Category Archives: Travel
This time talking a bit more about my trip to Dhaka:
I am in a tiny steel cage attached to a motorcycle, stuttering through traffic in Dhaka, Bangladesh. In the last ten minutes, we have moved forward maybe three feet, inch by inch, the driver wrenching the wheel left and right, wriggling deeper into the wedge between a delivery truck and a rickshaw in front of us.
Up ahead, the traffic is jammed so close together that pedestrians are climbing over pickup trucks and through empty rickshaws to cross the street. Two rows to my left is an ambulance, blue light spinning uselessly. The driver is in the road, smoking a cigarette, standing on his tiptoes, looking ahead for where the traffic clears. Every once in awhile he reaches into the open door to honk his horn.
This is what the streets here look like from seven o’clock in the morning until ten o’clock at night. If you’re rich, you experience it from the back seat of a car, the percussion muffled behind glass. If you’re poor, you’re in a rickshaw, breathing in the exhaust.
Me, I’m sitting in the back of a CNG, a three-wheeled motorcycle shaped like a slice of pie and covered with scrap metal. I’m here working on a human rights project related (inevitably) to the garment factories, but whenever I ask people in Dhaka what their main priority is, what they think international organizations should really be working on, they tell me about the traffic.
It might not be as sexy as building schools or curing malaria, but alleviating traffic congestion is one of the defining development challenges of our time. Half the world’s population already lives in cities, and the United Nations estimates that proportion will rise to nearly 70 percent by 2050.
Of the 23 “megacities” identified by the United Nations, only five are in high-income countries, places with the infrastructure (physical, political, economic, you name it) to deal with the increasing queues of cars snarling up the roads. Mexico City adds two cars to its roads for every person it adds to its population. In India, the ratio is three to one.
Dhaka, the world’s densest and fastest-growing city by some measures, and its twentieth-largest by population, is a case study in how this problem got so bad—and why it’s so difficult to solve.
I realize that it’s problematic for a rich white foreigner to visit somewhere for a short period of time, then come back and start making sweeping generalizations about it. I hope this doesn’t come off gawking, like ‘look how fucked up poor countries are!’
I’m amazed when I travel for work how not-different the problems of developing countries are from our own, how the solutions we propose for their cities (‘build more roads y’all!’) would be considered simplistic and utopian in our own. I hope a little of that comes through. Or at least that I conveyed how incredible the traffic in Dhaka is. Because that shit is bonkers.
Here’s a section that got cut from my New Republic story about the use of the US dollar in Zimbabwe
Wait, so a country can just adopt the United States’s currency without our permission?
“The U.S. government has never taken any overt position on dollarization, formal or informal.” This is Benjamin Cohen, a political economy processor at the University of California Santa Barbara, former Fed employee and the author of some articles I’ve been reading to try to understand how one country just gets up one morning and starts using another country’s money.
Ninety percent of the world’s $100 bills, Dr. Cohen says, are in circulation outside of the United States. Dozens of countries are considered to be “highly dollarized,” meaning more than 30 percent of their money supply is in dollars.
Unlike Zimbabwe, which has formally adopted the dollar, most countries use the U.S. dollar informally, in parallel with the local currency. A few years ago I was in Cambodia for work, and found that the local currency, the riel, was only used for small stuff like meals, transport and entertainment. Anything major—a TV, a plane ticket, an iPhone—prices were quoted and paid in U.S. dollars.
It’s not just Cambodia. These sorts of arrangements are commonplace throughout the Middle East, Latin America and Southeast Asia. People use the local currency, but keep U.S. dollars as a hedge against inflation, like Tea Partiers hoarding gold.
According to Cohen, the United States has no reason to prevent these arrangements. Not only does the U.S. dollar provide a quarry of monetary calm for citizens of inflating nations, the U.S. actually makes money every time our money leaves our borders. “Seniorage,” as the economists call it, is the profit the U.S. earns every time a foreigner ‘buys’ a dollar for a dollar (It costs 6 cents to print a $1 bill. If you print one, then use it to buy something that costs a dollar, you’ve just earned 94 cents profit. That’s seniorage.).
This sounds like it shouldn’t be a real thing, but the US earns $20 billion per year from all those $100 bills held internationally. Not a huge proportion of GDP, but hey, free money, right?
The other upsides are obvious. Every time another country uses our currency, it reinforces the U.S. dollar as world’s preferred international currency, just like every time someone drinks a Coke or eats a Big Mac it reinforces the status of those brands.
Foreign countries using our currency even gives us diplomatic power. Panama, one of the first countries to formally adopt the U.S. dollar, froze in its tracks when the U.S. cut off access to hard currency in the late 1980s to put pressure on Noriega.
The only real downside of foreign countries dollarizing, for the U.S. at least, is that it creates a headache for the Fed. The more countries dollarize, the more the Fed has to take them into account when making monetary policy. A million calculations go into the decision to raise or lower interest rates, and the last thing the Fed needs is to add the interests of Cambodian iPod salesmen into the mix.
One of the more significant downsides is if a dollarized country suddenly reintroduced their domestic currency, it might flood the market with millions of now-unneeded U.S. dollars, reducing the value of all of them. It doesn’t even have to be a whole country. If the dollar was used widely enough, huge purchases of dollars by foreigners could significantly affect its value.
This is why, Cohen says, the U.S. takes a policy of “benign neglect” toward foreign countries that want to formally or informally dollarize. You want to buy a bunch of dollars and give them to your citizens in exchange for your old currency? Fine. You want to encourage your banks to offer accounts denominated in U.S. dollars? Have a blast. The U.S. isn’t going to be particularly helpful in helping you set this up, but they’re not going to stop you either.
Ten countries (East Timor, Ecuador, El Salvador, Panama and a bunch of small island nations) are formally dollarized, meaning the U.S. dollar is their official currency (most of them have their own coins though).
Zimbabwe is formally dollarized in that all government spending is in U.S. dollars, but it also recognizes the euro, the British pound, the Botswanan pula and the South African rand (why the Mozambican metical got left out, I have no idea). Stores accept payment in whatever currency you have handy, and sometimes give you change in a different currency than you paid.
One of the things that always surprised me about Zimbabwe was how it just switched to U.S. dollars one day, without any relationship to the U.S. Federal Reserve. It was even under sanctions at the time. Can it just do that?
“It’s totally normal to switch to the U.S. dollar without any relationship to the Fed,” Cohen says. “It doesn’t require an application. Anyone can buy paper money, and anyone can get a dollar bank account. Their own country may restrict those things, but the U.S. doesn’t.”
When Ecuador officially adopted the U.S. dollar in 2000, it carried out a mass currency conversion. The central bank sold their U.S. treasury bonds to the U.S. for cash, brought the cash back to Ecuador and gave Ecuadoreans a window in which to exchange their sucres for U.S. dollars. The U.S. didn’t orchestrate, nor condemn, this process.
Like an introduced species, the U.S. dollar tends to take over an increasingly large percentage of the economy. The only country Cohen knows of that has de-dollarized is Israel, which introduced the U.S. dollar in the late 1970s as a parallel currency, and only managed to get rid of it after a series of economic reforms reinstated confidence in the shekel. Lots of informally dollarized countries, like Argentina, go through waves of increasing, then decreasing dollarization in line with citizens’ confidence in the local currency.
I have no idea what any of this means for Zimbabwe. As I say in the New Republic story, bringing back the Zimbabwe dollar is seen by economists (including the head of the Reserve Bank of Zimbabwe) as a bad idea, but that doesn’t mean it won’t happen.
Dr. Cohen’s written a bunch of interesting, easy to read articles on dollarization from the US perspective
- U.S. Policy on Dollarisation: A Political Analysis (my favorite)
- Dollarization: Pros and Cons
- Is A Dollarized Hemisphere in the U.S. interest?
- Dollarization, Rest in Peace
Thanks for the interview!
I have a piece in Pacific Standard Magazine (well, the website, not like the magazine-magazine) about my trip to Zambia:
Like Tolstoy’s unhappy family, every poor country is poor in its own way, and everyone I meet has a narrative, a creation myth, for how it got this way and why it remains so.
I will spend the next 10 days meeting NGO activists, government officials, and business representatives. They will tell me that Zambia is terrible, that Zambia is fine, and that Zambia is getting better, respectively.
I’m not here to determine which of those statements is true. I’m here for the numbers, the information I can’t get back home. Somewhere between the handshakes, the spreadsheets, the PowerPoints, the annual reports, a story will emerge about Zambia, a story of a country watching its mineral wealth disappear, a country making everyone rich but itself.
I can tell we’re getting close to Kitwe because the number of people crossing the highway increases. The highway has no streetlights, the only light is from the cars, and about halfway there we start to see silhouettes of people in twos and threes running across the road. Our driver never slows down, even as the groups increase to six, seven people, crossing our headlights, stopping in the road to let a car whiz by, running again. I could ask him to slow down, but instead I just look.
There are people there who know a lot more about Zambia’s poverty than I do. If you’re interested in making a donation to any of the organisations I profile in the essay, get in touch and I’ll give you their info.
‘Advertise here’ billboards are nothing new, of course, but what amazes me about these is that each one is different.
On the way from Kitwe to the Ndola airport, an hour’s drive, you see about 65 of them, and they never repeat. Each one has a different message, a different photo, a different font, even though they’re all advertising the exact same thing.
I keep trying to think of an economic explanation for this, a reason why they wouldn’t be at least partially standardized. It seems like a lot of extra work to design and print 65 billboards one time each, at least as compared to one billboard 65 times.
But the world is full of mysteries! Maybe they want to show off their range, maybe they want to try to catch your eye in as many ways possible, maybe they have a bored PR intern. Or maybe they just want to increase the world’s supply of stock photos of adorable children. As corporate responsibility goes, they could do worse.
One thing that fascinated me when I was in Portugal was the ubiquity of the ‘Pastelarias’, the little cafes—one espresso machine, four or five wooden tables, pastries behind glass—on nearly every corner.
But the ubiquity wasn’t the most interesting thing about them, it was the uniformity.
Each of them appeared to be an independent business. They didn’t have the same brand name or the same décor.
What they did have, though, was the same pastries. Not, like, a similar selection. The exact same pastries. Same size, same shape, same flavors, same perfect little char-marks on the custard, everything.
It wasn’t til I saw the same pastries in a grocery store that I started to get curious about what was going on. Most of these little hole-in-the-wall bakeries aren’t big enough for proper baking equipment, and seem understaffed as it is.
I was convinced that all these cute little bakeries were actually frauds, they were getting shipments of pastries from some suburban warehouse every morning, putting them in the window, tricking me into thinking they’re all charming and artisanal.
I imagined some vast conveyor belt near a suburban motorway. Chinese workers sweating into hairnets, mechanically charring an endless line of snack-size custards.
It turns out it’s not as bad as that. In a random bookstore I came across a coffee table book called ‘The Design of Portuguese Semi-Industrial Confectionery’, and I learned some things:
First, Portugal not only has the highest number of food establishments per capita, but also has the highest percentage of people who eat breakfast outside the home every day. This is why, I eureka’d, it’s the only European country I’ve been to where cafes are open before 8am.
Second, there’s not some beltway warehouse making millions of pastries every morning and trucking them into the city. It turns out there’s a standardized baking school curriculum, and a strict licensing regime for confectionery makers.
Not only that, but a lot of the pastries are made with powders and mixes (even the eggs, ew), minimizing the time and skill required to make them.
These three things—high demand, standard methodologies and effort-free production—mean pastries are a viable and profitable business model.
Due to the country’s history as a trading post where a lot of these recipes originated (the book’s version was that when Portugal Inquisitioned out the Jews starting in the 16th century, they all went to Vienna and became bakers), this business model is supported by government policies on opening hours, licensing, taxes, etc.
If you’re gonna pick something for government subsidies and high standards, you can do worse than pastries. Still, I don’t know if bags of Bisquick and buckets of egg whites are any more edifying than a giant suburban croissant factory.
The sustainable food movement wants to increase the availability of food that is ‘local’, ‘handmade’, ‘fresh’. These pastries are all of those things, at least technically, but there’s something about the process that leaves a bad taste in my mouth.
Metaphorically speaking, I mean. Literally, the taste they leave in my mouth is delicious.
But maybe that, more than anything, is what foodies should be afraid of.