Tag Archives: development economics

Nominate the best blogs of 2012

19 February 2013

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A View From the Cave blogger Tom Murphy is holding the annual Aid Best Blogger Awards (ABBA). I don’t consider my blog to be an “aid blog” per se but I think I fit into the general category that Tom intended to include in his awards.

If I may toot my own horn a little, I even once got a shout out from one of the better know aid bloggers out there, Chris Blattman (Blogger of the Year last year).

So if you like what you read on this blog please go ahead and nominate the blog for this year’s awards here.

Some of my better posts in recent months have been on the topics of the upcoming elections in Kenya and the conflict in eastern DRC.

Did European Colonialism Benefit Africans?

6 December 2012

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“We find it difficult to bring the available evidence together with plausible counter-factuals to argue that there is any country today in Sub-Saharan Africa which is more developed because it was colonized by Europeans. Quite the contrary.”

That is Leander Heldring and James Robinson writing in a new paper on the negative impact of colonialism on Africa’s economic prospects.

Source: Wikipedia

Source: Wikipedia

Interesting attempt at positive analysis of a difficult subject (esp. with regard to counter-factuals), although normative undertones drive most of the analytical narrative.

The negative legacies of colonialism – despotism, negative ethnicity, aid dependence, and general underdevelopment, etc – certainly do persist.

But for those unwilling to submit to the gods of path dependence, the question remains of how long incompetent African leaders will continue to blame outsiders for their own ineptitude. After half a century of independence, many Africans are wary of being the only ones left in the “bottom billion” once the East and South Asians climb up.

To paraphrase Achebe, the trouble with Africa is simply and squarely a failure of leadership. There is nothing basically wrong with the African character. There is nothing wrong with the African land or climate or water or air or anything else. Even external conquest and subsequent colonialism was not unique to Africa.

H/T Chris Blattman.

Rational Impatience and marshmallows (and development)

13 October 2012

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Back in 1972 Stanford psychologist Walter Mischel conducted experiments in which he claimed to show a correlation between patience and later success in life – in the experiment kids who could wait for 15 minutes before getting two marshmallows, instead of eating one immediately, were likely to be more successful and self-controlled later in life. Michel attributed patience and self-control to some of the kids’ innate capacities.

It turns out that that might not be the case after all. Researchers in Rochester revisited the experiment and show that kids’ choices over whether to wait or not are “moderated by beliefs about environmental reliability,” in other words, kids react rationally to the proposed deal based on prior experience.

According to Celeste Kidd (more on this here), a University of Rochester grad student and lead author on the study:

“Being able to delay gratification — in this case to wait 15 difficult minutes to earn a second marshmallow — not only reflects a child’s capacity for self-control, it also reflects their belief about the practicality of waiting,”

Adding that:

“Delaying gratification is only the rational choice if the child believes a second marshmallow is likely to be delivered after a reasonably short delay.”

This reminded me of the interesting works in economic history (gated, sorry) that try to tackle issues of culture and socialization and their role in economic development. The punchline from these works is that group-specific socio-cultural values have long-lasting effects on attitudes towards investment, saving, entrepreneurship and ultimately economic development (Think of the fabled frugality and self-discipline of Weber’s protestants). Putting some of the critiques of these works aside for a moment, they are a reminder of just how COMPLEX development is.

Because material conditions both shape and are a result of prevailing cultural norms and practices (both Marx and Weber were right!) it becomes difficult to change one thing while ignoring the other (And this is even before you open the pandora’s box, viz: POLITICS). To put it simply, you cannot increase the investment rate in a society simply by throwing money at people. They will spend it on a new shrine for their god or marry a third wife.

This is not to say that it is impossible to transform entire societies in a short while, just that it is not easy, and that we should be humble enough to accept this fact when thinking about how to promote economic development in the bottom billion societies of the world.

Re-assessing Africa’s Resource Wealth

21 September 2012

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Over at African Arguments Bright Simons tries to debunk the accepted paradox of African poverty in the middle of a natural resource glut. The post is definitely worth reading, and raises some salient questions regarding resource use and development policy in Africa – and by extension, the economic viability of some African states (thinking of Chad, Central African Republic and Niger….)

Of those few minerals that Africa is believed to hold globally significant or dominant reserves, nearly all of them are concentrated in 4 countries: South Africa, Angola, Democratic Republic of Congo and Guinea. When one computes the level of inequality of mineral distribution across different continental regions, Africa pulls up strongly, showing a far higher than average level of distribution ‘imbalance’ per capita or square mile. In very simple terms, it means that mineral wealth is more concentrated in a few countries in Africa compared to other continents. 

Adding that…..

with the exception of bauxite and petroleum, these minerals are not as widely used in industry (or in the same considerable volumes) as a number other minerals, such as tin, copper, nickel, zinc, iron, coal, and lead, that Africa does not produce in sufficient quantities. Indeed, of the top 5 metallic minerals which constitute 62 percent of the total value of global production, Africa is only a significant producer of one of them: gold. Africa has 8 percent of the world’s copper, 4 percent of aluminium, 3 percent of its iron ore, 2 percent of lead, less than 1 percent of zinc, and virtually no tin or nickel. To put these figures into perspective, recall that Africa has about 14.5 percent of the world’s population.

….. Africa’s low production of the ‘hard minerals’ minerals most intensely used in industry compared to the less widely used ‘soft minerals’ reduces its total take from the global mineral trade. But it also makes a nonsense of fashionable policy prescriptions that emphasise import-substitution strategies based on value addition to minerals, rather than export competitiveness through smart trade strategy and the deepening of the financial system to support entrepreneurs.

More on this here.

H/T Africa in Transition.

Persistence of Culture (and Institutions)

6 September 2012

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“How persistent are cultural traits? Using data on anti-Semitism in Germany, we find local continuity over 600 years. Jews were often blamed when the Black Death killed at least a third of Europe’s population during 1348–50. We use plague-era pogroms as an indicator for medieval anti-Semitism. They reliably predict violence against Jews in the 1920s, votes for the Nazi Party, deportations after 1933, attacks on synagogues, and letters to Der Sturmer. We also identify areas where persistence was lower: cities withhigh levels of trade or immigration. Finally, we show that our results are not driven by political extremism or by different attitudes toward violence.”

That is Voigtlander and Voth writing in the Quarterly Journal of Economics.

Their paper speaks to my previous post on the challenges of institutional engineering given the stickiness of institutions (and by extension the cultures that create and then reinforce them). Of course culture is a dicey subject that is often misused to explain economic and social outcomes. Instead of using the amorphous term “culture” I prefer to hear more about the reward systems that make it beneficial for individuals and communities to engage in certain cultural practices.

On a more positive note, the paper provides some evidence of the power of economic opportunities to dis-incentivize engagement in hateful cultural practices:

“Instead of reinforcing persistence, we argue that economic factors had the potential to undermine it…… Our results also lend qualified support to Montesquieu’s famous dictum that trade encourages ‘‘civility.’’

Where do the poor live, and how do we make them become middle class?

2 September 2012

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The Economist reports:

“WHERE do the world’s poor live? The obvious answer: in poor countries. But in a recent series of articles Andy Sumner of Britain’s Institute of Development Studies showed that the obvious answer is wrong. Four-fifths of those surviving on less than $2 a day, he found, live in middle-income countries with a gross national income per head of between $1,000 and $12,500, not poor ones. His finding reflects the fact that a long but inequitable period of economic growth has lifted many developing countries into middle-income status but left a minority of their populations mired in poverty. Since the countries involved include giants like China and India, even a minority amounts to a very large number of people. That matters because middle-income countries can afford to help their own poor.”

The article raises important issues that inform the debate on how to tackle problems of poverty and underdevelopment – is it all about politics & governance or all about economic expansion? The answer, of course is that it is a moderate mix of both.

But since political realities often force governments to concentrate on one or the other, a responsible answer is that it is all context-dependent; some places need strong economic expansion first, before political reforms can be anchored in society. In others, political change should be top of the checklist.

The Botswanas and Singapores of this world are lucky in that their leaders were smart enough to know what their countries needed and pursued it with singular ambition, despite the unavoidable mess that came with the choices they made.

This of course goes against the received wisdom among academics (me included) who believe in the strong power of the right types of (liberal, in the classical sense) institutions to put countries on the path to becoming Denmark. The problem with this approach is that it does not tell us how to compress the more than 600 years that transpired between the Magna Carta and the voting reform legislations in England in the latter part of the 19th century. Lest we forget, England (which is every scholar’s favorite source of empirical conceptualization of institutional development) has not always had good institutions.

Institutions take a lot of time to build. A lot more time than the average human life span.

So the question still stands: How do we get the most number of people out of poverty in the least amount of time with the least harm to their political and human rights?

More on this here.

On technology, governance and development

14 August 2012

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By now many of you have perhaps seen the takedowns of TED talks (see here, highly recommended), which some think have become rather pedestrian (I still find most TED talks insightful, just for the record).

The pushback against the belief among some disciples of TED talks that technology is the answer to all of humanity’s problems (whether this depiction is accurate or not) also speaks to the issues of governance and development. As Shea, the Journal’s blogger points out:

……. Morozov also detects, besides superficiality, a distinctively TED-style attitude toward politics in which institutions and democratic debate are derided and technology is looked to as a deus ex machina that will solve such once-intractable problems as poverty and illiteracy—obviating those pesky voters and squabbling elected leaders.

The global “development sector” has recently seen a wave of tech-inspired attempts to accelerate development by bypassing politics and other socio-cultural inhibitors, with little success (development economists are also implicated here). The lesson that many have missed is that bad governance and underdevelopment are not primarily technical problems that can be fixed by experts. Many have fallen to the temptation of thinking that,

…. technology is an autonomous force with its own logic that does not bend under the wicked pressure of politics or capitalism or tribalism; all that we humans can do is find a way to harness its logic for our own purposes. Technology is the magic wand that lifts nations from poverty, cures diseases, redistributes power, and promises immortality to the human race.

The characterization of governance and development as purely technical risks abstracting too much away from the human beings that development is supposed to help. Think of how scientific communism worked out. Statements like the one below are a reminder that bad ideas die hard.

Using technology to deliberate on matters of national importance, deliver public services, and incorporate citizen feedback may ultimately be a truer form of direct participation than a system of indirect representation and infrequent elections. Democracy depends on the participation of crowds, but doesn’t guarantee their wisdom. We cannot be afraid of technocracy when the alternative is the futile populism of Argentines, Hungarians, and Thais masquerading as democracy. It is precisely these nonfunctional democracies that are prime candidates to be superseded by better-designed technocracies—likely delivering more benefits to their citizens…. To the extent that China provides guidance for governance that Western democracies don’t, it is in having “technocrats with term limits.”

The problem, of course, is that more often than not these “technocrats” in the poor countries of the world (read those with the most and biggest guns, a.k.a autocrats) are woefully incompetent (see here) and never observe their term limits (this classic on dictatorship comes to mind).

The question of what to do with the relatively more competent autocrats will be the subject of a future post.

H/T Ideas Market

On Rwanda’s brand of Developmental Authoritarianism

21 June 2012

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Many, including yours truly, have a love-hate relationship with Paul Kagame and his RPF regime in Rwanda.

On the one hand, his adventures in eastern DRC; alleged involvements in the assassination of opposition figures both at home and abroad; and overall restriction of political space in Rwanda are cause for concern. But on the other hand, he seems to be doing a marvelous job on the economic front (see here and here, for instance).

Source: Kigali City Official Website

In the latest issue of African Affairs, Booth and Golooba-Mutebi explore the nature of state-led development in Rwanda, with particular attention to how state-run companies are “ice breakers” for private sector firms in different sectors of the economy. The paper also observes Kagame’s strict separation of state and private accumulation of wealth, a fact that is demonstrated by Rwanda’s comparatively good performance on corruption indices. It is definitely worth reading.

Here is part of the abstract:

This article addresses one thematic gap – the distinctive approach of the RPF-led regime to political involvement in the private sector of the economy. It does so using the framework of a cross-national study which aims to distinguish between more and less developmental forms of neo- patrimonial politics. The article analyses the RPF’s private business operations centred on the holding company known successively as Tri- Star Investments and Crystal Ventures Ltd. These operations are shown to involve the kind of centralized generation and management of economic rents that has distinguished the more developmental regimes of Asia and Africa. The operations of the military investment company Horizon and of the public–private consortium Rwanda Investment Group may be seen in a similar light. With some qualifications, we conclude that Rwanda should be seen as a developmental patrimonial state.

I often tell my friends that at the end of the day, really, all that matters is that we bring down infant mortality to under 10/1000 live births [this is a good proxy for quality of life] and improve the standards of living for the average person, everywhere.

With that in mind, the favored retort among anti-democracy crowds in Sub-Saharan Africa – that “you can’t eat democracy” – has some truth in it. I bet most people would rather live in authoritarian Singapore than democratic Malawi (feel free to disagree).

The point here is that good governance (and for that matter, democracy) are means to an end, and we should never forget what the end is – that is, the improvement of the human condition for all. And yes, I agree that democracy, i.e. political freedom, could also be an end in itself, with the qualifier that those most likely to enjoy freedom are those that are already fed, clothed and housed, with a little more time to spare to blog and read Chinua Achebe, Ngugi wa Thiong’o or Okot P’Bitek.

China and Vietnam in Asia, and now Rwanda and Ethiopia in Africa, are cases that will continue to invigorate the debate over how to improve living standards for the largest number of people in the least amount of time.

For now my love-hate relationship with Paul Kagame and Meles Zenawi [of Ethiopia] continues….

On Industrial Policy (In which I concur with Blattman 1001%)

7 May 2012

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I have made the case before here, here and here.

For more here’s Blattman, commenting on Industrial policy:

“You can’t pick winners” is the knee-jerk retort to the mention of anything that even rhymes with industrial policy. I would call it the triumph of ideology over evidence, except that even “ideology” feels like a generous term. Lazy thinking might be a more accurate description. Some have given the question a great deal of thought, but most have not.

I’m not suggesting that the paper above has the right answer (odds are, like most papers, it does not). I’m also not suggesting that governments can pick winners (probably they can’t). Nor am I forgetting that industrial policy is easily politicized and distorted (as surely it is). So what am I talking about?

More on this here.