From November 14^th to 22^nd, the Stanford Program on Regions of Innovation and Entrepreneurship (SPRIE) welcomed a delegation of leaders from Shanghai for intensive training on “Leading Innovative and Entrepreneurial Firms and Regions in the Global Economy”.  The 20-member delegation was composed of officials and senior managers with responsibilities over high tech parks, human resources, finance and urban planning in Shanghai, which has a total population over 20 million, and burgeoning investment in banking and finance, IT, bio science and media.

The weeklong program included more than 30 hours at the Stanford Graduate School of Business’ state-of-the-art Knight Management Center, the Bay Area Council and Department of Environment in San Francisco. The Chinese leaders engaged in dialogues and exchanged ideas with Stanford faculty, policy experts in the Bay Area, venture capitalists, entrepreneurs, and NGOs on the key strategies to drive innovation and entrepreneurship. 

Teaching sessions drew on the expertise and experience of 13 thought leaders who shared innovative strategies, current data, and lessons from Silicon Valley, and regions in the US, Europe and Asia.  From the GSB, Professor William F. Miller, Professor William P. Barnett and SPRIE Associate Director Marguerite Gong Hancock, each led sessions, ranging in focus from the ecosystem of Silicon Valley to strategies for discovering successful business models.

The classroom experience culminated in team presentations to translate what was learned into the context of the Chinese leaders’ own experiences and responsibilities in the Shanghai region.

“During the seven-day training program organized by SPRIE, we have learned several insights…especially under the theme of Engines of Innovation and Entrepreneurship,” said one group. The culture of innovation and entrepreneurship, the driving force of linking universities and industry, and the support of non-profit organizations could all play an increased role in Shanghai, another group concluded in a written report.

While appreciating the differences in cultures, systems, and the roles of government between Shanghai and the Valley, the Shanghai leaders also discussed how the Valley’s culture of risk taking and tolerating failure, and empowering creativity and productivity in talent had inspired them to apply lessons learned to Shanghai.

This program on “Leading Innovative and Entrepreneurial Firms and Regions in the Global Economy” is one of a series hosted by SPRIE to welcome international policymakers to Stanford at the heart of Silicon Valley to explore what leaders in successful high-tech regions around the world do to foster innovation and entrepreneurship and become engines for economic growth. Classes are offered by an interdisciplinary team of experts comprised of Stanford University faculty, Silicon Valley thought leaders, and other regional decision makers.  Previously, SPRIE hosted a three-day training program for 20 central, provincial and municipality government officials from China, featuring distinguished speakers such as George Shultz (right in the photo), former U.S. Secretary of State, and Burton Richter, a Nobel Prize Laureate in Physics.

As the world holds a collective breath waiting to see whether China’s white-hot economy blazes ahead or fizzles, Stanford economist Scott Rozelle is talking up a plan to protect the country’s future.

“China needs to make sure every kid goes to high school so they have the skills and training they’ll need to be productive workers,” he says.

With only 40 percent of the country’s poor and rural children now receiving a formal high school education, that’s a tall – and expensive – order to fill. Rozelle figures China needs to invest at least $500 billion during the next decade to make sure nearly all the country’s children have the support they’ll need for a quality education.

But he warns the price will be even higher if the country falls short of that goal.

Hourly wages – now about $2 – rose by 19 percent in the past year. If China’s growth pattern continues, those wages can hit $10 to $15 by 2030. That trend is pushing China to shift from an economy based on labor-intensive, low-skilled manufacturing to one needing smarter, more literate workers.

Facing increasing payroll costs, employers cannot afford to hire workers who don’t have a set of basic skills and an ability to master complicated tasks. If the labor force cannot measure up, businesses – and the jobs they promise – will go elsewhere.

And if that happens?

“Then,” Rozelle says, “You have Mexico and the crisis that country is facing today.”

China is now in much the same situation as Mexico during the late 1980s and early 1990s, when wages began to skyrocket and the country planned to attract and create high-skilled jobs to support them.

The idea was to move Mexico from a middle-income nation to a rich one. But there wasn’t a deep enough labor pool to sustain the shift. While just over 80 percent of kids in Mexico’s well-off cities were going to high school, only about 40 percent of those living in rural and poor urban areas were getting a secondary education.

Factories paying low wages soon moved to other countries. Job opportunities dried up. Unemployment soared, and so did the power and presence of drug cartels and organized crime. Gang violence is scaring away tourists, foreign investment and domestic business plans. More than ever, Mexico is now swamped with crime and corruption instead of the spoils of an economic windfall that seemed within reach just three decades ago.

Should China fall into the same trap, Rozelle warns of a destabilized Asian behemoth that would put a crimp in worldwide trade and global prosperity. And without a strong economy to assure its own population of a rising quality of life, China might begin to assert its military to increase a sense of nationalism, he says.

“The world is much better off with a stable and growing China,” says Rozelle, co-director of the Rural Education Action Project at Stanford’s Freeman Spogli Institute for International Studies.

And he says China can avoid Mexico’s mistake by following the path of countries such as South Korea.

While Mexico’s fortunes and wages were rising, so too were South Korea’s. But China’s neighbor made a smooth transition from a low-wage, labor-intensive economy to a highly productive, innovative and service-based workforce.

They pulled it off because of a strong commitment to education. Even in the years when South Korea’s economy was fueled by low-wage, labor-intensive manufacturing, nearly everyone went to high school. Whether or not South Korean officials were betting that education and economic success went hand-in-hand, it turned out that a strong education system was one of the key factors in the country’s growth, Rozelle says.

“In the 1970s and early 1980s, you had young women who were making shirts and socks in sweatshops transform themselves into highly skilled workers doing high-fashion design and other high-wage, high productivity jobs in the 1990s and 2000s,” Rozelle says. “And the key to it all was that those women went to high school and learned the skills that high-wage paying employers demanded. It was mandatory and free, and those women learned how to read, write and do math.”

China has a lot of catching up to do if it aspires to South Korea’s model. With up to 60 percent of children in poor rural areas missing out on high school, China’s education system in those regions now looks more like Mexico’s.

But if China begins investing heavily, the country stands a good chance of hitting a sustainable economic stride. That means spending about $50 billion a year on services like early childhood education and computer-assisted learning while making sure schoolchildren have the health care, vision care and nutrition they need to pay attention and perform well in class.

“China has the money and the resources to contain the problem,” Rozelle says. “But it needs to do something right now, because time is running out.” 

Kenjiro Takenami, Director of Ruby Software Business Development Project at Fukuoka Prefectural Government, spoke to an audience at Stanford about the government’s success in promoting entrepreneurship in the Fukuoka region of Japan, at a seminar organized by the SPRIE-Stanford Project on Japanese Entrepreneurship (STAJE) on November 3^rd, 2011.

In Takenami’s presentation, he discussed that Fukuoka now has over 800 local software and digital content companies with the number of companies increasing 20% annually. It is ranked 5^th in Japan for the total number of software businesses and total software sales revenue. He described that in the past, Fukuoka had faced challenges in promoting entrepreneurship because of the lack of investment, mentors, and innovators. In an attempt to solve these challenges, the Fukuoka government created new programs that financed local start-up companies and supported venture capital funds. However, these programs failed to boost entrepreneurship and regional development.

Takenami revealed that the turning point for the Fukuoka government’s success was the decision to support research and development for Ruby, a dynamic, open source programming language developed in Japan. The government committed to build a community around the programming language and helped entrepreneurs and businesses develop new technologies that used Ruby. They launched multiple incubators for developers and held periodic conferences for the community members to inspire and learn from each other.

Fukuoka prefecture has a population of five million and a GDP of over 180 billion US dollars. The city of Fukuoka, which was selected as one of the “Hot Cities The Top 10” by Newsweek in 2006, has been attracting the attention of foreign investors. It is located on the northern tip of Kyushu and is geographically closer to China and South Korea than any other major Japanese city. Historically, it has been the hub for business and trade to continental Asia. The prefecture is ranked 2^nd in Japan for the number of universities and colleges specializing in science and engineering, with approximately 7,000 graduates every year.

Takenami concluded the seminar by highlighting that eight times as many local companies in Fukuoka develop using Ruby since they began in 2008. He also shared success stories of companies which began in Fukuoka, but are now internationally known, such as Nautilus Technologies.

ABOUT THE Speaker

Kenjiro Takenami is Director of Ruby Software Business Development Project, Commercial and Industrial Policy Division of Fukuoka Prefectural Government and is responsible for the Fukuoka’s software industry development efforts. Takenami is the former Executive Director of the Fukuoka Center for Overseas Commerce in America, based in Silicon Valley.

Following the seminar, SPRIE-Stanford Project on Japanese Entrepreneurship (STAJE), Stanford Graduate Business School and US-Asia Technology Management, Stanford School of Engineering co-hosted the Fukuoka Ruby Night Event, an annual Ruby developer conference, organized by the Fukuoka Center for Overseas Commerce in America (FCOCA).

The video clips for the keynote presentations of this event can be found here.

Stanford’s Center on Food Security and the Environment (FSE) has received a $2 million grant from Cargill, a second gift from the company that raises its total contribution to FSE to $5 million over 10 years.

The announcement was made Nov. 10 at a dinner celebrating the launch of FSE as a full-scale research center. FSE has more than doubled in size in five years. Because of its growth and increasing importance of food security issues at Stanford and worldwide, it became an official center in September.

“The center’s rapid growth would not have been possible without the generous support of Cargill,” FSE Director and William Wrigley Senior Fellow Rosamond L. Naylor said. “Cargill’s initial investment provided seed-funding for the bold, new research and teaching that was happening at FSE while keeping our lights on and the staff running during our critical years of early development.”

A $3 million grant from Cargill in 2008 jump-started a visiting fellows program at FSE and helped build the infrastructure to support the center’s research.

The new grant will continue to provide program support, but will also be used to hire younger faculty and scholars to Stanford to work within the new Center.

Stanford-Cargill partnership

Stanford's partnership with Cargill extends back to 1976 when Cargill endowed Walter P. Falcon, then Director of Stanford's Food Research Institute and now FSE Deputy Director, with the Helen C. Farnsworth Professorship in International Agricultural Policy. The gift was intended to strengthen Stanford's work in agricultural policy, specifically as it relates to the international grain economy. FSI senior fellow Scott Rozelle now holds the Helen C. Farnsworth chair.

FSE and Cargill remain committed to helping feed a growing population while preserving the planet's natural resources. FSE is an applied group focused on providing real solutions to important food and agricultural issues.

“Poverty is the main issue driving food insecurity—it’s a question of access rather than food availability,” Naylor said.

FSE’s partnership with Cargill has demonstrated how Stanford-based research can be relevant to the private sector. FSE is conducting ongoing research on oil palm and land use issues in Indonesia that is helping inform and shape policy. Work on aquaculture feeds in China is another overlapping area of interest, as are ongoing assessments of biofuels in the U.S., Africa and Asia. Both have a stake in better understanding climate change impacts on agriculture and food commodity price volatility.

“It is clear to us at FSE—and increasingly to leadership of Stanford—that global food security will remain a critical issue within international policy circles,” said Naylor. “With support like the grant from Cargill, we are confident that Stanford can play a leading role in shaping the future policy discourse.”

The International Energy Agency has released its flagship publication on global energy markets. PESD research directly contributed to a special section in this year’s outlook focusing on coal.

PESD Working Papers that helped inform the analysis include:

1. Industrial Organization of the Chinese Coal Industry by Kevin Tu
2. The Future of South African Coal: Market, Investment, and Policy Challenges by Anton Eberhard
3. Remaking the World’s Largest Coal Market: The Quest to Develop Large Coal Power Bases in China by Dr. Huaichuan Rui, Richard K. Morse, and Gang He
4. The World’s Greatest Coal Arbitrage: China’s Coal Import Behavior and Implications for the Global Coal Market by Richard K. Morse and Gang He

 

For more information: http://www.iea.org/weo/

This past Thursday, on the 10th of November 2011, former U.N. Secretary-General, Kofi Annan delivered a speech at Stanford University on the occasion of the launch of the Freeman Spogli Institute for International Studies' Center on Food Security and the Environment. Citing UN estimates, more precisely the UNFPA State of the World Population 2011 report, he highlighted that the world population had recently reached seven billion and growing. Advancements in healthcare and technology have increased our life expectancy, affording 'man' the ability to escape a life that is, in Hobbesian parlance, "poor, nasty, brutish, and short." Yet this apparent human success story eclipses the "shameful failure" of the international community to address an indiscernible fact: that in the contemporary technological age, an astonishing number of people in the world go hungry each day. The marriage of a globalized economy and scientific innovation was supposed to - at least in theory - increase and spread wealth and resources to enhance the human condition. And yet today - talks of unfettered markets and the financial crisis aside -, we lay witness to close to one billion people around the world who lack food security (both chronic and transitory). Citing numbers from the World Bank, Annan stated that rapidly rising food prices since 2010 have "pushed an additional 70 million people into extreme poverty". Adding to these disturbing figures is the fact that one of the world's most ravenous culprits of infanticide is no other than hunger, which claims the young lives of 17,000 children every day.

Dwindling incentives to farm and increasing pressures on farmers are not helping the food insecurity crisis. Frequently, companies who contract local farmers to produce cash crops for export do not employ "strategic agricultural planning" or take into account the impact their policies and modus operandi may have on local farming communities and their immediate (food) needs. Artificially low prices for agricultural goods force farmers from their land and discourage investment in the sector, Annan warns. Agricultural subsidies in the US and Europe against farm produce injected into the market by farmers from developing countries have also added to the problem. Agricultural subsidies in Europe in particular have had a devastating impact on farmers from other parts of the world - mostly in Asia and Africa - who simply cannot compete with the existing market conditions and the low price tags attached to their goods. This phenomenon is most acute in Africa where a significant segment of the population lives modestly by working the land and these subsidies are choking the lifeline that feeds their families. To bring home the point of the sheer imbalance between the conditions of Western farmers and the 'rest', Annan stated that with a fraction of the funds generated by a reduction of subsidies, one "can fly every European cow around the world first class and still have money left over". Without a more balanced approach to international trade policy making, subsidies will continue to be a factor in food insecurity.

And it gets worse. The 'Four Horsemen of the Apocalypse' of our times - (i) an ever emerging global water crisis, (ii) land misuse and degradation, (iii) climate change, and (iv) kleptocratic governance - have combined to aggravate an already dire international food insecurity predicament. The hard truth is that without countering the forward gallop of these ills, food insecurity cannot be adequately addressed.

The facts on the ground and projections into the future do not paint a promising picture. Food prices are expected to rise by 50 percent by the year 2050, Annan warns, and this at a time when the world will be home to two billion more inhabitants. In 40 years from now, there simply isn't enough food to nourish and satisfy the world's population.

The growing world food crisis also stifles development. It is the cyclical brutality of poverty that keeps the hungry down. Without the means or access to proper and adequate nutrition, the impoverished who are always the first victims of food insecurity invariably suffer from poor health, in turn resulting in low productivity. This vicious cycle traps the less privileged to a seemingly inescapable downward spiral.

During the course of his poignant remarks, Annan stated that without addressing food insecurity "the result will be mass migration, growing food shortages, loss of social cohesion and even political instability". He is correct on all counts.

The fact is that a world which 'cultivates' and then neglects the hungry is a dangerous and volatile world. Since time immemorial, dramatic human migrations have had a direct correlation with changes in climate, habitat and resource scarcity. Survival instincts are engrained in our genetic make-up. When the most basic and fundamental necessities of life are sparse and hard to come by, our natural inclination is to look for 'greener pastures'. An unaddressed and lingering food insecurity crisis will mean the world will witness significant and rapid migration trends in the 21st century (a phenomenon very much in motion today). The injection of mass flows of people into other foreign populations will cause friction and conflict induced by integration challenges, both social and economic (surmountable, but conflicts no less).

Moreover, the desperation and unmet basic needs of the underprivileged can translate into open outbursts of conflict and violence. Tranquility and social harmony are virtues enjoyed by countries that can provide for their people. Leaving the growing food insecurity dilemma unaddressed will be to invite inevitable political instability and violence in countries and fragile regions of the world grappling with high poverty rates and concomitant food insecurity challenges. More often than not, history has shown a positive nexus between hunger and social upheaval (it bears noting that La Grande Révolution of 1789-99 was preceded by slogans of "Du pain, du pain!"). Further, it does not take too much of a forethought to recognize that it is precisely in environments of destitute and despondency where autocratic rule can easily take root and grow to inflict further suffering.

Food insecurity can also lead to wars, but similarly wars contribute to food insecurity by destroying both the land and the ability to cultivate the land. Conflict represents formidable barriers to the access and availability of otherwise usable land (countries like Somalia, Sudan, Burundi, Ethiopia and Liberia come to mind).

To be sure, "[w]ithout food, people have only three options: they riot, they emigrate or they die" (borrowed from the often cited words of Josette Sheeran, the Executive Director of the UN World Food Program).

How are we to tackle this grave problem in a realistic and effective manner? Annan rightly tells us that the "[l]ack of a collective vision is irresponsible". Implicit in Annan's remarks is also a lack of leadership to effectively tackle and untie the Gordian Knot of food insecurity. The nature and colossal character of food insecurity demands action and cooperation on a global scale. Climate change and its negative impact on the environment - e.g. diminishing arable lands, water resources, recurring drought -, one of the accelerators of food insecurity, requires robust and committed international agreement and action to reduce the emission of greenhouse gases. Strict adherence and compliance with the Kyoto Protocol and the Copenhagen Accord are a must in this regard. With strategic agricultural planning, knowledge transfer and investment, uncultivated arable lands - abundant in many parts of the world, including in Africa - can become productive and bear fruit, reducing in turn the hunger crisis. Efforts to implement more balanced international trade policies which make farming viable across continents as well as efforts to eradicate corruption (by promoting good governance) are also part and parcel of the fight against hunger. So are innovative ways of thinking about establishing, say rapid response mechanisms to preempt and effectively counter famine and other food emergencies by bolstering the capacities of relevant existing international and regional organizations. We could also reduce the threat of hunger by doing more than just pay lip-serve to the UN Millennium Development Goals (MDGs) and uphold our commitments to the MDGs through sustained funding and support.

The UN and other multilateral bodies and pacts are tools we have created to work collaboratively - as best as human frailties permit - to confront global challenges and ills that threaten the social fabric of human society (whether they be food insecurity, dearth in development, war and the crimes that emanate from aggression which threaten peace and security, inter alia). Our capacity to reason, innovate, communicate and cooperate is hence an indispensible tool in our struggle to keep the peace, to protect our fundamental human rights and to satisfy our most basic needs for survival. It's time to put these faculties to work in confronting the world's food security challenges.

It is only fitting to conclude these brief remarks by quoting from the man and the lecture that inspired them. "If we pool our efforts and resources we can finally break the back of this problem", stated Annan in his call for action to defeat food insecurity. If there's a will, history tells us, change is within grasp, no matter how daunting the task. It only takes the trinity of courage, commitment and leadership.