The role of elites in development (Danish Edition)

Kenya’s founding president, Jomo Kenyatta, often reminded Kenyan elites of their roles as living examples of material “development” to the peasantry. Contra Oginga Odinga — who wanted to empower the masses through land redistribution, Kenyatta believed that an elite-driven developmental agenda was the quickest way to end the scourges of poverty, illiteracy, and disease in Kenya (yes, he had very selfish reasons for holding this belief. But that is beside the point).

Turns out he was onto something.

This is from a paper by Jensen et al. on the dairy industry in Denmark:

We explore the role of elites for development and in particular for the spread of cooperative creameries in Denmark in the 1880s, which was a major factor behind that country’s rapid economic catch-up. We demonstrate empirically that the location of early proto-modern dairies, so-called hollænderier, introduced onto traditional landed estates as part of the Holstein System of agriculture by landowning elites from the Duchies of Schleswig and Holstein in the eighteenth century, can explain the location of cooperative creameries in 1890, more than a century later, after controlling for other relevant determinants. We interpret this as evidence that areas close to estates which adopted the Holstein System witnessed a gradual spread of modern ideas from the estates to the peasantry. Moreover, we identify a causal relationship by utilizing the nature of the spread of the Holstein System around Denmark, and the distance to the first estate to introduce it, Sofiendal. These results are supported by evidence from a wealth of contemporary sources and are robust to a variety of alternative specifications.

We thus demonstrate econometrically that the pattern of adoption of cooperative creameries in Denmark followed the introduction of proto-modern dairies by agricultural elites on estate farms. In the Duchies of Schleswig and Holstein, ruled by the King of Denmark in personal union until 1864 when they were lost to Prussia, an intensified crop rotation system with an important dairy component was developed on the large manorial estates known as Koppelwirtschaft in German, or kobbelbrug in Danish. It became the dominant field system in the Duchies in the 1700s, and included unprecedentedly large herds of milch cows and the invention of an innovative new centralized system of butter production, the hollænderi, with unparalleled standards of hygiene and equipment (Porskrog Rasmussen 2010a). These innovations – collectively known as the above mentioned ‘Holstein System’ when the crop-rotation was combined with the dairy unit – came relatively late to Denmark, but when they did they gradually transformed Danish agriculture.

Denmark’s current status as an ‘agricultural superpower’ , dominated by massive firms such as Arla (a dairy cooperative) and Danish Crown (a food, especially meat, processing firm previously also a cooperative until 2010), is usually traced back to the aforementioned developments in the 1880s. As we will discuss in more detail below, at this point a new technology, the steam-powered automatic cream separator made it possible to use milk which had been transported over long distances to be processed in a central production facility, and the voluntary associations of Danish peasants, the cooperatives, sprang up to take advantage of this possibility. Thus, modern Denmark emerged based on a democratic, cooperative countryside, providing something of a role model to other agricultural countries around the world.

The whole paper is worth reading, as it provides a rather interesting rebuttal (if I may call it that) to the core ideas about the long-run effects of inequalities in initial endowments in Engerman and Sokoloff (on Latin America) as well as Banerjee and Iyer (on India):

By contrast, we stress that agricultural elites may spread knowledge, which then subsequently aids development in the agricultural sector. In other words, our work suggests that agricultural elites may also be knowledge elites, who facilitate later development. Recent work by Squicciarini and Voigtländer (2016) demonstrates that knowledge elites played a significant role in the industrialization of France by e.g. running businesses themselves or exchanging knowledge with entrepreneurs. Our work emphasizes the importance of knowledge spill-overs and agricultural enlightenment (Mokyr 2009, ch. 9), and shares some similarities with Hornung’s (2014) work on high-skilled immigration of Huguenots into Prussia. He shows that this led to higher productivity in the textile sector and interprets this as evidence of an effect of diffusion of technology. We focus on agricultural elites and their impact on the part of the agricultural sector that led to an economy-wide take-off.

The key difference in Denmark, of course, was that the social conditions permitted easy diffusion of ideas and practices from the knowledge elites to the masses, despite the inequalities in initial endowments. The situation might be different, for ex when race, ethnicity, or caste gets in the way.

On the Odingas and Kenyattas of Kenya

This is from Jina Moore (who is doing a great job as East Africa bureau chief).

Jaramogi Oginga Odinga, the father of Raila Odinga, negotiated independence with the British. The colonial rulers wanted Mr. Odinga to lead the new Kenya, but Mr. Odinga had other ideas: He demanded Mr. Kenyatta’s freedom — and his appointment as Kenya’s first head of state.

“Kenyatta would not have been released, and he wouldn’t have been made prime minister, if it hadn’t been for Odinga’s backing,” said Daniel Branch, a professor of history at the University of Warwick and an expert on post-colonial Kenyan politics. “The two men always admired each other.”

Willy Mutunga, who was chief justice of the Supreme Court from 2011 to 2016, believes Mr. Odinga was motivated by more than mere admiration. “I think he genuinely believed that the country was going to be better off with somebody who had become a legend,” he said.

And so, in 1964, when Kenya became a republic, Jomo Kenyatta became its president, and Jaramogi Odinga vice-president.

The piece is worth reading. I liked the bits about the Odinga/Kenyatta conflict over land redistribution.

It would be interesting to think of the counterfactual: What if Odinga/Kaggia had won over Kenyatta/Mboya and redistributed all the land? What kind of Kenya would have emerged? Would it have been more stable and prosperous than present day Kenya? Was this a feasible option given the preferences of Whitehall? What would have been the political and human costs?

My (positivist) take is that most people under-estimate the important role that the “willing buyer willing seller” mantra played in facilitating elite-level buy-in into the Kenya Project (state-building and elite-level stability). It’s not just Kenyatta and his co-ethnics that got land. Lots of elites from other communities in the districts got land, too, and a chance to earn rents. For example, as part of his coup-proofing strategy, Kenyatta bought off the officer class in the armed forces (mostly composed of non-co-ethnics) with land. Kenyatta’s cabinets reflected this political economy reality, too. All the major districts had a representative.

How Eastern Africa can avoid the resource curse

This post originally appeared on the African Development Bank’s Integrating Africa Blog, where yours truly is a regular contributor. 

Eastern Africa is the new fossil fuel frontier (for more check out this (pdf) Deloitte report). In the last few years Kenya, Uganda, Tanzania and Mozambique have discovered large quantities of commercially viable oil and gas deposits, with the potential for even more discoveries as more aggressive prospecting continues. There is reason to be upbeat about the region’s economic prospects over the next three decades, or at least before the oil runs out. But the optimism must be tempered by an acknowledgement of the dangers that come with the newfound resource wealth. Of particular concern are issues of governance and sound economic management.

We are all too aware of the dangers of the resource curse. This is when the discovery and exploitation of natural resources leads to a deterioration of governance, descent into autocracy and a fall in living standards. Associated with the resource curse is the problem of the Dutch disease, which occurs when natural resource exports (e.g. oil and gas) lead to an appreciation of the exchange rate, thereby hurting other export sectors and destroying the ability of a country to diversify its export basket. The new resource-rich Eastern African states face the risk of having both problems, and to avoid them they must cooperate.

In many ways Eastern African states are lucky to be late arrivals at the oil and gas game. Unlike their counterparts in Western and Central Africa, nearly all of them are now nominal electoral democracies with varying degrees of institutionalized systems to ensure transparency in the management of public resources. Across the region, the Big Man syndrome is on the decline. But challenges remain. Recent accusations of secrecy, corruption and bribery surrounding government deals with mining companies suggest that there is a lot of room for improvement as far as the strengthening of institutions that enforce transparency (such as parliaments) is concerned. It is on this front that there is opportunity for regional cooperation to improve transparency and resource management.

While it is easy for governments to ignore weak domestic oversight institutions and civil society organizations, it is much harder to renege on international agreements and treaties. A regional approach to setting standards of transparency and accountability could therefore help ensure that the ongoing oil and gas bonanza does not give way to sorrow and regret three decades down the road. In addition, such an approach would facilitate easier cross-border operations for the oil majors that are currently operational in multiple countries, not to mention drastically reduce the political risk of entering the region’s energy sector. It would also leave individual countries in a stronger bargaining position by limiting opportunities for multinational firms to engage in cross-border regulatory arbitrage.

The way to implement regional cooperation and oversight would be something akin to the African Peer Review Mechanism, but with a permanent regional body and secretariat (perhaps under the East African Community, EAC). Such a body would be mandated to ensure the harmonization of laws to meet global standards of transparency and protection of private property rights. The body would also be mandated to conduct audits of national governments’ use of revenue from resources. The aim of the effort would be to normalize best practices among states and to institute a global standard for states to aspire more – more like the way aspirations for membership in the European Union has been a catalyst for domestic reforms in the former Yugoslavia and Eastern Europe.

Regional cooperation would also provide political cover to politicians with regard to economically questionable fuel subsidies. The realities of democratic government are such that politicians often find themselves forced to concede to demands for fuel subsidies from voters. But history shows that more often that not subsidies come at an enormous cost to the economy and instead of benefitting the poor only benefit middlemen. In addition, as the case of Nigeria shows, once implemented such policies are never easy to roll back both due to politics and the power of entrenched interests. Regional agreements capping any fuel subsidies at reasonable levels would be an excellent way to tie politicians’ hands in a credible manner, while at the same time providing them with political cover against domestic criticism.

Beyond issues of governance, there is need for cooperation on regional infrastructure development in order to reap maximum value for investment and avoid unnecessary wastes and redundancies. Landlocked Uganda and South Sudan will require massive investments in infrastructure to be able to access global energy markets. The two countries’ oil fields are 1,300 km and 1,720 km from the sea through Kenya, respectively. One would hope that as these projects are being studied and implemented, there will be consideration for how to leverage the oil and gas inspired projects to cater to other exports sectors – such as agriculture, tourism and light manufacturing – as well. KPMG, the professional services firm, recently reported that transportation costs eat up as much as 20 per cent of Africa’s foreign exchange earnings.  There is clearly a need to ensure that the planned new roads and railways serve to reduce the cost of exports for all outward oriented sectors in the region. Embedding other exports sectors (such as agriculture, timber, domestic transport, etc.) in the process of developing new transportation infrastructure will minimize the likelihood of their being completely crowded out by the energy sector.

In isolation, each country’s resource sector policy is currently informed by domestic political economy considerations and regional geo-politics. There is an emerging sense of securitization of resources, with each country trying to ensure that the exploitation of its resources does not depend too much on its neighbours. Because of the relatively small size of the different countries’ economies, the risk of ending up with economically inefficient but expensive pipelines, roads and railways is real. South Sudan is currently deciding whether to build a pipeline through Kenya (most likely), through Ethiopia, or stick with the current export route for its oil through Sudan (least preferred due to testy relations). For national security and sovereignty reasons, Uganda is planning on a 30,000-barrel per day refinery in Hoima, despite warnings from industry players that the refinery may not be viable in the long run. Some have argued for the expansion of East Africa’s sole refinery in Mombasa to capture gains from economies of scale, an option that Uganda feels puts its energy security too much in Kenya’s hands.

In the meantime, Kenya and Tanzania are locked in competition over who will emerge as the “gateway to Eastern Africa,” with plans to construct mega-ports in Lamu and Tanga (Mwambani), respectively. While competition is healthy and therefore welcome, this is an area where there is more need for coordination than there is for competition among Eastern African governments. The costs involved are enormous, hence the need for cooperation to avoid any unnecessary redundancies and ensure that the ports realize sufficient returns to justify the investment. Kenya’s planned Lamu Port South Susan Ethiopia Transport Corridor (LAPSSET) project will cost US $24.7 billion. Tanzania’s Mwambani Port and Railway Corridor (Mwaporc) project will cost US $32 billion.

Chapter 15 of the EAC treaty has specific mandates for cooperation in infrastructure development. As far as transport infrastructure goes, so far cooperation has mostly been around Articles 90 (Roads), 91 (Railways) and 92 (Civil Aviation and Air Transport). There is a need to deepen cooperation in the implementation of Article 93 (Maritime Transport and Ports) that, among other things, mandates the establishment of a common regional maritime transport policy and a “harmonious traffic organization system for the optimal use of maritime transport services.”

The contribution of inefficient ports to transportation costs in the regional cannot be ignored. Presently, the EAC’s surface transportation costs, associated with logistics, are the highest of any region in the world. According to the African Development Bank’s State of Infrastructure in East Africa report, these costs are mainly due to administrative and customs delays at ports and delays at borders and on roads. Regional cooperation can help accelerate the process of reforming EAC’s ports, a process that so far has been stifled (at least in Kenya) by domestic political constituencies opposed to the liberalization of the management of ports. The move by the East African Legislative Assembly to pass bills establishing one-stop border posts (OSBPs) and harmonized maximum vehicle loads regulations is therefore a step in the right direction.

Going back to the issue of governance, more integrated regional cooperation in the planning and implementation of infrastructure development projects has the potential to insulate the projects from domestic politics and patronage networks that often limit transparency in the tendering process. Presently, Uganda is in the middle of a row with four different Chinese construction firms over confusion in the tendering process for a new rail link to South Sudan and port on Lake Victoria. The four firms signed different memoranda with different government departments in what appears to be at best a massive lapse in coordination of government activities or at worst a case of competition for rents by over-ambitious tenderpreneurs.  This does not inspire confidence in the future of the project. A possible remedy to these kinds of problems is to have a permanent and independent committee for regional infrastructure to oversee all projects that involve cross-border infrastructure development.

In conclusion, I would like to reiterate that Eastern Africa is lucky to have discovered oil and gas in the age of democracy, transparency and good governance. This will serve to ensure that the different states do not descend into the outright kleptocracy that defined Africa’s resource sector under the likes of Abacha and Mobutu in an earlier time. That said, a lot remains to be done to ensure that the region’s resources will be exploited to the benefit of its people. In this regard there is a lot to be gained from binding regional agreements and treaties to ensure transparency and sound economic management of public resources. Solely relying on weak domestic institutions and civil society organizations will not work.

Petro-Politics in East Africa

Is LAPSSET under threat? May be.

The Economist reports:

The Lamu pipeline makes the most economic sense for all involved. But failure to work together may doom it. National and personal interests trump regional co-operation and commercial logic. In Uganda Mr Museveni is keen to settle his legacy as the champion of a strong nation, building vast refineries and spiting the tiresome Kenyans. South Sudan is fixated on warding off the north at the expense—it seems—of almost everything else. Ethiopia sees a chance to steal Kenya’s thunder, too. “It’s every guy for himself,” says an oil executive wryly. “And I thought the private sector is rough.” Pipeline politics makes a mockery of the East African Community, a bloc dedicated to regional co-operation. All but one of the countries are members or aspire to join.

Of late, a new momentum behind the oil push is being felt. The Ugandan government is in final production talks with three oil companies. Executives from Tullow, Total and the China National Offshore Oil Corporation (better known as CNOOC), as well as local civil servants, conferred with Mr Museveni at his farm near the Rwandan border in late April. In June South Sudan will finish a feasibility study for the Ethiopian pipeline to Djibouti, after which it has said it will make a decision on export routes. “Everything is up in the air,” says a diplomat. Kenyan and Ethiopian officials, as well as oil-company representatives, have been scurrying to Juba to make their case. Pagan Amun, who leads South Sudan’s talks with the north, is said to be keen to ditch the Lamu pipeline.

My guess is that Nairobi, for historical reasons, will prevail in Juba. Plus Juba and Addis are not the best of buddies, despite recent warm relations. Mengistu was a key ally and supplier of SPLM before he was overthrown by Meles and his army. The departure of Meles may have made things a little better. Time will tell. Uganda will most likely construct a mini-refinery as it is not integral to the implementation of LAPSSET.

President Kenyatta’s first address to a joint session of Parliament (National Assembly and Senate)


My favorite parts of the speech: the desire to reduce the public wage bill (over 12% of GDP); the need for JOBS (40% unemployment; 70% among youth); land reform.

Mr. Kenyatta’s coalition has majorities in both houses of parliament and so he should have a relatively easy time pushing through his rather ambitious agenda. The best indicator of his ability to do so will come soon when he announces nominees for his cabinet (they have to be approved by the National Assembly).

Kenyan election update

Results painfully slowly coming in. About 5.54m votes have been counted so far with 43% of centres reporting. 333k of thesey have been rejected.

Interestingly, the IEBC this evening announced that the rejected votes will also go into the final tally since the law requires that the winner get 50%+1 of all votes cast.

That means that Kenyatta’s effective vote share at 11PM on Tuesday is 50.3% and Odinga’s is 39.6%.

The difference in raw votes between the two candidates has stagnated at aroung 600k all evening.

It appears that IEBC will simply incorporate the votes rejected without an audit. As I said below this move will likely force a runoff.

6% of ballots cast, so far, were rejected – a massive civic education FAIL, both on the part of IEBC and political parties.

Martin Shikuku is dead at 79

Veteran Kenyan politician Martin Shikuku is dead at 79. Mr. Shikuku is believed to have succumbed to cancer at a Nairobi hospital. The former Butere MP was one of the most valiant civil rights and reform activists in Kenya – going all the way back to the Kenyatta Administration. He was member of parliament for Butere from 1963-1997 and participated at the Lancaster conference that drafted Kenya’s independence constitution.



perspective: land issues in Kenya and zimbabwe

This quote made me pause for a moment:

“As seen in this work, the naked exploitation of land rights has a far longer and more illustrious history in Kenyan than in Zimbabwe. Further, the human cost of such exploitation of land rights in Zimbabwe pales in comparison to Kenya. Human Rights Watch, which is not known to underestimate rights abuses, reports that, by the year 2000 seven white farmers and several tens of black farmers had been killed in Zimbabwe in such violent exploitation of land rights. By the year 2000, these activities in Kenya had resulted in the deaths of thousands and displaced hundreds of thousands”

That is Onoma in his book on the Politics of Property Rights Institutions in Africa.

Notice that the figures quoted do not include the victims of Kenya’s 2007-08 post election violence. 1300 died, and just over 300,000 were displaced.

In 1980 6000 (white) Zimbabweans owned 42% of the land in the country. How anyone, including the white farmers, thought this was sustainable in the long run beats me.

In some sense Zimbabwe was inevitable. South Africa is next.

kenya: a model of conservative revolution?

An ambitious project is in the works to build a new city from scratch in Kenya, a sign that things are indeed changing in the economic engine of the wider eastern African region. The stock market voted for the new constitution with a bullish run on the eve of the ratification of the document. Investments in property – the property class has outdone most asset classes in the last two years – serve as a sure marker that Kenyans are confident in government’s commitment to protection of property rights. I am one of those who remain optimistic that Kenya is on the verge of take-off. And here is why.

Not long ago the idea of a cabinet minister resigning in Kenya was a pipe dream. Even more improbable was the idea of parliament defying the president. But these days ministers resign and the Kenyan parliament routinely defies State House. More importantly, the august house has continued its march towards independence from the executive – both functionally and financially. By controlling their own budget and calendar and building a functioning committee system, members of The House have acquired enough muscle to expose lapses in the management of public affairs – including the present scandals involving the Kenyan foreign ministry and the Nairobi City Council.

The biggest question, however, is whether the reforms embodied in the new constitution will last. My answer is yes they will, for two reasons. Firstly, the reforms are not as radical as some commentators think they are. The Kenyan establishment still stands to gain the most from the institutional reforms embodied in the new constitution. Land ownership, taxation, regulation of business, among other topics of interest to the elite are still firmly in the hands of the conservative centre and their provincial allies. Secondly, the emerging culture of bargaining, as opposed to Nyayo era “wapende wasipende (like or not) politics,” provides opportunities for amicable settlement of disputes resulting in self-reinforcing deals. No single political grouping can force its will on Kenyans. Mr. Kenyatta needed to only convince the Kiambu mafia for his policies to fly. Moi only needed a small group of collaborators. The new dispensation, however, requires that a significant number of elites, with varied political interests, buy into an idea before it can fly. This is progress. It is stable and sustainable progress.

Kenya’s dark hour in early 2008 was an eye-opener to the political and economic elite. The more than 1300 deaths will forever be a reminder of the evils of strongman rule. The broader legacy of the 2007 election will however be positive. The elections showed the core conservative establishment that they cannot run the country on their own, and that the peripheral elites also have significant de facto political power. By forcing the elite into agreeing to a self-enforcing arrangement, the regrettable events of 2007-08 facilitated elite compromises culminating in their new Kenyan constitution. The yet to be established supreme court will provide the final piece of the foundation needed for sustained institutional development in a predictable environment. Paradoxically, the biggest plus of Kenya’s new constitution is its conservative bent. And for that reason it will endure beyond the current teething phase. A more radical document would have been eviscerated just as the Kenyatta and Mboya amendments decimated Kenya’s independence constitution.