Powering Africa: “Off-grid” is not the answer

This is from the Economist:

Generating power at home may transform life in rural areas for the better, but factories, mines and mills need a reliable, large-scale power supply. If Africa is to industrialise, it needs power plants.

More here.

Also, a little known fact is that in the next five years nearly all of eastern Africa will have an energy surplus (everyone is increasing their installed capacity). But the power lines need to be upgraded, extended, and integrated (see here); and governments need to come up with policies (mostly related to financing) to get more people living under the grid (close to power lines) on the grid.

Thandika Mkandawire on the “Kenya Debate”

The ‘Kenya debate’ was a debate not among Kenyans but about Kenya by a group of expatriates, most of whom were temporarily resident in Kenya. This may partly explain its abrupt end. Kitching (1985) also suggests that the fact that all the protagonists viewed themselves as progressives precluded the further pursuit of the debate on how a capitalist accumulation process could be promoted.

Ouch. Kenyanists (Kenyan or not) will appreciate the zinger (please bring back economic history!) The quote is from a footnote on page 198.

Mkandawire’s paper on “Thinking About Developmental States in Africa” (not on Kenya) is a must read in any PE class on African development.

Review: Why Economists Miss the Point on Economic Growth in Africa

Africa continues to be a fertile ground for economic research. A significant number of economists in the development economics subfield have made careers explaining the “Africa” dummy variable in cross-national growth regressions — that is, explaining Africa’s “growth tragedy.”

In his latest book, Africa: Why Economists Get it WrongMorten Jerven argues that this is a misguided approach. Instead of explaining African exceptionalism (why is Africa poorer than the rest of the world?), Jerven argues that scholarly inquiry ought to focus on explaining fluctuations in African growth, and intra-Africa variation in general economic performance. Jerven persuasively argues that explaining African poverty and trying to find ways to fix it have distracted researchers and policymakers alike from the more useful endeavor of understanding how economic growth (and decline) happens in Africa. The former approach accepts as a stylized fact the lack of meaningful growth in Africa’s economic history; while the latter more realistic approach acknowledges that African economic history has been characterized by periods of both growth and decline.

Screen Shot 2015-06-24 at 4.52.42 PMJerven is an economic historian, and it shows (see also here). He begins by reminding readers that African economic history did not begin in 1960, the time around which aggregate national economic data became available for a large number of African countries. Jerven then shows that economic growth in Africa has been cyclical, characterized by periods of both growth and decline. At the same time, periods of growth in Africa have not necessarily coincided with the implementation of “good” policies as the literature suggests. The “lost decades” of the late 70s and much of the 80s (due to oil and commodity shocks and associated debt problems) were a period of decline that also coincided with the “good” policies implemented under structural adjustment programs (SAPs). Without getting into the details of the specific policies in question, Jerven makes the point that African states’ experiences in the 70s and 80s are not representative of the full history of economic growth and development in the region.

Yet, according to Jerven, it is the growth record from these two decades that has become accepted as the “stylized fact” of Africa’s growth experience. The idea of an African growth tragedy has been so sticky that most economists (with a few exceptions) did not notice the uptick in growth in the region over the last decade and a half. A quick survey of syllabuses on African political economy will reveal this fact.

Why is Africa poor?” is a question common on course descriptions in many American political science and economics departments, giving the impression that the region has always had a growth deficit to be explained.

Second, Jerven takes on the quality of data that have historically been used to study African economies (remember Poor Numbers?). In this part of the book he pokes holes through major papers in the economic growth literature. The data he looks at range from widely used stats on African economies from sources like the Bank, the IMF, country statistical departments, and other academic sources. He also questions the validity of outcome variables (such as institutional quality, property rights protection, et cetera) that are often found on the left hand side in cross-national growth regressions. Jerven does not seek to provide a review of the development economics literature. Instead, his focus is on the substantive implications of statistical models widely employed by economists to explain relative growth between different regions of the world. In doing so he challenges social scientists to think more careful about issues of measurement and the substantive meanings of regional dummies.

Jerven’s critique of what he calls the “Wikipedia With Regressions” style of academic research is welcome, and hopefully will inspire more students of economics and politics (not just in Africa) to invest in acquiring useful knowledge on the specific countries they study. The basic point here is that the cocksure certainty of findings in scholarly studies on the determinants of growth is unwarranted, given the shaky (data) foundations on which many of them stand. Jerven drives the point home by citing Durlauf, Johnson, and Temple who in their review of the growth literature found 145 different regressors that were found to be statistically significant determinants of economic growth.

Lastly, Jerven takes head on the claim that institutions and good governance cause economic growth. His core argument in this section is that “good” institutions are typically the result of, rather than the cause of economic growth. He gives examples of countries that have experienced sustained economic growth without having the typical bundle of institutions that scholars attribute to be the fundamental cause of long-run growth. I am partially persuaded by this argument, especially after having read Working With the Grain (see review here).

This latter section is the least strong part of the book, and may be the result of trying to do too much in one short text. As a student of institutions I am keenly aware of the importance of elite political stability and institutions that lock in intra-elite commitments for sustainable economic growth. It is not enough to claim that the view that institutions cause growth is misguided because some economies elsewhere have achieved growth without the hypothesized good institutions. I would argue, for instance, that a key difference between the “Asian Tigers” and their African counterparts (some of which we are often reminded were relatively richer in 1960) was the level of stateness (i.e. institutionalization of centralized rule) on account of a much longer experience with statehood. Jerven would have helped his argument by providing alternative explanations for Africa’s economic collapse in the late 1970s and much of the 1980s.

What kinds of institutions matter in “late” economic development? Why did African states almost uniformly fail to contain the oil and commodity shocks and the resultant debt problems that visited them during this period? Has there been institutional variation within Africa over time, and can it explain intra-Africa variation in growth?

Overall, Africa: Why Economists Get it Wrong is a fantastic quick read for anyone (whether in the academy or not) interested in understanding economic growth in Africa. Besides being a brilliant economic historian, Jerven is also an engaging writer with an ability to make even the most technical arguments accessible to the reader. I did not have the book on my original summer reading list but couldn’t stop once I started reading it.

In my view this book is the economics companion to Thandika Mkandawire’s excellent critique of scholarship on African politics. It also raises several very interesting questions that will inspire or reinforce a few dissertations in the field of development economics.

Neopatrimonialism & Political Economy in Africa

[t]he monotonic mapping of some aspects of neopatrimonialism into a definite economic policy, let alone an outcome, is based more on a leap of faith than on the existence of a tightly knit algorithm or, as advocates of the neopatriomonial approach suggest, on the impeccable logic of neopatrimonialism. The claim that neopatrimonialism provides the microeconomic foundations with which to understand the macroprocesses of Africa is unwarranted. As John Maynard Keynes argued, macroeconomy is not reducible to microfoundations. There are simply no nontrivial algorithms that will establish a one-to-one correlation between microeconomic behavior and macroeconomic outcomes. Similarly, there is simply no way that the logic accounting for the macroeconomic problems in Africa and their possible solutions can be derived from the myriad communities in the region, regardless of claims about the logic of neopatrimonialism.

…. The analytical template forged by the neopatrimonialism school has had the effect of flattening the African political and economic landscape—often rendering monochromatic the many colorful and varied characters who have taken the African political stage over the last half century. This flattening extends beyond space to time as well. There is simply no sense of conjuncture or periodization within the analysis. By neglecting the cross-sectional and longitudinal variance of the African experience, the neopatrimonialist view provides an impoverished understanding of the complexities of the continent. It also oversimplifies the many contradictions of the continent. Adverbial caveats do not diminish the essentially leveling effect of the term “neopatrimonial.” What ultimately results is not a rich tapestry of case studies but rather reportages of one damned country after another.

That is Thandika Mkandawire of LSE writing on the concept of neopatrimonialism as applied to research on Africa over the last half-century. The paper is forthcoming in World Politcs. It is destined to be required reading in Comparative Politics and Comparative Political Economy classes. I highly recommend adding it to your summer reading list.

No shortcuts to sustained economic growth

Dani Rodrik keeps reminding us that one of the factors slowing down the anti-poverty fight in Africa is the slow growth in manufacturing which comes with the risk of “premature” de-industrialization. Economic histories of several countries over the last two centuries tells us that rapid and sustained growth only occurred on the back of industrialization. In Africa on the other hand manufacturing is still a paltry 10.1% of annual output on average (and ranges between 10-14%, which is bad for a developing region). Compare this to 34% in Thailand, 31% in South Korea and 24% in Malaysia. Furthermore, productivity in the manufacturing sector in Africa has actually declined over the last 40 years (see figure below).


Productivity in Manufacturing (USA=100)

Now, starry-eyed technophile African leaders can talk about leapfrogging the historical stages of economic growth until the cows come home but there is no hiding from the fact that sustained growth and reduction of poverty will only come once Africa’s poor (up to 70% of whom still depend on subsistence agriculture in SSA) have access to well paying jobs. Yes, the types of jobs and products will be different, from say steam powered 18-19th century northwestern Europe or even 20th century East Asia, but there will have to be jobs for the masses. M-apps won’t do, as they will only benefit those who are already well off (mainly the creators), once they are sufficiently monetized. Asking poor people to be “entrepreneurial” with high interest micro-loans and grow themselves out of poverty as a matter of national development policy will also not work.

To quote Chris Blattman:

The difference between a country with $1,500 and $15,000 of income a head is simple: industry. All the microfinance and microenterprise programs in the world are not going to build large firms and import technology and provide most people with what they really want: a stable job, regular wages, and a decent work environment.

The good thing is that in quite a few countries on the Continent structural conditions favorable to mass job creation are beginning to congeal. Hopefully sooner, rather than later, PRSPs will start focusing less on pro-poverty “pro-poor” initiatives and more on strategies for mass job creation. Remember, “making the lives of poor people better is not the same thing as fighting poverty.” Over to you Development Economists and African policymakers.

Does Chris Blattman hate state capacity?

The simple answer is NO. The long answer is below.

Blattman’s latest post decries Bill Gates’ (and much of the development community’s) focus on data gathering, and may I add, strengthening of statistics departments. He writes:

I would like to see better GDP numbers–who wouldn’t?–but it’s hard for me to see the constraint on development this revelation would relieve, and why it’s anywhere close to the top ten constraints poor countries face.

The problem with those of us in the development complex, be we academics or Presidents or foundations or NGOs, is we want the world nicely ordered with levers to pull and a dashboard to monitor. And so we put a lot of energies into levers and dashboards and monitors.

I think of poverty and political powerlessness in terms of constraints and frictions–the limitless host of things, little and big, that made it more difficult to run a business profitably or turn a profit or invent a new product or get your kid educated or select the leader who serves your interests. States and institutions and norms and technology and organizations reduce these frictions and relieve these constraints. That is the fundamental driver of development. This is the basic logic behind almost every theory of development in your textbooks, from growth models to poverty traps to everything in between.

Blattman is right that improving the capacity of statistics departments will not do much to alleviate poverty now (although as I write this in the basement of a government library in Nairobi I can’t stop thinking that stats departments need to do more). At the same time however, I would be wary of an outright dismissal of the need for better data gathering by governments, for two reasons.

Firstly, at the core of state capacity is the ability to make legible (depite Scott’s observations) the terrain over which the state claims to have dominion. Strong states are those that know your home address, the number of children you have and how much money you made last year. When governments have the capacity to get better GDP data, they will also know how many kids died or were not immunized last year, etc etc. And perhaps more importantly, they will be able to know how much you made last year and how they can get a bigger share of it. As Besley and Persson have argued, there is a strong case to be made for the centrality of public finance to development. Poor countries have small tax bases yes, but tax evasion in these countries still denies national treasuries lots of cash. And it is not just a question political will. Low capacity plays a role. Imagine trying to implement an income tax in a country of about 20 million adults but where under 4 million are in formal employment and can have their taxes withheld.

Secondly, Blattman seems to be making an argument for the private sector as a key part of greasing frictions that stifle development (which is true). But the private sector initiatives he cites can only flourish when there is strong state monitoring (with reliable data) in the background. Credit bureaus need a strong and enforceable regulatory framework. Otherwise no one will believe their credit reports. Freedom of (government) information laws are cool, but such information must first exist, and in reliable format. In other words stats departments must do their job well.

Lastly, good data also make for more informed politics. Kenya, for instance, could do with more disaggregated GDP data – by counties or lower – as it attempts to implement a devolved system of government and revenue allocation.

All this to say that when states have a handle on how much is produced, they will know how and where to get their share. And the more they demand a bigger share, the more the people will demand some of it to be returned as public goods (and these can also include reliable information that would be accessed via freedom of information laws). Yes, GDP data was invented post-WWII when some countries were already winning against poverty for decades. But even before that the more successful states were the ones that were better at information gathering. Flying blind is simply not an option for states.


What Obama’s re-election means for US Africa Policy

On the 14th of June this year President Obama outlined his policy for Sub-Saharan Africa. Included in the policy statement were four key strategic objectives: (1) strengthen democratic institutions; (2) spur economic growth, trade, and investment; (3) advance peace and security; and (4) promote opportunity and development.

In my view, of the four aspirational goals the one that will receive the most attention in the near future will be the third (especially security).

US strategic security interests in Africa mainly involve two key concerns: (1) China’s growing economic presence in the region and (2) the spread of Al-Qaeda linked groups in the region, stretching from Somalia to Mauritania (This is why Mali featured more prominently than the EU in the Presidential foreign policy debate). Before talking about China, here are my thoughts on the US campaign against  al-Qaeda in Africa.

While I don’t foresee any success in the creation of an African base for AFRICOM, the US will continue to cooperate with AU member states in fighting Islamist extremism in the region. The “successful” AU mission in Somalia could provide a blueprint for future operations against potential terror groups. The biggest lesson from Somalia is that the US cannot just pick one nation (in this case Ethiopia) to fight its wars in the region, and that a collaborative effort with the blessing of the regional umbrella organization (the AU) and others such as IGAD can deliver results.

Having helped (both directly and indirectly) in the ouster of Al-Shabaab from strategic locations in Somalia, the next big task will be dealing with the mushrooming Islamist extremism in the Sahel (especially in northern Mali but also in Niger and Nigeria).

The problem of extremism in the Sahel is further compounded by the link of some of the groups to the drug trade flowing from Latin America and into Europe. There is significant evidence that drug money has financed the activities of separatist groups in northern Mali. The fight against these groups will necessarily involve dealing with this crucial source of finance. This means that for the operation to succeed the US will have to engage in capacity building and the strengthening (and clean-up) of security institutions (especially the armies) in states like Guinea, Guinea-Bissau, South Africa, Kenya, among others, in which officials in the security sector have been implicated in the drug trade.

The Sahelian challenge might yet prove more formidable than Somalia. The latter case had relatively stable neighbors that served to contain the anarchy. The Sahel (Sahelistan, if you will) is much larger and includes some of the least governed spaces on the planet.

On China, the US (and for that matter, the rest of the West) has to change its present approach of total freak-out overt suspicion over Chinese involvement in Africa. Africans need protection from China only as much as they need protection from the West. China is not out to “exploit” Africa any more than the West has. Nobody should expect China to engage Africa more benevolently than the West did for the better part of the last 60 years (Mobutu and Bokassa were not that different from Bashir and Mugabe).

A constructive approach ought to include policies designed to strengthen African states so that they can engage China on their own terms. It is ultimately African leaders who mortgage their resources and sovereignty to China (or the West). Instead of focusing too much on China, a better approach might be one that creates strong regional organizations (like the SADC or the EAC) that can improve the bargaining power of African states.

The other policy objectives outlined by Obama appear to fall in the business-as-usual category. Democracy promotion will not yield much in the face of other more pressing priorities (notice how security has triumphed over democracy in Mali). And unless the US is willing to get involved in massive infrastructure projects like China has (last time I checked they were in 35 African states), I don’t see how it can help spur economic growth in the region (AGOA was great, but Africa needs something better). Plus the US continues to be hampered in its development-promotion efforts by its aversion to state industrial policy. It’s about time Foggy Bottom realized that it is really hard to have a thriving private sector and American-style free enterprise in places with bad roads, very few (and bad) schools, and governments that are run by personalist dictators. In these instances some corruption-laden developmental state policies may be the best way to go.

Foreign Aid for Institutional Development?

In a speech at the Clinton Global Initiative, U.S. Republican presidential candidate Mitt Romney urged that more of U.S. foreign assistance should have strings attached. Mr. Romney said that:

“Working with the private sector, the program will identify the barriers to investment and trade and entrepreneurialism in developing nations…………. In exchange for removing those barriers and opening their markets to U.S. investment and trade, developing nations will receive U.S. assistance packages focused on developing the institutions of liberty, the rule of law, and property rights.”

Romney also added that:

“The aim of a much larger share of our aid must be the promotion of work and the fostering of free enterprise. Nothing we can do as a nation will change lives and nations more effectively and permanently than sharing the insight that lies at the foundation of America’s own economy — and that is that free people pursuing happiness in their own ways build a strong and prosperous nation.”

I am of the opinion that an approach to foreign assistance embodying the spirit of the latter quote is more likely to succeed than the former.

The thing with institutions is that they often reflect already existing social equilibria. The courts, the police, the military, the legislature, the stock exchange, etc, all reflect established norms and moral claims that individual stakeholders have on the system and on each other. When Westerners foreigners come in (many of whom often have very little understanding of the social basis of the existing equilibria) they often tend to work at cross-purposes with the existing social compacts (a good example here is the phenomenon of mono-issue activism – think of Human Rights Watch fighting the World Bank at the expense of locals).

Granted in some parts of the world these very social compacts need to be changed (e.g. misogynous social systems). But even in such cases the changes have to be grounded in local political arrangements that are self-enforcing. Media pronouncements from Western ambassadors are not enough.

Many development academics and practitioners alike often neglect the fact that in European history (contemporary Western experience informs a lot of institutional proselytizing) political development (i.e. the creation of responsive and impartial bureaucratic institutions to manage the affairs of the state) was preceded by modernization and general economic development. In most of the developing world this relationship is reversed. Political development has become the independent variable charged with driving the process of modernization and economic growth and development.

As a result, the mantra seems to be that if only everyone could get governance right then everything would fall in place and we’d all be on the road to becoming Denmark.

May be this can be achieved. I remain skeptical.

Six Questions You Always Wanted to Ask About Africa….

Rohac and co-authors provide answers (from Rwanda) to six questions you always wanted to ask about Africa. The questions and answers revolve around issues of rule of law, police-making, institutions, development assistance, human capital and culture.

Check out the publication here.

Re-assessing Africa’s Resource Wealth

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.

Quick hits

Texas in Africa’s review of Fighting for Darfur.

Blattman on economic growth and development.

The long arms of the Rwandan state?

The Zambian elections will be close. Last time round the opposition leader lost by a mere 3% (I will be there for the campaigns this summer).

And lastly, Kenya’s trillion-shilling proposed budget. High on development expenditure but could it crowd out the private sector?


debating africa’s growth prospects

The Economist has an interesting debate going on about Africa’s growth prospects. The consensus appears to be that structural factors – such as institutions, culture, colonial history and what not – are the main culprits in the tragic tale of African underdevelopment. I agree. Bad governance, the historical accident of colonialism which halted the natural processes of state formation, among other things such as historical low population densities and a culture that mystifies most things are what continue to deter African nations from realizing their full potential.

Gilles Saint-Paul argues that:

most African countries are trapped at a “low-trust” equilibrium where basic property rights are not enforced and corruption is rampant. Essentially if I do not expect others to fulfil their side of the contract, it is rational for me not to fulfill mine, and transactions eventually disappear

One of my favorite economists, Daron Acemoglu, adds that:

The economic problems of African nations are a consequence of their postcolonial institutions, which are themselves the continuation of the precolonial institutions.

But Lant Pritchett is quick to remind us of the folly of lumping all the sub-Saharan African countries together, pointing out the stark differences between places like Botswana and Somalia or Cote d’Ivoire and Mozambique.

More here.

William Easterly’s Burden

William Easterly continues his great crusade against the development establishment. I like his pitch for spontaneous development, but I remain skeptical of his quick dismissal of the role of the state in African development for two reasons:

1. The rest of the world has a massive head start which means that if the African entrepreneur is to survive the state must be there to provide the relevant public goods and some minimal protection from foreigners.

2. Let us not forget that stable societies are those in which capital and politics have a symbiotic relationship. The realities of the political economy of development are such that the state – and current holders of political power – must be brought on board if real and lasting development is to be achieved.

Also, check out Blattman’s Blog.

Development and how to achieve it

A while back I argued for a move away form small scale, “pro-poor” development strategies to more robust development strategies aimed at economic innovation and large-scale job creation. This is not to say that micro-development should be neglected. What I am saying is that jua kali kiosks will not increase Africa’s per capita income to 10,000 USD. The most they do is enable people to cope without really changing their standard of living.

Alkags, a blog I just discovered, deals with this debate.

Aid watch also has videos from a conference at the Yale law school on development. Chris Blattman and William Easterly are some of the featured development experts. Blattman makes some interesting comments about micro-finance, industrialization (medium to large farms) and development.

Quoting Blattman: “I think we have gone too far in the pro-poor direction…… we don’t necessarily have trade-offs. Factories are pro-poor.”