Glencore buys out Dan Gertler, Israeli businessman accused of bribing DRC’s President Joseph Kabila

It’s hard to imagine a more fitting embodiment of the sad story of economic vandalism in the DRC than the friendship between Israeli businessman Dan Gertler and President Joseph Kabila. Regular readers know that Gertler’s pillage of the DRC is a pet topic on this blog – see here, here, here and here, for example.

Now FT’s  has yet another story on how mining giant Glencore has been forced to buy out Gertler over accusations of bribery:

After years of doing business together in one of the world’s poorest countries, Glencore has dissociated itself from Dan Gertler, an Israeli mining tycoon implicated in the payment of bribes to the ruler of the Democratic Republic of Congo.

Glencore’s announcement last month that it would pay $534m to Mr Gertler to buy him out from their shared prize assets in the DRC — two giant copper mines — is designed to insulate the London-listed mining cum trading behemoth from the fallout of a widening corruption investigation involving the Israeli businessman, say people who have followed the saga. The decision by Ivan Glasenberg, Glencore’s chief executive, highlights the risks of doing business in the resource-rich, war-torn central African country, where Mr Gertler wields influence by virtue of his close friendship with Joseph Kabila, the DRC president.

Settlement documents released in September by US authorities in a scandal involving Och-Ziff, the New York hedge fund, alleged that an “Israeli businessman” — whose description clearly matches Mr Gertler — had paid bribes to Mr Kabila in order to obtain special access to mining rights in the DRC.

One banker who does dealmaking in the mining sector and owns Glencore shares says the company’s purchase of Mr Gertler’s stakes in the two DRC copper mines is defensive. “Buying out Gertler is primarily about detoxification for Glencore,” he adds. “The Och-Ziff investigation in the US has made it very risky to have clear ties to him.”

More on this here. Definitely worth a quick read.

President Joseph Kabila was paid $7m in bribes. Dan Gertler’s buyout is worth $534m in cash, paid by Glencore.

Intrahousehold Inequality Across Income Levels: Evidence From Nutrition Data

Antipoverty policies in developing countries often assume that targeting poor households will be reasonably effective in reaching poor individuals. This paper questions this assumption, using nutritional status as a proxy for individual poverty. The comprehensive assessment for Sub-Saharan Africa reveals that undernourished women and children are spread widely across the distribution of household wealth and consumption. Roughly three-quarters of underweight women and undernourished children are not found in the poorest 20 percent of households, and around half are not found in the poorest 40 percent. The mean joint probability of being an underweight woman and living in the poorest wealth quintile is only 0.03. Countries with higher overall rates of undernutrition tend to have a higher share of undernourished individuals in nonpoor households. The results are consistent with evidence of substantial intrahousehold inequality.

…. the paper has provided a comprehensive study for 30 countries in Sub-Saharan Africa. We find a reasonably robust householdwealth effect on individual undernutrition indicators for women and children. Nonetheless, on aggregating across the 30 countries studied here, about three-quarters of underweight women and undernourished children are not found in the poorest 20% of households when judged by the household wealth index in the Demographic and Health Surveys.

That’s Caitlin Brown, Martin Ravallion, and Dominique van de Walle in a new World Bank working paper. 

 

Naming Diseases After One’s Enemies

This is an interesting graphic showing the initial names giving to syphilis in various jurisdictions.
Screen Shot 2017-03-08 at 1.57.28 PM.png

The WHO recently came out against naming diseases after people, foods, animals, occupations, or places. However, this decision has raised some new concerns. According to Science:

Many scientists agree that disease names can be problematic, but they aren’t sure the new rulebook is necessarily an improvement. “It will certainly lead to boring names and a lot of confusion,” predicts Linfa Wang, an expert on emerging infectious diseases at the Australian Animal Health Laboratory in Geelong. “You should not take political correctness so far that in the end no one is able to distinguish these diseases,” says Christian Drosten, a virologist at the University of Bonn, Germany.

Naming diseases has long been a fraught process. Badly chosen names can stigmatize people, as did gay-related immune deficiency, an early name for AIDS. They can also lead to confusion and hurt tourism and trade. The so-called swine flu, for instance, is not transmitted by pigs, but some countries still banned pork imports or slaughtered pigs after a 2009 outbreak. More recently, some Arab countries were unhappy that a new disease caused by a coronavirus was dubbed Middle East respiratory syndrome.

 

Thoughts of a Warrior-Scholar

I’ve started reading H. R. McMaster’s Dereliction of Duty.

As some of you may know, McMaster is the new national security advisor to U.S. President Donald Trump. I chose the title of this post because, besides sounding great, the term “warrior-scholar” pretty much describes the professors and cadets that I met on my one visit to West Point. The American system of government (including its national security apparatus) has its faults, but a good chunk of Americans certainly do try to engage in everyday performative expressions of the (admittedly still aspirational) ideals of their republic.

Here are two paragraphs in Dereliction of Duty that caught my eye:

McNamara’s Whiz Kids were like-minded men who shared their leader’s penchant for quantitative analysis and suspicion of proposals based solely on “military experience.” Many of them had worked in think tanks and research corporations, such as RAND, and they were eager to apply their techniques to the problems of the Defense Department. Taylor recalled that “cost-effectiveness charts appeared on all the walls, and a whole host of requests for information and advice flooded the JCS.” The two most important offices were Paul Nitze’s International Security Affairs (ISA) and Alain Enthoven’s Systems Analysis divisions.

Enthoven quickly became McNamara’s point man in establishing firm civilian control over the Defense Department. His flair for quantitative analysis was exceeded only by his arrogance.70 Enthoven held military experience in low regard and considered military men intellectually inferior. He likened leaving military decision making to the professional military to allowing welfare workers to develop national welfare programs. Enthoven suggested that military experience “can be a disadvantage because it discourages seeing the larger picture.” He and many of his colleagues believed that most people in the Department of Defense simply tried to “advance their particular project or their service or their department.” He was convinced that “there was little in the typical officer’s early career that qualifies him to be a better strategic planner than… a graduate of the Harvard Business School.” He used statistics to analyze defense programs and issues and then gave the secretary of defense and the president information needed to make decisions. Enthoven saw no limits to the applicability of his methods.

It’s almost as if McMaster had read William Easterly’s Tyranny of Experts. These two paragraphs highlight the dangers of privileging narrowly defined ways of “knowing”; especially when dealing with complex social systems as typically the case with policymaking. McNamara, for some reason, imagined that he could tame Vietnam solely by faithfully following the numbers.

 

Scottish Land Ownership Fact of the Day

As far as land ownership goes, Scotland is still in the 16th century (I am not making any normative judgment here).

This is from a briefing paper for the House of Commons:

Scotland has the most concentrated pattern of private land ownership in the developed world. The degree of concentration is evident from the fact that a mere 432 landowners account for half of all Scotland’s privately owned land – such land (since not much more than 10 per cent of Scotland is in public ownership) accounting, in turn, for the bulk of the country.

 

Economics in Low-Income Countries

I came across Ingrid Kvangraven‘s very thoughtful review of Alternative Theories of Economic Development over at Developing Economics. The book sounds like a rehashing of the standard critiques of contemporary research in the field of development economics, some which tend to fall squarely in the caricature column. That said, caricatures can sometimes be useful in forcing us to reconsider core assumptions. In particular, I think the field of development economics has yet to deal with the problem of being “a tool-driven profession, where the tools determine the types of questions that are possible to ask as well as the type of analysis possible to carry out.”

For instance, I love most of the exciting micro work in development economics, but would certainly be interested in reading more books or papers covering big picture macro topics in developing countries. I also realize that economists from developing countries are the best-placed (in terms of incentives and access to information) to try and answer some of the big picture questions that do not always lend themselves to empirical analyses.

Here are some excerpts:

The editors also emphasize the increasing focus on methods in the field of development economics, rather than theory and history (in line with my own observation). The editors argue that the field has developed into a tool-driven profession, where the tools determine the types of questions that are possible to ask as well as the type of analysis possible to carry out. For example, as pointed out by Viner (1937), increasing returns was removed from international trade theory because it was not compatible with equilibrium. As Paul Krugman (1991) puts it: Economics came to “follow the line of least mathematical resistance”.

screen-shot-2017-02-14-at-3-49-26-pmThe editors also find that the basic fact of uneven development tends to be reduced to models of “dualism,” which implies less attention to the differentiation internal to sectors, and patterns of interaction of different groups of classes within and across sectors. Furthermore, when it is discovered that certain institutions are different from “the norm” in developing countries, they are highlighted and explained using the same basic analytical tools developed for the norm. This type of Economics is what the editors call a National Geographic view of the broader process of development, as only snapshots of particular institutions or economic activities are separated for the analysis.

You can read the whole thing here.

Why is Mugabe Still in Power?

Zoe Samudzi provides some excellent answers to the question of why President Robert Mugabe has had such staying power despite the many political and economic upheavals that have beset Zimbawe since the late 1990s.

Here is an excerpt:

Throughout the course of his thirty-six years in office, President Robert Mugabe has used coercion and violence to clear the Zimbabwean political arena of opposition and dissent and consolidate his political power. He has singularly blamed the deteriorating economy on western sanctions rather than responsibly attributing it also to his own inadequate planning, mismanagement of both capital and resources, his allowance of economic liberalisation and structural adjustment, and political corruption. Yet, contrary to the singularly critical narratives that tend to dominate, he enjoys some earnest support beyond what western reports about stolen elections indicate.

Also:

Most critically, the land issue – an issue of indigenous sovereignty, and perhaps the most unifying politic of Black resistance to colonial rule – went unaddressed. President Mugabe’s refusal to resign or allow regime change is justified, in part, by an idea that the revolution was stalled, and there must be consistent leadership in its continuity. It is no mistake that the ongoing process of land repossession and reform is characterised as the Third Chimurenga, and it is no accident that such vehement western critique has been levelled at state policy (genuine or otherwise) seeking to regain land sovereignty.

Remember that around independence in 1980 some 6,000 European immigrants, nearly all of whom defended the apartheid-lite (Southern) Rhodesian regime, owned 42% of Zimbabwe. Given the importance of land in an agrarian economy such as Zimbabwe’s, this was always going to be a politically untenable situation — regardless of the race of the landowners. Zimbabwe was on a path to significant land redistribution, one way or another.

So why didn’t Zimbabwe deal with the land question before independence in 1980?

Screen Shot 2017-02-10 at 7.45.33 AM.pngThe answer has to do with the the relative political power of the European settler community, especially after UDI. Since 1923 the group had enjoyed effective self-government with significant autonomy from London. And it is precisely because of their political power that Zimbabwe never had a “Swynnerton Plan” akin to what happened in Kenya in response to the Mau Mau anti-colonial insurgency.

Zimbabwe’s landowners failed to appreciate the need to make deals when they had the (political) upper hand. And by so doing set themselves up for very costly reforms/expropriations thirty years hence.

Why they made this choice is an interesting and open question.

Perhaps they trusted that Zimbabwe would continue to rely on Western aid in a manner that would have incentivized property rights protection by the government (under the threat of aid cuts and sanctions). They may have also thought that the government would not be crazy enough to jeopardize its commercial farming sector and risk total economic collapse. Another reason might have been the comfort of knowing that any land reform efforts in Zimbabwe would elicit reaction from South Africa (then under apartheid) in defense of property rights.

Apartheid, of course, ended in 1994. And the first two considerations did not stop President Robert Mugabe, at great cost to Zimbabweans of all stripes.

Given the complicated history of Zimbabwe and the wider anti-colonial struggle in eastern and southern Africa, I expect Mugabe’s legacy to be sanitized as soon as he passes on, especially outside of Zimbabwe.