Africa’s First City

National Geographic has a fascinating take on Lagos. And since we are just under two months to the next Nigerian elections, here is my favorite paragraph:

When I asked Kola Karim if the federal government’s sorry reputation made Western investors wary of doing business in Lagos, the worldly CEO elaborately dismissed it as a nonissue. Companies partnered with companies, not with bureaucrats, he maintained. “What does government do for you anyway, apart from charging you more taxes?” he said. “Look, it’s not about who rules anymore. Lagos is a train that has left the station. And you can only slow it down—you can’t stop it. So it doesn’t matter who comes next. This is the fun of democracy! It’s not about [President] Goodluck Jonathan! It’s about progress! Forget politics!” [More here]

From a political economy standpoint, one of the most fascinating things to happen in Africa over the last decade or so has been the quiet property rights revolution. In Nigeria, and a few other African countries, millionaires and billionaires have come out of the woodwork, willing to have their estimated net worth published in Forbes and other similar magazines for all to see. Very few of them have been politicians. Yes, many made their money in no small measure because of their political connections. But the fact that they no longer feel the need to hide their wealth from the ever changing political class means a lot.

It means that entrepreneurship and politics are getting decoupled in Africa’s biggest and most important economies. This transition is important because it will allow the magic of specialization to flourish. For instance, Dangote must be a savvy entrepreneur. But I doubt that he would have created as many jobs across the Continent if he also had to worry about running Abuja.

Also, it matters that Forbes’ Africa list is increasingly dominated by politically relevant high net worth individuals, as opposed to “apolitical” migrant businesspeople. Dangote is Nigerian “through and through.” When the going gets tough, he is more likely to voice his concerns than simply exit. The chaps in Abuja can’t simply revoke his visa or work permit. His political views therefore matter a lot.

One hopes that at some point Nigeria’s Dangotes will start investing in higher quality political talent to ease the cost of doing business and improve human welfare through greater investment in public goods.  But of course there is another possible equilibrium path in which they decide that low quality political talent is what’s best for their business prospects.

Either way I hope to visit Lagos soon.

Asking the right questions in development

When it comes to aid and development, the question we should be asking is not whether aid works (a.k.a the Great Easterly-Sachs Debate), but rather what kind of aid works and under what conditions.

Here’s CGD’s Jonathan Glennie and Andy Sumner on the subject (read the whole paper here):

Part of the problem is the polarised and non-nuanced public policy debate between the ‘aid works’ versus ‘aid is a waste of money’ camps. In our review we are constrained by reviewing how the literature has approached this question. We thus take aid ‘working’ or ‘effective aid’ to mean aid that contributes to, or is associated with, even if only modestly, positive development outcomes such as economic growth and social development. This is not an ideal definition but it is common in the literature and thus a review is constrained in opening this question further. Meanwhile the lack of a counter-factual is the biggest barrier to ever knowing for certain the impact of aid. The idea that aid ‘works’ can be questioned by interested parties, both informed and uninformed; assertions that aid is wholly or in part responsible for impressive improvements in human development in the past couple of decades are questionable. It is also not difficult to find examples where aid has been detrimental to countries and communities and where there may be trade-offs in terms of positive and negative impacts. More modesty is needed in any claims for how aid can contribute to development. However, the evidence, which we discuss in this paper, does suggest that aid has contributed in many countries and, despite its many flaws, can continue to do so.

Read the whole paper here (highly recommended).