Economist 1/13/15

  1. Between 2008 and 2013 the number offering at least some poor people cash with strings attached, such as a requirement to send their children to school, almost doubled, from 27 to 52. No-strings cash programmes spread from 21 to 37 African countries in just three years.Indonesia is planning what will be the world’s biggest cash-transfer programme, for 15.5m families.Around half of India’s vast expenditure on subsidised food and cooking gas, and public-works programmes in rural areas, for example, is thought to be wasted or stolen. But done well, they could transform lives. Brazil’s Bolsa Família, which covers 14m families, has cut dire poverty by 28% in a decade for just 0.5% of GDP.First, it should take a hard look at all its social spending. All too often, only a small part of it goes on the poor.Next, governments must decide what to give, and how. Cash is less wasteful and economically distorting than food or fuel subsidies (though school lunches can boost enrolment and cut micronutrient deficiencies).Making recipients do something in return for their money may amplify a scheme’s benefits. But here, governments should tread carefully.The main reason the Bolsa Família has boosted enrolment in Brazil is not that recipients are compelled to send their children to school, but that the stipend makes it easier to forgo children’s meagre earnings.
  2. Free parking may sound like an unalloyed good, but the refusal of Americans to pay for—or indeed charge for—parking has created all sorts of bizarre incentives.In many parts of the country, politicians have long balked at raising the cost of parking, even as inflation has made it cheaper in real terms.San Francisco’s scheme uses sensors to estimate whether spaces are in use or not. Prices now vary according to the time of day, and are adjusted upwards or downwards each month to target particular occupancy levels. A study found that this helped to reduce the amount of time drivers spent looking for a spot by 43%.  In 2013 the government in Washington, DC issued 1.7m parking-violation tickets, taking some $80m in fines. If it charged for more of its spaces, perhaps it could get by with issuing fewer tickets.
  3. FOR DECADES commodities have shaped Africa’s economic growth. When prices were high, growth was good; when prices dipped, so did the continent. But that is slowly changing. Two reasons stand out. First, the continent’s economic growth is coming from other places. Governments have worked hard to make life easy for investors. The World Bank’s annual “Doing Business” report revealed that in 2013-14 Sub-Saharan Africa made more regulatory improvements than any other region. Mauritius is 28th on the bank’s list of the best places to do business. Rwanda, which 20 years ago was in the throes of a civil war, is now a better place for investors than Italy. Second, many African governments are better at managing the inevitable booms and busts of commodity markets.
  4. The combined sales of American fast-casual outlets rose by 10.5% last year, compared with 6.1% for fast-food chains, according to Mintel, a market-research firm.There are four main reasons why these outlets have been winning customers. First, they promise “fresh” food, meaning at the very least not frozen.Chipotle is now a threat to its former parent. Although still relatively small, it is enjoying 20% annual growth, quite a feat in the crowded restaurant market. Second, they offer diners a high level of customisation, such as choosing each ingredient in a sandwich, burrito or burger. Third, clever pricing helps these chains optimise their profits. Fourth, fast-casual chains often try to give each outlet a touch of distinctiveness.
  5. Mr Bjorgolfsson was the 249th richest man in the world with a fortune of more than $4 billion. He was also a folk hero in his native Iceland: its first billionaire and the embodiment of the Icelandic economic miracle.He gave Mikhail Gorbachev a lift in his private jet. Prime ministers called him Thor.Within 18 months the Scandi-hero had been reduced to an Icelandic zero. Ninety-nine per cent of his fortune had gone up in smoke. Seven major banks were on his heels. His personal debts were heading towards $1 billion. Many of his former friends shunned him.He made his first fortune in the wild east of post-Soviet Russia with Bravo Brewery. Selling alcohol to thirsty Russians does not sound like a challenge, but it is impossible to read about Mr Bjorgolfsson’s dealings with leathery thugs and corrupt politicians without thinking that he deserved the $100m he got for selling his company to Heineken. Over the next six years he multiplied it 40-fold by investing in telecoms (mostly in eastern Europe), building up Activis, a generic drugs company, and then, disastrously, by becoming the biggest investor in one of Iceland’s three largest banks, Landsbanki.Mr Bjorgolfsson has put his life back together. He took out a front-page advertisement in Iceland’s biggest newspaper apologising for his role in the crisis.
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