Food Prices: Drivers and Welfare Impacts in Emerging Market Economies - a new SIEMS research

Growing protests against high food prices in both the developing and developed world have elevated food prices to one of the top issues in the international agenda. Global food price increases in recent years have been astronomical. However, if unabated, these price increases threaten to erase much of the gains in poverty reduction that have been achieved in the last decade and reduce the growth rate of the most dynamic emerging market economies.

In their new Research «Food Prices: Drivers and Welfare Impacts in Emerging Market Economies» SIEMS experts offer a preliminary diagnostic of some of the important factors which may have contributed to the immediate crisis. Some of these factors are more immediate and possibly short-term in nature while other factors will impact countries’ food security in the medium- to longer-term.

The Figure below summarizes the content of this article and illustrates a preliminary “anatomy” of the present global food crisis.

Food Price Drivers

Short-term external factors: 


FINANCIAL SPECULATION. There is suggestive evidence that there is indeed a speculative bubble at least in some commodities. It is difficult to reconcile such abrupt volatility and sharp increases in some commodities with changes in fundamentals. The role of index investors has increased substantially, bringing a new class of investor and a new way of investing into commodity markets.

HIGHER OIL PRICES. The higher price of petroleum has helped raise the costs for producing agricultural commodities (namely the costs of fertilizers, some of which are petroleum-based), thus creating add-on effects to the cost of production and productivity.

GOVERNMENT POLICIES. Authorities have responded in a variety of ways to meet the challenges related to the recent increases in food prices. Some of these policies are meant to secure a country’s food stocks and keep domestic prices affordable, including applying taxes on exports, export ceilings or bans.

Medium- to long-term external factors:


RISING AND CHANGING PATTERNS OF FOOD CONSUMPTION. Global demographic changes and changing patterns of income distribution over the next fifty years are expected to lead to an increased general demand for food, as well as different patterns of food consumption. It is predicted that global cereal demand will increase by 75 percent between 2000 and 2050, while global demand for meat is expected to double during that same period. The increase in demand for the latter also implies a concurrent increase in feedstock demand. It is expected that more than three-fourths of this growth in demand for both cereals and meat will be accounted for by developing countries, notably China and India.

An article by Pierre Casse: "Manager or leader - feel the difference"

Here is the translation of the article by Pierre Casse, the SKOLKOVO professor, published last week in his personal blog on the Vedomosti Newspaper. The original text in Russian is available here.

The difference between a leader and a manager can be explained in two words: the first inspires, the second directs. The only problem is that leaders are born, and managers are trained. And these two lines can be really seldom found in one person. However if a company lacks both there will be soon no company as well.

Hardly there is an employee who can’t tell you what is being wrongly run at his work and what is to be done for everything to work better. It’s generally assumed that how to cure and to teach people acquire from the very childhood and without any graduation. Thus it’s even more surprising that work of many companies is inefficiently built. And it is good if a manager timely notices a problem.

Having achieved the needed financial results, Jim Adamson, Ex-CEO of NCR (Dundee Scontland), announced, “From now on I’m going to spend 80% of my working time on removal of barriers on my employees’ way so they could run faster”. Jeffrey immelt, CEO of General Electric, has expressed a similar opinion more than once as well, just may be not so vividly. According to Mr Immelt from the moment he occupied his position he had to spend at least one third of his time on communication with employees in order to understand what they would like to have and what is lacking for better work conditions. Such work, sometimes bureaucratic and dull, doesn’t have much in common with the high concept of leadership.

The essence of management is to create an atmosphere, depending on the company’s character, where it would be comfortable for people to work and as easy as possible reach their best results. There are lots of factors that a manager has to consider. How to build the system of the employee-manager interaction, how to launch processes of internal communication and even how to organize the vacation schedule is to be taken care of.

Advice on business literature from Helen Edwards

A new selection of business literature from SKOLKOVO Library Project Manager Helen Edwards - read, discuss and advise the most interesting books!

1. Poor economics: a radical rethinking of the way to fight global poverty
Abhjihit Banerjee and Esther Duflo
PublicAffairs, 2011.
320 pages
ISBN: 978-1586487980

Winner of the FT Goldman Sachs Business Book of the Year 2011, this book reveals the lives of the 850 million people who live on less than a dollar a day. By a process of randomised controlled trials throughout the world, the researchers test the impact of policies designed to help poor people. They found that the billions of dollars spent on government, NGO and charity sponsored programmes can be based on untested assumptions, characterised by ideology, inertia and ignorance. Also the perilous existence endured by the very poor can affect their decision making, so that seemingly beneficial opportunities are not taken up. This book maps out a third way between those in favour of foreign aid and those who believe it does no good.

2. Willful blindness: why we ignore the obvious at our peril
Margaret Heffernan
Simon & Schuster, 2011.
391 pages
ISBN: 9781847377708

Also shortlisted for the FT Goldman Sachs Business Book of the Year 2011, Margaret Heffernan looks into the concept of wilful blindness, defined as that which you could and should have known, but deliberately determine not to see. The book explores such concepts as "just following orders" and "out of sight out of mind" where people play their part in activities while shielding themselves from acknowledging their full impact. Systems also have much to answer for by dissipating information and reducing individual responsibility and by maintaining competitive corporate cultures which provoke conformity.

3. The rare find: spotting exceptional talent before everyone else
George Anders
Portfolio Penguin, 2011.
276 pages
ISBN: 9780670920945

Instead of asking if a candidate or employee is good enough, this book explores how to identify those people with spectacular potential. Despite availability of ever more data, when it comes to spotting the stirrings of genius, conventional selection processes often miss the very people able to make the most impact. The author discusses the jagged resume, talent that whispers and talent that shouts, using stories from the performance industries - sport, the arts and entertainment- , the high stakes business of finance and IT and public service - the military, teaching, government and medicine. Examples include the Facebook puzzle page where computer programmers can submit their solutions to problems, through which Facebook has recruited some extraordinary talent which would never have passed standard hiring routes.

11/11/11 at SKOLKOVO: secrets of getting to know people

On 11.11.11 an event in an unusual form took place at SKOLKOVO. Our guests has a chance to meet 11 SKOLKOVO MBA representatives “face-to-face” sticking to the speed dating rules. Each had just 11 minutes to tell about himself, to win the companion’s favour, to ask for advice or to get answers to his questions.

At 11.11 AM sharply the event started, and for more than two hours our guests were wandering between the tables to meet the SKOLKOVO experts. The event ran extremely actively; there were even cases of competition for a place at this or that business-school representative’s table. As a result everybody was delighted and after the end of the official part had an opportunity to continue discussion with the most interesting companion over a coffee. And our 11th guest received a souvenir – a book from the SKOLKOVO series.

We also engaged ourselves in the form of brief meetings and held a rapid quiz of the SKOLKOVO representatives. Find out opinions of our experts on how it’s better to proceed during the first meeting and what should be avoided, and discover the secrets of entering the SKOLKOVO MBA programme.

1. How should one introduce himself, proceed and what should he talk about you in order to impress you?

Lawrence Wright, SKOLKOVO start-up projects director, he also leads SKOLKOVO entrepreneurial eco-system:
«I suppose the key secret is to inspire the companion. One should focus on his own vision. People just can’t remember much information, that is why one should speak clearly about the project concept, explain why it’s important and offer a couple of others short points that are easy to keep in mind».


Tatiana Scherban, SKOLKOVO Director of Career Development and Admission department:
«People are my key occupation; I work with people, that is why each person is interesting for me».

Nadezhda Kuznetsova, in charge of Students’ Individual and Career development:

«Presence of personality makes the strongest impression. If a person is vivid, interested, if he has his own opinion, it will be always fascinating to talk to him. If a person speaks so or has such questions that show that he has an outlook, has dreams, that he differs from others, he will be always welcomed at SKOLKOVO».


Stepan Kolesnechenko, SKOLKOVO MBA student of the third intake:
«People who have already achieved something, who clearly understand what they need, make the strongest impression on me. The point is that many don’t have a strong opinion why they are here, what they want and what the result is going to be. No dream, no dear purpose. For sure, in the process new ideas come, some drive appears. However if a person enters a business-school and invests a significant sum of money, he should understand why he does it, why it is interesting for him. He should have the entrepreneurial spirit inside, his eyes should glow. And I suppose that the future of SKOLKOVO is based on people who have this drive, who understand that they invest money on this stage, but they are already living another life, in some other condition where this money doesn’t play any role».

Irina Linnik, SKOLKOVO MBA Alumni, graduated 2010, co-founder of "Knopka Zhizni":
«People buy you as a personality but not the words you speak out. That is why it is the worst variant when people try to adjust to the companion. Be yourself, be self-confident, don’t spell out everything that crosses your mind but try to deliver the information that could be interesting for the companion. If you came to find something out, you should listen more than talk».

SKOLKOVO Entrepreneurs’ Club meeting: “A good entrepreneur with a bad idea is more likely to succeed than a bad entrepreneur with a good idea”

On October, 26, another meeting of SKOLKOVO Entrepreneurs’ Club took place (read here about the September meeting). The number of our guests rises, and this time we were happy to welcome more than 100 people united by the idea of enterprise! We would like to thank all our guests and speakers for a wonderful evening, especially Lawrence Wright, founder and moderator of the Club who every time finds and invites interesting people ready to share their experience.

For the first time the meeting started with a first film performance, namely, a documentary about history of Alaska, various cultures mixed there and Russian culture in particular. The film is made in a modern way with a good spirit; it inspires and leaves a lot to think about. After the show Elena Golubeva, director of the film, told everybody how the film had been created and how that work had pulled together her team. She also mentioned that she had plans to launch the film on TV.

After that, traditionally, performances of the speakers started.

Kendrick White, Executive director of Marchmont Capital Partners in Nijniy Novgorod, shared his experience in management of Russian companies and venture investment. . Kendrick supposes that there are lots of ideas in Russia that cost more than gas and oil, but if no venture specialists to cooperate with scientists are found, these ideas will be left dying in laboratories. At the end of the day scientists can’t work alone – they should interact with the outer world.

“There are lots of talented, genius people in Russia. However the science is totally separated from business-processes nowadays. This is the core problem”.

In order to solve this problem Kendrick proposes to organize a group of specialists in each Russian city which will help scientists to promote their ideas. However the issue of trust and communication is still left as people, incubators and companies almost don’t communicate with each other.

After all Mr White recommended several books, the whole list may be found on the SKOLKOVO Library page.

One of the brightest quotation by Mr Kendrick White:
“Driving force of progress, economy, innovations, everything is individual motivation”.

Anna Puzey, SKOLKOVO: “Studying turned out to be harder than work”

Former marketing director for Arbat Capital, and now a student of the third intake of SKOLKOVO MBA programme, is sharing her impressions after two months of studies.

8 weeks have passed since I started my SKOLKOVO studies. Since then I have heard 6 courses, solved around 60 cases and passed 10 exams; two times a week we have met businessmen of Dmitry Grishin’s level (Mail.ru Group); I had a picture with Medvedev (my mom is pleased now); and I learned some basics of Chinese (the Russian part of our group is studying Chinese).

The only thing is that it all turned out a bit different than I expected. That’s why I will try to dispel some myths here again, this time about MBAs, basing on my SKOLKOVO experience, and also to give some advice to those who are choosing a programme for themselves now.

Studying turned out to be harder than work


When I was preparing to my GMAT exam, I thought that scoring 710 at it is the hardest thing about the whole MBA idea. As one of my classmates at pre-MBA courses told, “The thing is to get yourself into it, and then we’ll see”. Well, I’m afraid to disappoint some of you who are not really ready to stick to some intellectual labor – but here is the picture of my study materials for two weeks. Actually, all the first months at SKOLKOVO are pretty intense; this is done to prepare the students for corporate projects (all in all we are to pass through 6 projects).