliament, said after the delegation for relations with the Korean peninsula met high-level North Korean officials. “Iraq also applied so if one horse can get through the door, maybe two can.”

Observer countries are allowed to participate in meetings but not be involved in the decision making process.

Post-Saddam Iraq was granted the right to attend meetings and hold talks with WTO member countries in February last year. The US had vigorously opposed attempts by Iran, which it also accuses of secretly developing nuclear weapons, to gain observer status but in May agreed to allow Iran to start the membership process.

The WTO on Friday said it had not received any application from North Korea.

I really do not know how much credence to put into this report. But if there's any truth to it, I'd love to be a fly on the wall when the accession negotiations start.

posted by Dan at 09:15 PM | Comments (3) | Trackbacks (0)

My contribution to the greatest sports moments meme

Earlier this month, Steven Taylor of PoliBlog provided his anwer to the "Ten Unforgetable Sports Moments that You Actually Saw (not ones you saw later on tape)" meme. Kevin Drum offered his as well. More specifically, it's events you saw live, be it in person or on television.

Taylor puts together a pretty good list, but he betrays his youth -- most of his examples are in the last ten years.

Here are my answers -- and remember, the key adjective is "unforgettable," not "greatest":

10) The Fumble (1978). The New York Giants had a regular-season game wrapped up against the Philadelphia Eagles. Then QB Joe Pisarcik was told to hand the ball off to Larry Csonka instead of downing it himself. Herman Edwards (now the coach of the New York Jets) caught the fumble and went on to score, propelling the Eagles into the playoffs. Because of this play, in part, my father still cannot watch the Giants live.

9) The Pass (1985). Doug Flutie's 60 yeard heave to Gerald Phelan in the closing seconds of a regular season game against Miami on Thanksgiving Day. It capped an extraordinary display of offense by both teams.

8) The Tackle (1999). The Tennessee Titans' Steve McNair, on the last play of scrimmage in Super Bowl, completes a pass to Kevin Dyson at the Rams' one yard line. Mike Jones makes the game-saving tackle as Dyson tries in vain to break the plane of the end zone.

7) Mark Ingram's catch (1990). Super Bowl XXV, third quarter, down by two, third and 13 at the Buffalo 32. Ingram catches a two yard pass, breaks four tackles, and gets the first down. The Giants take the lead on that drive, which was the longest in Super Bowl history.

6) The Dunk (1983). Houston's Phi Slamma Jamma was supposed to destroy N.C. State in the 1983 NCAA tournament final. Lo and behold, an airball + Lorenzo Charles = Jim Valvano running around the court like a maniac.

5) Joe Theisman's last play (1985). Monday Night Football's introduction of it's "super-slo-mo" instand replay coincided with Lawrence Taylor sacking Theisman into the back of Leonard Marshall (I think). Immediately after the play ended, Taylor started gesticulating wildly to the Redskins bench for their trainer. ABC showed why -- the images of Theisman's leg breaking must have been replayed in super slo mo at least ten times before play resumed. I have no memory of who won that game, but I'll always remember Theisman's shin bending in the most unnatural way.

4) Michael Jordan's final minute as a Bull (1998). Strong drive to the basket for a lay-up. A steal of Karl Malone under the Bulls' basket. A a 20-footer with 5.2 seconds left, nothing but net. Having seen the final shot replay numerous times, I'm still not sure if Byron Russell fell down because Jordan faked him out or if there was a push.

3) The fourth set tie-breaker (1979). The British despised John McEnroe before his first final against Bjorn Borg. After the tiebreaker in the fourth set -- in which McEnroe fought off five match points -- the relationship turned more into a love-hate one. With the big serves in today's tennis, I'm not sure this match will ever be equalled.

2) Back to Foulke (2004). Until Foulke caught that ball, I wasn't completely convinced that the Red Sox were actually going to win the World Series (The NESN DVD, interestingly enough, shows that Foulke almost didn't hold onto the ball). The moment he caught it, I stopped caring about 1978, 1986, etc....

1) David Ortiz's final at-bat, ALCS, Game 5 (2004). Sure, Ortiz hit more dramatic homers, but his at-bat against Loiza led to the walk-off hit than ended the greatest game of the 2004 postseason, and perhaps the greatest game ever in baseball. Loiza hada lousy 2004 season, but he pitched well that night, and Ortiz fought off five straight nasty cut fastballs before he finally muscled the game-winning single.

The end of this game is #1 for another reason -- my wife finally got it. Until Game 5, Erika thought my Red Sox fandom was a particularly extreme aberrational aspect of my behavior. Fox's coverage of the extra innings -- in which there were plenty of shots of fans on both sides gnawing at anything to try to keep some semblance of emotional control -- convinced my lovely wife that this was a regional epidemic, and hardly unique to me.

That's it -- feel free to add yours. [Where the hell is the Miracle on Ice? You saw that, right?--ed. Oh, I saw it, but no one outside of the ice rink saw it live. ABC showed the game tape-delayed. And thank God there was no World Wide Web back then, because it would have been too tempting to find out who had won beforehand. As it was, my parents turned off all the radios and TVs in the house to ensure ignorance.]

posted by Dan at 08:18 PM | Comments (9) | Trackbacks (0)

Friday, July 15, 2005

Is the war against Al Qaeda generating results?

Bruce Jentleson kicks off his first post for America Abroad with a valid question:

At Fort Bragg and after London, President Bush has stayed on message about the need to show resolve. Resolve in Iraq, resolve in the GWOT. But the issue can’t be just the will to stay the course --- it also has to be whether the policies we are staying with are sound enough and solid enough to win in our arenas.

Just about everyone is questioning the policy on Iraq. However, one of the key criticisms of the Iraq war is that it incubated a new generation of adherents to Al Qaeda. Is that really true? Are the Bush administration's anti-terrorim policies "sound enough and solid enough to win in our arenas"?

Via Orin Kerr, I see the latest Pew Global Attitudes survey is up, and there are some numbers that suggest the answer is (mostly) yes. It turns out that Osama bin Laden is losing the hearts and minds of Muslims. Susan Page summarizes in USA Today:

Support for suicide bombings has dropped significantly in several predominantly Muslim nations, a worldwide public-opinion survey has found — a positive note at a time concerns have been heightened by terrorist attacks in London, Iraq and Israel.

The report by the Pew Global Attitudes Project, released Thursday, also found substantial concern about Islamic extremism not only among Westerners but also in Muslim nations. Three-quarters of those in Morocco and roughly half of those in Pakistan, Turkey and Indonesia said Islamic extremism posed a threat to their countries.

Click here for more poll results. As Nick Gillespie put it in Hit & Run, "Bin Laden: Hopes for Re-Election as World's Most Popular Asshole Dim."

Here are the key charts:



The numbers offer support to both supporters and critics of the way the Bush administration has prosecuted the war of terror.

On the one hand, the numbers are trending in the right direction, and the comparison between the July 2002 numbers and July 2005 numbers in most countries suggests that Iraq hasn't generated the negative externalities greater sympathy for Al Qaeda and its aims that some Bush critics have predicted. It remains possible that the invasion of Iraq had a negative effect on Muslim attitudes, but these figures suggest that at a minimum this effect was dwarfed by more powerful counter-trends. Indeed, the trend suggests staying the course with the current set of anti-terrorism policies.

On the other hand, the numbers for Jordan are not trending in the desired direction at all. This could be due to Iraq, although if that was the case one would have expected a similar trend in Turkey and that hasn't happened. Still, it should disturb policy analysts across the policy spectrum that the one Arab country simultaneously possessing a free trade agreement with the United States and a peace treaty with Israel has a population that is growing more comfortable with radical Islam.

posted by Dan at 04:36 PM | Comments (31) | Trackbacks (0)

In honor of Justice Rehnquist....

Anyone attempting to earn a Ph.D. is familiar with Matt Groening's Life is Hell strip about graduate school. Patricularly this part:


In honor of Chief Justice William Rehnquist's contrarian announcement that he's staying on for a while, I thought it worth reprinting this fact from Charles Lane's profile of Rehnquist in the July/August 2005 issue of Stanford magazine:

Applying credits earned at Kenyon and diligently working through the summers, Rehnquist picked up his bachelor’s and master’s degrees in political science in 1948. Then he left for Harvard, where [his undergraduate mentor Charles] Fairman had studied, with the idea of gaining a PhD in government. But something about Cambridge did not agree with him. Perhaps it was the cold weather; perhaps it was the liberal politics of what detractors called “the Kremlin on the Charles.” “I remember him saying he did not like Harvard, and he did not like political science,” says Craig Bradley, a professor of law at Indiana University who clerked for Rehnquist in the court’s 1975-76 term. “He didn’t think much of the professoriate.”

Bradley says Rehnquist saw academics generally as “liberal blatherers.” By the fall of 1949, he was back at Stanford, enrolled at law school.

Readers should feel free to speculate on how history would have changed had the Harvard Government department not been as hostile an environment to Rehnquist.

posted by Dan at 01:32 PM | Trackbacks (0)

The media in the year 2014....

Click here for one possible future.

I, for one, welcome our new GoogleZon overlords.... I think.

posted by Dan at 11:55 AM | Comments (1) | Trackbacks (0)

This is supposed to cheer me up?

In the middle of an essay on the Weekly Standard's web site that is generally upbeat on the economy, Irwin Stezler comes to the paragraph that depresses the hell out of me:

At home, the strength of the dollar will inevitably cut into exports and encourage imports; protectionist sentiment is rising, spurred on by China's attempt to acquire Unocal; it is unclear whether the president can or cares to restrain spending; and his economic team remains closed to outside ideas. "We don't do dissent here," one White House aide told me a few weeks ago. (emphasis added)

Well, that makes me feel much better.

posted by Dan at 12:02 AM | Comments (8) | Trackbacks (0)

Thursday, July 14, 2005

A new outsourcing business model

Bo Cowgill was kind enough to e-mail me a link to this Computerworld story by Patrick Thibodeau about an entirely novel outsourcing venture:

What San Diego-based start-up SeaCode Inc. plans to do is nothing if not novel: anchor a cruise ship three miles off the coast of Los Angeles, fill it with up to 600 programmers from around the world, eliminate visa restrictions and make it easy for customers to visit the site via water taxi. The two men behind the venture -- Roger Green, who describes himself as an IT and outsourcing veteran, and IT consultant David Cook, whose job history includes a stint as a ship captain -- recently discussed their plan in an interview with Computerworld.

What is the business model? Green: The promise of the benefits of outsourcing in distant lands doesn't come free. Most of the gotchas are related to the geography and to the cultural difference....

Green: The model is based on making a platform, if you will, to house these engineers, this workforce, which is very close to the U.S. but which is in fact not in the U.S. We can pull programmers and engineers from anywhere in the world. A fact of life is there are different skills that are stronger in one country versus another....

Does U.S. labor law apply? Cook: U.S. labor law does not apply except on a U.S. flagship. The flag of the ship will provide the labor law -- more than likely [the ship will be registered in] Vanuatu, the Bahamas or Marshall Islands. Their intellectual property laws, as well as the laws governing seamen, are very similar to the United States'.

What will life be like for your employees? Cook: The pay is about three times what they earn in India today....

What is the salary? Cook: Approximately $1,800 a month.

What is your pricing going to be relative to India? Green: We will be approximately the same price as the distant-shore companies. We will take a little less margin than they do.

Do you expect U.S. residents to apply? Cook: Absolutely. Approximately 50% of the resumes that we've received are from U.S. residents.

There are a lot of things that don't make sense to me about this business model:

1) How can they pay three times the Indian wage but maintain similar pricing levels?

2) How are cultural differences eliminated by moving developing country programmers from their country of origin to a ship three miles off the U.S.?

3) Is evading U.S. regulatory strictures (payroll taxes, health insurance, labor standards) the only thing that makes this venture even close to profitable? If so, what does that say about U.S. regulations?

posted by Dan at 08:22 AM | Comments (23) | Trackbacks (0)

Wednesday, July 13, 2005

Progress for the Doha round?

Richard McGregor reports in the Financial Times about a potential breakthrough in the agricultural negotiations for the Doha round of world trade talks.

Sounds great, until you get to the nitty-gritty of the proposal:

The G20 proposal centres on a new five-tier tariff system for developed countries, setting uniform tariff cuts in each band, and also capping the maximum tax on imports at 100 per cent.

The plan offers greater leeway for developing countries, with a four-tiered system and a maximum tariff of 150 per cent. Mariann Fischer Boel, EU agriculture commissioner, said: “We welcome the G20 proposal on market access.”

Rob Portman, US trade representative, also backed the G20 plan as a potential basis for negotiations, saying: “The US is prepared to move, and move to the middle.”

The differences between the world's two largest trading blocs remain substantial, with the EU proposing a variation on the G20 plan to give it greater flexibility to resist sharp tariff cuts.

The EU is also demanding that the US put on the table a plan to reduce its domestic farm subsidies as part of any negotiating package, something that Mr Portman rejected yesterday as “not realistic”.

With only about two weeks to go before a framework is needed to allow time for the detailed and difficult negotiations ahead of Hong Kong, not everybody was optimistic about a genuine resolution to the impasse.

“I am pessimistic but I want to be proved wrong,” said Supachai Panitchpakdi,the WTO director-general.

“We have days. We don't have weeks.”

The G20 plan potentially faces stiff resistance from countries such as Japan, Taiwan and South Korea, which have tariffs on farm goods far higher than the caps set by the G20 proposal.

The scary thing is that what's proposed represents liberalization of a sort -- agriculture is so heavily protected and subsidized that it will take decades for complete liberalization.... if it ever happens.

Supachai is more pessimistic about the overall progress of the Doha round. Click here for his statement from last week. Key paragraphs:

It is true that some progress has been made in certain areas of the negotiations. But let us be clear: this progress is nowhere near sufficient in terms of our critical path to Hong Kong, and it is not being seen in the key issues which would help unblock progress across the board. Overall, there seems to be a renewed sense of blockage and frustration. We are also seeing a resurgence of sterile debate about process, rather than negotiations on substance.

I am afraid we have to face the facts. These negotiations are in trouble. Very little of the political support which has been shown at successive Ministerial meetings has been turned into concrete progress in the negotiating groups. Everyone has a generalized commitment to progress, but when it comes to the specifics, the familiar defensive positions take over.

posted by Dan at 10:47 AM | Comments (18) | Trackbacks (0)

Tuesday, July 12, 2005

Are times changing in France?

Christian Noyer, governor of the Bank of France, recently gave an interview to the Financial Times in which he said some very un-French things:

The Scandinavian economic model, combining market flexibility with a high degree of social protection, “is full of lessons for countries such as France, Germany and Italy”, Christian Noyer, governor of the Bank of France, has argued.

The willingness of France's central bank governor to admit in an interview with the Financial Times that other countries might have found a better answer to the forces of globalisation highlights how the political debate in Paris has shifted since the country rejected the European Union constitution in May.

Asked about last month’s appeal by Tony Blair, UK prime minister, for Europe to rethink its social model, Mr Noyer said: “I tend to agree with that.”

Sweden, Finland and Denmark have seen some of the fastest growth and lowest inflation rates among the main continental European economies. Sweden, which plunged into financial crises in the early 1990s, has re-invented its famed social model in the past decade.

“One of the key elements in the way these countries work is that they have mixed a greater level of flexibility in labour and product markets – a bit like the UK economy – with a high degree of social protection, which is traditional in continental Europe,” he said.

Social protection, he added, did not mean “a job for life even if your company is sinking. Protection means you have a social safety net to help you during a transitional period, and a whole system of education, training and retraining that obliges people to find a new job”.

Read more of the interview here -- in which he gives faint praise to new French PM Dominique de Villepin while dismissing Villepin's suggestion for closer political consultations with the European Central Bank.

posted by Dan at 04:25 PM | Comments (8) | Trackbacks (0)

Open Karl Rove thread

I'm on quasi-vacation in Aspen at the moment (more about that later), but feel free to comment here on the whole Karl Rove mess. In particular:

1) Did Rove commit a hanging offense? The liberal blogosphere says yes; Mickey Kaus and Tom Maguire say no; [And what about you?--ed. I'm on vacation... but click here for my last post on the whole affair.]

2) How much will White House stonewalling on the issue hurt Rove's chances of survival?

posted by Dan at 04:20 PM | Comments (35) | Trackbacks (0)

An immigrant's take on offshoring

Suketu Mehta has an op-ed in the New York Times on the rise of offshoring to India. Mehtu comes at this from an interesting angle, as he and his family "came to America in 1977 not for its political freedoms or its way of life, but for the hope of a better economic future." While acknowledging the anxiety caused in the tech sector by offshoring, Mehta's conclusions are straightforward:

The rich countries can't have it both ways. They can't provide huge subsidies for their agricultural conglomerates and complain when Indians who can't make a living on their farms then go to the cities and study computers and take away their jobs. Why are Indians willing to write code for a tenth of what Americans make for the same work? It's not by choice; it's because they're still struggling to stand on their feet after 200 years of colonial rule. The day will soon come when Indian companies will find that it's cheaper to hire computer programmers in Sri Lanka, and then it's there that the Indian jobs will go.

Of course, it's heart-wrenching to see American programmers - many of whom are of Indian origin - lose their jobs and have to worry about how they'll pay the mortgage. But they are ill served by politicians who promise to bring their jobs back by the facile tactic of banning them from leaving. This strategy will ensure only that our schools stay terrible; it'll be an entire country run like the dairy industry, feasible only because of price controls and subsidies.


posted by Dan at 11:20 AM | Comments (38) | Trackbacks (0)

Monday, July 11, 2005

Prospect theory and homeland security

In the wake of the London transport attacks and calls in the United States for protecting our infrastructure,, it is worth remembering one of the most important results from the work on prospect theory in economics is that human beings overestimate the likelihood of rare events actually occurring. One political implication of this fact is that governments will be asked to overinvest in measures designed to regulate and curb low-risk events.

In the wake of the London transport bombings, there has been a lot of chatter on television about what must be done to boost homeland security. However, prospect theory offers an important corrective to this natural response -- we exaggerate the cost of terrorist attacks on U.S. soil.

Keep this in mind when reading Benjamin Friedman's article in Foreign Policy on the myths and realities of homeland security. Here's how it opens:

The odds of dying in a terrorist attack are minuscule. According to the U.S. Centers for Disease Control, the odds are about 1 in 88,000. The odds of dying from falling off a ladder are 1 in 10,010. Even in 2001, automobile crashes killed 15 times more Americans than terrorism. Heart disease, cancer, and strokes are the leading causes of death in the United States—not terrorism.

People overestimate risks they can picture and ignore those they cannot. Government warnings and 24–hour news networks make certain dangers, from shark attacks to terrorism, seem more prevalent than they really are. As a result, the United States squanders billions of dollars annually protecting states and locations that face no significant threat of terrorism. In 2003, Tulsa, Oklahoma, received $725,000 in port security funds. More than $4 million in 2005 federal antiterror funding will go to the Northern Mariana Islands. In 2003, Grand Forks County, North Dakota, received $1.5 million in federal funds to purchase trailers equipped to respond to nuclear attacks and more biochemical suits than it has police officers.

These small expenses add up. Federal spending on first responders grew from $616 million in 2001 to $3.4 billion in 2005, a 500 percent increase. Homeland security spending will approach $50 billion this year, not including missile defense—roughly equal to estimates of China’s defense spending. Yet pundits call for more. A 2003 Council on Foreign Relations report hyperbolically titled, Emergency Responders: Drastically Underfunded, Dangerously Unprepared, recommmends increasing spending on emergency responders to $25 billion per year. To his credit, the new secretary of homeland security, Michael Chertoff, wants to trim the pork from the department’s budget. But efforts in congress to link funding with risk have failed largely because haphazard spending is consonant with the current U.S. strategy that tells all Americans to be afraid.

It’s true that al Qaeda’s attacks on Sept. 11, 2001, may be a harbinger of a more destructive future. But it is also true that parts of the war on terrorism are working. Tighter U.S. entry requirements, more aggressive European policing, the destruction of al Qaeda’s Afghan sanctuary, and refined intelligence operations have crippled al Qaeda’s ability to strike the United States. Most of al Qaeda’s original leadership is dead or in prison. Few other Islamist terrorists—even the most wanted terrorist in Iraq, Abu Musab al–Zarqawi—are as capable or organized as al Qaeda once was....

Most Americans are safe from terrorist attack. And the most likely forms of attack remain conventional. The fact is, all terrorist attempts to use chemical and biological weapons have failed to cause mass casualties. True, a successful biological weapons attack could kill hundreds of thousands of people. But manufacturing, controlling, and successfully dispersing these agents is difficult—probably too difficult for today’s terrorist groups. Synthesizing and handling chemical agents such as the deadly nerve agent VX, sarin, or mustard gas is complicated and extremely dangerous, often requiring access to sophisticated chemical laboratories. Most experts agree, for instance, that al Qaeda does not possess the technical capability necessary to produce VX. And even if terrorists procure and deploy chemical weapons, they are unlikely to kill many people. The 1995 sarin attack in Tokyo’s subway system was limited to only 12 deaths. Official U.S. government reports, including that of the Gilmore Commission, which examines domestic responses to terrorism, show that it would take one ton of chemical agent, favorable weather, and considerable time to kill thousands of people with chemical weapons.

Read the whole thing -- and then check out this 2003 primer on "Prospect Theory and its Applications for Disaster and Emergency Management."

posted by Dan at 05:37 PM | Comments (12) | Trackbacks (0)

You can feel the Euromentum!!

Never mind that France and the Netherlands rejected the EU constitution last month -- it's back on track now!!. Sarah Laitner explains in the Financial Times:

Luxembourg on Sunday threw the slimmest of lifelines to the European Union's ailing constitution, when the tiny grand duchy voted in favour of the treaty resoundingly rejected by France and the Netherlands.

The decision keeps alive the European ambitions of Jean-Claude Juncker, Luxembourg's veteran prime minister, who threatened to quit if he lost the vote.

Luxembourgers supported the constitution by 56.5 per cent to 43.5 per cent in the referendum, a slightly larger margin of victory than government officials had expected.

"This is a very important vote for Luxembourg," said a relieved Mr Juncker. "The message that has emerged from our vote is that the constitution is not dead."....

"The result means the constitutional treaty will remain on the European agenda," Mr Juncker claimed. "It will have an influence on the various debates and arguments that will be heard in other member states."

The Luxembourg vote, the 13th country to ratify the treaty, also gives renewed life to Mr Juncker's ambitions of high office in Brussels.

An influential figure in European affairs, the prime minister is thought to covet the role of permanent president of the European Council, representing the EU's 450m citizens - if the post is created.

Given that neither the French nor the Dutch seem to be suffering from voter's remorse, I'd say the EU constitution has as much mojo right now as..... Joementum.

Indeed, this definition of Joementum perfectly captures Juncker's plight.

posted by Dan at 12:42 AM | Comments (5) | Trackbacks (0)

Sunday, July 10, 2005

The real digital divide

A common lament among development activists is that regions like Africa are held back by the digital divide -- these places have less access to the Internet.

However, the Economist runs a good story on the information technology that would benefit poor African countries the most:

All eyes are on what governments can do to end poverty, with aid, debt relief and trade top of the agenda at this week's G8 summit. But what about the role that business can play—and, in particular, technology firms? It is increasingly clear that, when it comes to bridging the “digital divide” between rich and poor, the mobile phone, not the personal computer, has the most potential. “Emerging markets will be wireless-centric, not PC-centric,” says C. K. Prahalad, a management scholar and author of “The Fortune at the Bottom of the Pyramid”, a book that highlights the collective purchasing power of the world's 4 billion poorest people and urges firms to try to profit from it.

Mobile phones have become indispensable in the rich world. But they are even more useful in the developing world, where the availability of other forms of communication—roads, postal systems or fixed-line phones—is often limited. Phones let fishermen and farmers check prices in different markets before selling produce, make it easier for people to find work, allow quick and easy transfers of funds and boost entrepreneurship. Phones can be shared by a village. Pre-paid calling plans reduce the need for a bank account or credit check. A recent study by London Business School [Sponsored by Vodaphone--DD] found that, in a typical developing country, a rise of ten mobile phones per 100 people boosts GDP growth by 0.6 percentage points. Mobile phones are, in short, a classic example of technology that helps people help themselves.

But despite rapid subscriber growth in much of the developing world, only a small proportion of people—around 5% in both India and sub-Saharan Africa—have their own mobile phones. Why? The price of handsets is the “biggest obstacle” to broader adoption, says Alan Knott-Craig, boss of Vodacom, which runs networks in five African countries. Azmi Mikati of Investcom, which runs networks in Africa and the Middle East, estimates that the number of users would double in those markets if the cheapest handset cost $30 instead of $60.

The good news is that firms like Motorola have a huge incentive to expand to this market, and are in the process of creating low-cost handsets.

The bad news is that developing countries themselves might block further expansion of cell phone usage:

Lower prices will make a second barrier ever more apparent: high taxes and duties imposed by many governments on handsets and services, often just as growth in the sector starts to take off. “It does seem strange for countries to say that telephone access is a public-policy goal, and then put special or punitive taxes on telecoms operators and users,” says Charles Kenny, an economist at the World Bank. “It's a case of sin taxes on a blessed product.”

In Turkey, new subscribers must pay a special tax of 20 new liras ($15) for a connection. A sales tax of 18%, plus a special communications tax of 25%, is added to all mobile bills. Uganda has just imposed a 10% tax on mobile phones. In Afghanistan, telecoms taxes account for 14% of government revenue, says Mr Kenny. In Bangladesh, the government has just imposed a tax of 900 taka ($14) on all new connections, in addition to an import duty of 300 taka levied on all imported handsets.

In big markets, such as Brazil, handset-makers have set up local factories to avoid import duties. That will not pay in smaller, poorer places. To avoid taxes and duties, many mobile operators in sub-Saharan Africa do not supply handsets, but rely on customers to get them on the black market, says Mark Burk of Informa, a research firm.

Yet there is anecdotal evidence that reducing taxes on handsets can boost government revenues. People would rather pay a small tax on a legal handset than no tax on a smuggled one that cannot be returned if it goes wrong. There are some hopeful signs: India cut its import duty on handsets to 5% last year and plans to scrap it altogether. Mauritius recently cut its taxes on handsets to boost adoption.

One reason left unmentioned in the Economist piece why some governments might impose high barriers to cell phone usage -- cell phones increase the costs of repression. A newtork of opposition activists armed with cell phones and text messaging capability can more easily coordinate political action against a repressive government.

posted by Dan at 09:47 AM | Comments (7) | Trackbacks (0)