Is Asia Aging Prematurely?

This is from the FT:

China’s working-age population peaked in 2011 but its per capita income was just 20.7 per cent of the US level. Thailand was a little wealthier, at 28.9 per cent, when its working-age share peaked in 2013, but Vietnam was far poorer still, at 10.4 per cent of the US level, when it reached the same point a year later. Malaysia, Indonesia, India and the Philippines are projected to be somewhat better off when they reach peak working-age share, probably between 2020 and 2056, but still some way below the income levels reached in the west, as the third chart shows.

In February of this year, projections by Standard Chartered suggested that, by 2050, the likes of South Korea, Singapore, Thailand and China would have a higher share of pensioners in their population than most developed countries, depicted in the second chart [see below].

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These are pretty sobering figures. Basically (East) Asia’s dependency ratios will quickly begin to look a lot more like what obtains in low-income as opposed to high and upper middle income states. And that means a stagnation or even decline in per capita income.

It will be interesting to see how these countries — most of which have historically been averse to immigration — will deal with this demographic challenge.

In addition to the obvious economic challenges, Asian countries will also have to figure out how to take care of the medical needs of an aging population that will likely be living longer.

More on this here.

“The International Community”

internationalcommunity

It is one of those silly unspoken truths.

Conventional wisdom also holds that only these countries have national interests. Everyone else just does what these mostly WENA countries asks them to do.

For more on this subject see herehere, and here.

H/T Adam Johnson.

Reading the Torah in Abuja, and how the Talmud Became a Bestseller in South Korea

This is from The Economist:

In Abuja, the capital, there are at least four small communities of Igbo-speakers that have opened synagogues. (Jews joke that every town needs at least two so that members can hold a grudge, and refuse to attend one of them.) In one, on the outskirts of the city, there is a gospel lilt to the songs: members taught themselves to read Hebrew and then had to make up the tunes, says one…..

It might seem odd that people would sign up to join a small faith whose members have suffered centuries of oppression. Yet Uri Palti, Israel’s ambassador to Nigeria, reckons there are more than 40 such communities across the country. Daniel Lis, an academic, thinks there may be thousands of Nigerians who practise Judaism. Millions more of the Igbo tribe (sic) believe that they are descended from biblical Israelites. Across Africa as a whole there may be thousands more self-declared Jews. One community in eastern Uganda, the Abayudaya, adopted the faith almost a century ago. Its rabbi was recently elected the country’s first Jewish member of parliament.

And this is from the New Yorker:

About an hour’s drive north of Seoul, in the Gwangju Mountains, nearly fifty South Korean children pore over a book. The text is an unlikely choice: the Talmud, the fifteen-hundred-year-old book of Jewish laws. The students are not Jewish, nor are their teachers, and they have no interest in converting. Most have never met a Jew before. But, according to the founder of their school, the students enrolled with the goal of receiving a “Jewish education” in addition to a Korean one.

When I toured the boarding school last year, the students, who ranged in age from four to nineteen, were seated cross-legged on the floor of a small tentlike auditorium. Standing in front of a whiteboard, their teacher, Park Hyunjun, was explaining that Jews pray wearing two small black boxes, known as tefillin, to help them remember God’s word. He used the Hebrew words shel rosh (“on the head”) and shel yad (“on the arm”) to describe where the boxes are worn. Inside these boxes, he said, was parchment that contained verses from one of the holiest Jewish prayers, the Shema, which Jews recite daily. As the room filled with murmurings of the Shema in Korean, the dean of the school leaned over to me and said that the students recited the prayer daily, too, “with the goal of memorizing it.”

Both are pretty interesting reads. Definitely worth your time.

This graph doesn’t tell us what you think it does (Because stateness matters)

You probably saw this graph in your undergraduate development class — almost invariably as a demonstration of South Korea’s massive growth relative to countries that were allegedly at similar levels of “development” in the early 1960s.

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But were these countries really at the same level of development as South Korea?

The simple answer is no.

And to know why you need to read States and Markets: The Advantage of an Early Start:

A longer history of statehood might prove favorable to economic development under the circumstances of recent decades for several reasons. There may be learning by doing in the ways of public administration, in which case long-standing states, with larger pools of experienced personnel, may do what they do better than newly formed states. The operation of a state may support the development of attitudes consistent with bureaucratic discipline and hierarchical control, making for greater state (and perhaps more broadly, organizational) effectiveness. An experienced state like China seems to have been capable of fostering basic industrialization and the upgrading of its human capital stock even under institutions of government planning and state property in the 1960s and 1970s, whereas an inexperienced state like Mozambique sowed economic disaster when attempting to pursue similar policies a few years later. Such differences may carry over to a market setting — contrast, for instance, the late 20th century economic development of Japan and South Korea, modern countries with ancient national histories, with that of the Philippines, a nation that lacked a state before its 16th century colonization by Spain.

Development is not just about income. It also involves a lot of intangible socio-political variables. Going back to the graph, a key difference in 1960 between Ghana, India, and South Korea was the degree of coherent stateness. On this measure South Korea was way ahead of its developing country peers.

For more on this Dani Rodrik has a delightfully concise take on how South Korea and Taiwan grew rich.

Even within Africa, historical stateness makes a difference in development outcomes. A neat recent example can be found in Ethiopia’s ability to build a light rail in Addis in record time as Nigeria floundered.

How is the world reacting to China’s rise?

China has experienced a spectacular economic growth in recent decades. Its economy grew more than 48 times from 1980 to 2013. How are the other countries reacting to China’s rise? Do they see it as an economic opportunity or a security threat? In this paper, we answer this question by analyzing online news reports about China published in Australia, France, Germany, Japan, Russia, South Korea, the UK and the US. More specifically, we first analyze the frequency with which China has appeared in news headlines, which is a measure of China’s influence in the world. Second, we build a Naive Bayes classifier to study the evolving nature of the news reports, i.e., whether they are economic or political. We then evaluate the friendliness of the news coverage based on sentiment analysis. Empirical results indicate that there has been increasing news coverage of China in all the countries under study. We also find that the emphasis of the reports is generally shifting towards China’s economy. Here Japan and South Korea are exceptions: they are reporting more on Chinese politics. In terms of global sentiment, the picture is quite gloomy. With the exception of Australia and, to some extent, France, all the other countries under examination are becoming less positive towards China.

That’s Yuan, Wang and Luo writing in a neat paper that analyzes news coverage of China in different countries.

More on this here (HT Jay Ulfelder).

On the Continent opinion survey data from a select set of countries show high favorability ratings for China — by about two thirds or more of survey respondents. The same countries have seen some decline in US favorability ratings over the last few years. As you’d expect, people’s reaction to China’s rise is based on perceptions of the potential material impact it will have on their lives. On average, the survey evidence suggests that most Africans view China’s rise as a good thing.

It is interesting that across the globe young people, on average, have a more positive view of China’s rise than older people. Younger people probably associate China more with glitzy gadgets in their pockets; and less with cultural revolutions and famine-inducing autocracy.

will the latest land grab help africa?

Update: You can find individual country reports from the Oakland Institute, a California based think tank, here.

I am on record as having reservations about the latest scramble for Africa African governments leasing vital arable land to foreign companies and governments (esp. in the face of high levels of food insecurity in the region).

Like many, my first reaction was to protest against these land deals. Like most natural-resource concessions on the Continent, they appeared to favor only the foreigners and a tiny clique of well placed individuals in African governments – at the expense of the many.

But I am beginning to have second thoughts. This latest land grab on the continent maybe the catalyst of an African green revolution. Most African governments gave up on non cash-crop agriculture in the 1970s. Some, like Nigeria, abandoned agriculture wholesale and quickly became net exporters of agricultural goods. Bad policy (see Bates) and non-agricultural resources (mostly oil and metals) were to blame.

While my general skepticism remains, here are potential upsides:

  1. Commercialization of non cash-crop agriculture: The vast majority of agricultural production in Africa takes place in smallholder farms that are hard to finance or insure (tea, coffee, and other cash crops get all the money). Their small sizes also limit the economic feasibility of improvements such as mechanization, irrigation, etc. The advent of commercial production of food crops in the region will have market effects, for sure. Agricultural SM&Es and even Big Agriculture will bring much needed capital to this vital sector of the economy.
  2. Land consolidation: This is already happening (and is the main source of my skepticism regarding the benefits of these deals). With consolidation comes economics of scale, R&D, mechanization, etc. I hope that African governments will ensure that this latter day enclosure movement takes place in a humane manner. It is in their own interest since most of these governments’ political bases reside in the countryside and live on subsistence agriculture. Consolidation might also spur further growth by creating demand for more goods (people earn wages and their are no longer producing their own food). Remember that specialization determines the extent of the market (Adam Smith).
  3. Technological diffusion: With commercialization will come irrigation, mechanization, use of fertilization, R&D, etc that will most certainly diffuse to the local agricultural sector. Rain-fed agriculture when you have the Nile, the Niger, the Voltas, the Congo, the Zambezi, Tana, Athi, etc, is so pre-Mesopotamia.
  4. Political reforms: In my view, one of the key impediments to political reforms in Africa has been the persistence of what Hyden called the “uncaptured peasantry.” A landed peasantry that can live off the land allows politicians to play with the macro-economy like there is no tomorrow. If the people get off the land, the general performance of the national economy will have a bigger impact on their lives. Suddenly, reaction to stratospheric inflation rates and other failures in the macroeconomy will not be confined only to urban centres. This will, in part, serve to end Africa’s tyranny of the countryside – a situation in which ethnic chiefs elected from the countryside ignore the underrepresented urban dwellers – and spur real democratic accountability.

Discussion of the downside of these deals is already out there. It also helps to look at the potential upside (at least in the long-run). I remain convinced that the real pro-poor growth in Africa will come from SM&Es and big business, whether in agriculture or other sectors.

reality check

Recently I have been reminded over and over again of the fact that in the sixties South Korea, Ghana, Kenya, the Congo etc had roughly similar per capita GDP (I just started reading economic gangsters and have attended two very interesting lectures by Francis Fukuyama). Assertions of this nature are usually accompanied by accounts of what happened post-60s that made South Korea several times richer than its African counterparts in the present day. But an equally important question to ask is how different pre-60s Korea was from the African countries? (Korea’s long history with some form of organized polity, the nature of Japanese colonization, geographic location near the economic giants Japan and the US, relative importance in cold war politics, etc etc).

These are real issues with real consequences. Briefly stated, the differences between say the Congo and Singapore extend beyond those between Lee Kwan Yew and Mobutu Sese Seko. Pre-independence history and realities (including culture and forms of socio-economic organization) played a significant role in determining the respective trajectories of the  post-independence states of Asia and Africa.

While I am not a believer in historical institutional determinism, I find the reality of findings such as this hard to ignore. The short of it all is that everything is endogenously determined – institutions, quality of leaders, rates of capital accumulation, savings etc etc.

africa continues to be myopic and ready for the picking

So I keep reading stories about foreign governments like China, the Gulf States and South Korea that are planning on buying millions of acres of Africa’s arable land in order to provide food security for their citizens. From what I gather, most African governments are eager to sell 100 year leases in order to make a quick buck and then for 100 years condemn their countrymen and women to being near-slaves to foreigners in their own countries. How more stupid can our leaders get?

As a continent, Africa is the most food insecure place on the planet. Millions depend on food aid, even in supposedly more developed countries like Ghana, Kenya and Senegal. Some countries like Ethiopia, Somalia, Sudan, and nearly all of the Francophone Sahel have never known food security for decades. They have been permanent recipients of aid from the US and the World Food Program. It makes you wonder why it is not these governments making deals with their fellow African countries to guarantee the continent some food security.

Food production is what propelled human civilization. Mesopotamia, the Indus-Gangetic Valley, the Nile Valley, were all organised with an aim of improving food production so as to free up talent for other more meaningful human endeavors. Africa, nearly 12,000 years later, still cannot afford to feed its own people. It is not a question of land or water. The great lakes regions can feed the entire continent and still have a surplus. With the exception of the South West African countries and the Sahelian states, all of Sub-Saharan African countries ought to be food-secure. The fact that they are not is simply and squarely because of poor leadership.

And now these same inadequate leaders want to sell the land to foreigners. I am assuming that when foreign governments buy land they’ll treat it like they do with their embassies – provide their own security and run the show by their own rules. I wonder how different this will be from an outright recolonization of the African continent by more developed and better run countries.

We are still in the woods. And we are screwed for the foreseeable future. Like it is not even funny anymore. Our Mugabes, Obiangs and Zenawis continue to fail us big time. How hard can it be to run a country? Like seriously.