Tag Archives: economic growth

Is Tanzania more unequal than Kenya?

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In the 1970s, prominent critics of Kenya’s capitalist economy often characterized the country as a land of 10 millionaires and 10 million beggars. Many also (implicitly) compared Kenya to Tanzania. Back then, Tanzania was in the midst of implementing Ujamaa under President Julius Nyerere. The trope of Kenya being a highly unequal “dog-eat-dog society,” and Tanzania being less unequal stuck, and persists to this day.

But the data tell a different story. According to the Knight Frank Wealth Report, Tanzania has the fifth largest number of high networth individuals in Africa ($30m and more), ahead of Kenya:

South Africa led the pack with 1,033 ultra-rich persons followed by Egypt (764) Nigeria (724) Morocco (215) and Tanzania (114)

Kenya is 6th, with only 42 individuals worth more than $30m.

Kenya has a Gini index of 40.8 (2015) and Tanzania 40.5 (2017).

We need to pay more attention to subnational variation

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This is from Marshall Burke and Apoorva Lal:

Using these data across all African countries, we calculate that 43% of the overall variation in asset wealth is  countries, and nearly a quarter is  states within countries. This number is even higher if we focus on just sub-Saharan Africa — 65%. Similar numbers have been found for other outcomes, including child health. These within-country differences are starkly apparent in the corresponding map, which shows how wealth estimates change when country-level averages are disaggregated down to the state and then district level.subnational

 

The wonder that is Chinese growth

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Below is an amazing illustration of shifts in the sizes of leading global economies:

For more on China see here, here, here, and here. This reminded me of this graphic from Carlos Lopes, former head of the UNECA:Dr3w9PhW4AAnCGU

All that happened in just 36 years. Time is on Africa’s side. If (and that’s a big IFF) African elites can get their act together. As shown in the graph below, the lost long decade (1980-1995) was particularly brutal for African economies — but it was a temporal dip and not a permanent feature of African economies.income

It is also worth noting that in 1980 African states and China were not at the same level of institutional development. By that time China had already accumulated centuries of coherent stateness — which made it possible for elites to optimally allocate human and capital resources in ways that produced the growth miracle.

Here is a good nuanced take on trends in economic growth and development on the Continent.

Human Capital and Economic Development in Britain, 1750-1930

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B. Zorina Khan writes:

Many argue that the nature of early British industrialization supports the thesis that economic advances depend on specialized scientific training, the acquisition of costly human capital, and the role of elites. This paper examines the contributions of different types of knowledge to British industrialization, by assessing the backgrounds, education and inventive activity of the major contributors to technological advances in Britain during the crucial period between 1750 and 1930. The results indicate that scientists, engineers or technicians were not well-represented among the British great inventors, and their contributions remained unspecialized until very late in the nineteenth century. For developing countries today, the implications are that costly investments in specialized human capital resources might be less important than incentives for creativity, flexibility, and the ability to make incremental adjustments that can transform existing technologies into inventions that are appropriate for prevailing domestic conditions.

…….. The patent records also enable us to examine whether a science background increased productivity at invention. Again, the patterns are consistent with the notion that at least until 1870 a background in science did not add a great deal to inventive productivity. If scientific knowledge gave inventors a marked advantage, it might be expected that they would demonstrate greater creativity at an earlier age than those without such human capital. Inventor scientists were marginally younger than nonscientists, but both classes of inventors were primarily close to middle age by the time they obtained their first invention (and note that this variable tracks inventions rather than patents). Productivity in terms of average patents filed and career length are also similar among all great inventors irrespective of their scientific orientation. Thus, the kind of knowledge and ideas that produced significant technological contributions during British industrialization seem to have been rather general and available to all creative individuals, regardless of their scientific training.

The whole paper is definitely worth reading and is available here.

A note on economic development

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

I am on record as not being too enthusiastic about “pro-poor growth” as it is currently practiced. Loans to the poor and other approaches that completely bypass those with a higher probability of succeeding at creating big business – the educated and middle class – will at best only keep the poor afloat and at worst divert resources from much needed long-term investment. I am not saying that the educated have a monopoly on entrepreneurship. All I am saying is that what we want is to create sustainable jobs. This requires scale. And scale comes with big business and industry.

Blattman neatly summarizes this point:

The difference between a country with $1,500 and $15,000 of income a head 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.

More on this here.

quick hits

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The Economist has a piece on the positive prospects for economic growth in SSA in the next few years.

Business Daily reports that Kenya’s property markets are no longer the exclusive preserve of old money or men, for that matter.

Still in Kenya, investment in higher education may start paying off. The BBC reports on Kenya’s growing outsourcing industry. Now they just have to learn Portuguese and Chinese for when they Brazilians and Chinese start calling to ask how to turn their (unplugged) electrical appliances on.

And lastly, Nairobi is (almost) no longer Nairobbery.