darwinism: survival of fittest??

The recent special issue of the Economist revisits the human evolution in a series of articles.

….It was Spencer… who invented that poisoned phrase, “survival of the fittest�. ..originally applied it to the winnowing of firms in the harsh winds of high-Victorian capitalism, but when Darwin's masterwork, “On the Origin of Species�, was published, he quickly saw the parallel with natural selection and transferred his bon mot to the process of evolution…. became one of the band of philosophers known as social Darwinists. Capitalists all, they took what they thought were the lessons of Darwin's book and applied them to human society. Their hard-hearted conclusion …. was that people got what they deserved—albeit that the criterion of desert was genetic, rather than moral. The fittest not only survived, but prospered. Moreover, the social Darwinists thought that measures to help the poor were wasted, since such people were obviously unfit and thus doomed to sink.

... For 100 years Darwinism was associated with a particularly harsh and unpleasant view of the world and, worse, one that was clearly not true—at least, not the whole truth. People certainly compete, but they collaborate, too. They also have compassion for the fallen and frequently try to help them, rather than treading on them. For this sort of behaviour, “On the Origin of Species� had no explanation. As a result, Darwinism had to tiptoe round the issue of how human society and behaviour evolved….. the disciples of a second 19th-century creed, Marxism, dominated academic sociology departments with their cuddly collectivist ideas—even if the practical application of those ideas has been even more catastrophic than social Darwinism was.

…the real world …penetrates even the ivory tower. The failure of Marxism has prompted an opening of minds, and Darwinism is back with a vengeance—and a twist. Exactly how humanity became human is still a matter of debate. But there are, at least, some well-formed hypotheses... they rely not on Spencer's idea of individual competition, but on social interaction. That interaction is…sometimes confrontational and occasionally bloody. ..it is frequently collaborative, and even when it is not, it is more often manipulative than violent.

Modern Darwinism's big breakthrough was the identification of the central role of trust in human evolution. People who are related collaborate on the basis of nepotism. It takes outrageous profit or provocation for someone to do down a relative with whom they share a lot of genes. Trust….allows the unrelated to collaborate, by keeping score of who does what when, and punishing cheats.

Very few animals can manage this. .. outside the primates, only vampire bats have been shown to trust non-relatives routinely. (Well-fed bats will give some of the blood they have swallowed to hungry neighbours, but expect the favour to be returned when they are hungry and will deny favours to those who have cheated in the past.) The human mind…seems to have evolved the trick of being able to identify a large number of individuals and to keep score of its relations with them, detecting the dishonest or greedy and taking vengeance, even at some cost to itself. This process may even be…the origin of virtue.

The new social Darwinists (those who see society itself, rather than the savannah or the jungle, as the “natural� environment in which humanity is evolving and to which natural selection responds) have not abandoned Spencer altogether... they have put a new spin on him. The ranking by wealth ….is but one example of a wider tendency for people to try to out-do each other. .. competition, whether athletic, artistic or financial, does seem to be about genetic display. Unfakeable demonstrations of a superiority that has at least some underlying genetic component are almost unfailingly attractive to the opposite sex. Thus both of the things needed to make an economy work, collaboration and competition, seem to have evolved under Charles Darwin's penetrating gaze.

This is ..full of ironies…. One is that its reconciliation of competition and collaboration bears a remarkable similarity to the sort of Hegelian synthesis beloved of Marxists. Perhaps a bigger one… is that the Earth's most capitalist country, America, is the only place in the rich world that contains a significant group of dissenters from any sort of evolutionary explanation of human behaviour at all. …. suggests a constant struggle, not for existence itself, but between selfishness and altruism—a struggle that neither can win. Utopia may be impossible, but Dystopia is unstable, too, as the collapse of Marxism showed. Human nature is not, … red in tooth and claw, and societies built around the idea that it is are doomed to early failure.

Of the three great secular faiths born in the 19th century—Darwinism, Marxism and Freudianism—the second died swiftly and painfully and the third is slipping peacefully away. But Darwinism goes from strength to strength. If its ideas are right, the handful of dust that evolution has shaped into humanity will rarely stray too far off course….

simple and classic

This is classic way to fold a T-shirt. Check out the video.

from seattle to hong kong: multi trade negotiations

In a prelude to the rounds of multi trade negotiations under WTO, the Foreign Affairs has come up with a special issue with some of the world's top experts on international trade consider what will be necessary for the Doha Round to succeed — and what might happen if it does not.

remittances: economic lifeline of many developing countries

Migrants from developing countries send home part of their earnings in the form of either cash or goods to support their families, which are known as workers' or migrant remittances. The recent years there have been growing trend, and now represent the largest source of foreign income for many developing countries. A senior economist at the World Bank's Development Prospects Group, Dilip Ratha has examined the issue in the recent issue of Finance and Development of IMF publication.

…. Worldwide, officially recorded international migrant remittances are projected to exceed $232 billion in 2005, with $167 billion flowing to developing countries. These flows are recorded in the balance of payments…Unrecorded flows through informal channels are believed to be at least 50 percent larger than recorded flows. …remittances large…they are also more evenly distributed among developing countries than capital flows, including foreign direct investment, most of which goes to a few big emerging markets…. remittances are especially important for low-income countries.

How is the money transferred?

..typical remittance transaction takes place in three steps.

1. the migrant sender pays the remittance to the sending agent using cash, check, money order, credit card, debit card, or a debit instruction sent by e-mail, phone, or through the Internet.
   
2. the sending agency instructs its agent in the recipient's country to deliver the remittance.
3. the paying agent makes the payment to the beneficiary. For settlement between agents, in most cases, there is no real-time fund transfer; instead, the balance owed by the sending agent to the paying agent is settled periodically according to an agreed schedule, through a commercial bank. Informal remittances are sometimes settled through goods trade.

The costs of a remittance transaction include a fee charged by the sending agent, typically paid by the sender, and a currency-conversion fee for delivery of local currency to the beneficiary in another country. Some smaller money transfer operators (MTOs) require the beneficiary to pay a fee to collect remittances, presumably to account for unexpected exchange-rate movements…. remittance agents (especially banks) may earn an indirect fee in the form of interest (or "float") by investing funds before delivering them to the beneficiary…float can be significant in countries where overnight interest rates are high.

Why are remittances helpful?

Remittances are …transfers from a well-meaning individual or family member to another individual or household….targeted to meet specific needs of the recipients and thus, tend to reduce poverty…..World Bank studies, based on household surveys conducted in the 1990s, suggest that international remittance receipts helped lower poverty (measured by the proportion of the population below the poverty line) by nearly 11 percentage points in Uganda, 6 percentage points in Bangladesh, and 5 percentage points in Ghana.

How are remittances used? In poorer households, they may finance the purchase of basic consumption goods, housing, and children's education and health care. In richer households, they may provide capital for small businesses and entrepreneurial activities. They also help pay for imports and external debt service, and in some countries, banks have been able to raise overseas financing using future remittances as collateral.

Remittance flows tend to be more stable than capital flows, and they also tend to be counter-cyclical—increasing during economic downturns or after a natural disaster in the migrants' home countries, when private capital flows tend to decrease. In countries affected by political conflict, they often provide an economic lifeline to the poor. The World Bank estimates that in Haiti they represented about 17 percent of GDP in 2001, while in some areas of Somalia, they accounted for up to 40 percent of GDP in the late 1990s.

Is there a downside?

…a number of potential costs associated with remittances. Countries receiving migrants' remittances incur costs if the emigrating workers are highly skilled, or if their departure creates labor shortages…. if remittances are large.. the recipient country could face an appreciation of the real exchange rate that may make its economy less competitive internationally…remittances can also create dependency, undercutting recipients' incentives to work, and thus slowing economic growth. But …the negative relationship between remittances and growth observed in some empirical studies may simply reflect the counter-cyclical nature of remittances—that is, the influence of growth on remittances rather than vice-versa.

Remittances may …have human costs. Migrants sometimes make significant sacrifices—often including separation from family—and incur risks to find work in another country. …they may have to work extremely hard to save enough to send remittances.

Can high transaction costs be cut?

Transaction costs are not …an issue for large remittances (made for the purpose of trade, investment, or aid), because, as a percentage of the principal amount, they tend to be small, and major international banks are eager to offer competitive services for large-value remittances. But in the case of smaller remittances—under $200, say, which is often typical for poor migrants—remittance fees can be as high as 10–15 percent of the principal (see table).

Transfer costs Remittance fees could be reduced significantly if they were converted to a flat fee instead of a percentage of the principal transferred. Approximate cost of remitting $200 (percent of principal) Belgium–Nigeria Belgium–Senegal Hong Kong–Philippines New Zealand–Tonga ($300) Russia–Ukraine South Africa–Mozambique Saudi Arabia–Pakistan UAE–India2 United Kingdom–India United Kingdon–Philippines United States–Colombia United States–Mexico United States–Philippines Major MTOs1 12 10 4.5 12 4 — 3.6 5.5 11 — — 5 1.2–2.0 Banks 6 — — 3 3 1 0.4 5.2 6 0.4–5.0 17 3 0.4–1.8 Other MTOs 9.8 6.4 — 8.8 2.5 — — 2.3 — — 10 4.7 — Hawala — — — — 1–2 — — 1–2 — — — — — — Data not available. Source: World Bank Global Economic Prospects 2006: Economic Implications of Remittances and Migration. Note: Figures do not include currency-conversion charge. 1MTOs: money transfer operators. 2UAE: United Arab Emirates.

Cutting transaction costs would significantly help recipient families.

How…?

1. the remittance fee should be a low fixed amount, not a percent of the principal, since the cost of remittance services does not really depend on the amount of principal. Indeed, the real cost of a remittance transaction—including labor, technology, networks, and rent—is estimated to be significantly below the current level of fees.
2. greater competition will bring prices down. Entry of new market players can be facilitated by harmonizing and lowering bond and capital requirements, and avoiding overregulation (such as requiring full banking licenses for money transfer operators). The intense scrutiny of money service businesses for money laundering or terrorist financing since the 9/11 attacks has made it difficult for them to operate accounts with their correspondent banks, forcing many in the United States to close. While regulations are necessary for curbing money laundering and terrorist financing, they should not make it difficult for legitimate money service businesses to operate accounts with correspondent banks. An example where competition has spurred reductions in fees is on the U.S.–Mexico corridor, where remittance fees have fallen by 56 percent from over $26 (to send $300) in 1999 to about $11.50 now. In addition, some commercial banks have recently started providing remittance services for free, hoping that would attract customers for their deposit and loan products. And in some countries, new remittance tools—based on cell phones, smart cards, or the Internet—have emerged.
   
3. establishing partnerships between remittance service providers and existing postal and other retail networks would help expand remittance services without requiring large fixed investments to develop payment networks. However, partnerships should be nonexclusive. Exclusive partnerships between post office networks and money transfer operators have often resulted in higher remittance fees.
4. poor migrants need greater access to banking. Banks tend to provide cheaper remittance services than money transfer operators. Both sending and receiving countries can increase banking access for migrants by allowing origin country banks to operate overseas; by providing identification cards (such as the Mexican matricula consular), which are accepted by banks to open accounts; and by facilitating participation of microfinance institutions and credit unions in the remittance market.

Can governments boost flows?

Governments …often offered incentives to increase remittance flows and to channel them to productive uses. But such policies are more problematic than efforts to expand access to financial services or reduce transaction costs. Tax incentives may attract remittances, but they may also encourage tax evasion. Matching-fund programs to attract remittances from migrant associations may divert funds from other local funding priorities, while efforts to channel remittances to investment have met with little success. Fundamentally, remittances are private funds that should be treated like other sources of household income. Efforts to increase savings and improve the allocation of expenditures should be accomplished through improvements in the overall investment climate, rather than targeting remittances. Similarly, because remittances are private funds, they should not be viewed as a substitute for official development aid.