Taxation on the Congo River

This is the abstract of Olsson, Baaz, and Martinsson in the JDE:

In many post-conflict states with a weak fiscal capacity, illicit domestic levies on trade remain a serious obstacle to economic development. In this paper, we explore the interplay between traders and authorities on Congo River – a key transport corridor in one of the world’s poorest and most conflict-ridden countries; DR Congo. We outline a general theoretical framework featuring transport operators who need to pass multiple taxing stations and negotiate over taxes with several authorities on their way to a central market place. We then examine empirically the organization, extent, and factors explaining the level of taxes charged by various authorities across stations, by collecting primary data from boat operators. Most of the de facto taxes charged on Congo River have no explicit support in laws or government regulations and have been characterized as a “fend for yourself”-system of funding. Our study shows that traders have to pass more than 10 stations downstream where about 20 different authorities charge taxes. In line with hold-up theory, we find that the average level of taxation tends to increase downstream closer to Kinshasa, but authorities that were explicitly prohibited from taxing in a recent decree instead extract more payments upstream. Our results illustrate a highly dysfunctional taxing regime that nonetheless is strikingly similar to anecdotal evidence of the situation on the Rhine before 1800. In the long run, a removal of domestic river taxation on Congo River should have the potential to raise trade substantially.

The magnitude of taxation is not trivial:

congotaxesIn our applied analysis, we collect novel data from a sample 137 river boat operators, which corresponds to approximately 90 percent of all boats arriving during our 3.5 month survey period. During the journey downstream on Congo River, a boat passes several administrative stations where various authorities are present. Our data record more than 2000 de facto tax payments to more than 20 different authorities at 10 different stations on the journeys downstream Congo River towards the capital Kinshasa. The average total cost of such de facto taxes amounts to almost 14 percent of the variable costs of a single journey, equivalent to more than 1.5 times the official GDP per capita in DR Congo and 9 times the average monthly wage of a public official.

… In total, 2226 tax payments were recorded among the sampled boats, adding up to a total sum of 76,148 USD. On average, boat operators made about 18 payments per journey.

Why did modern nation-states not emerge in China?

This is from Yuhua Wang (highly recommended):

The collapse of the Chinese state in the early twentieth century was surprising. China was a pioneer in state administration: it established one of the world’s most centralized bureaucracies in 221 BCE, two hundred years before the Roman Empire. In the seventh century, it produced a quarter of the world’s GDP (Maddison 2007, 381) and became the first country to use a civil service examination to recruit bureaucrats…

Why, then, did China suffer a dramatic reversal of fortune, given its early bureaucratic development?

… elites’ level of support for state building depends on the geographic span of their social networks. If they must protect a geographically dispersed network, it is more efficient to support state-strengthening policies. These elites have an encompassing interest (Olson 1982, 48). If they need to protect a geographically concentrated network, it is more efficient to rely on private protection and oppose state strengthening. These elites have a narrow interest (Olson 1982, 48).

China…. As the elites’ social networks became localized, they also fragmented; they found it difficult to organize cross regionally. A fragmented elite contributed to a despotic monarchy because it was easier for the ruler to divide and conquer. Historians have noted the shift to imperial despotism during the Song era, as the emperor’s position vis-à-vis his chief advisors was strengthened (Hartwell 1982, 404–405). The trend further deepened when in the late fourteenth century the founding emperor of the Ming Dynasty abolished the entire upper echelon of his central government and concentrated power securely in his own hands (Hucker 1998, 74–75). This explains the increasing security of Chinese rulers [see image].

The despotic monarchy and the narrow interest elite became a self-enforcing equilibrium: the rulers were secure, while the elite used the state to protect their local interests and enjoyed their autonomy. Yet this arrangement led to the gradual decline of the Chinese state.

There are so many parallels to the challenges to state-building in Africa throughout the piece (many of which were documented by Catherine Boone in the excellent Political Topographies of the African State).

Read the whole thing here.

The world’s largest measles outbreak has killed over 4000 people in the DRC

This is astonishing news:

The world’s largest measles outbreak has killed more than 4,000 people in the Democratic Republic of the Congo this year, according to UNICEF.

The agency found that 203,179 measles cases have been reported throughout the country’s 26 provinces since January, according to UNICEF, including 4,096 deaths. Seventy-four percent of infections and nearly 90 percent of deaths have been children under the age of five.

According to the WHO:

  • Even though a safe and cost-effective vaccine is available, in 2017, there were 110 000 measles deaths globally, mostly among children under the age of five.
  • Measles vaccination resulted in a 80% drop in measles deaths between 2000 and 2017 worldwide.
  • In 2017, about 85% of the world’s children received one dose of measles vaccine by their first birthday through routine health services – up from 72% in 2000.
  • During 2000-2017, measles vaccination prevented an estimated 21.1 million deaths making measles vaccine one of the best buys in public health.

The measles outbreak in the DRC is attributable to low immunization rates due to the country’s weak public health infrastructure. According to the UNICEF:

measles.png“We’re facing this alarming situation because millions of Congolese children miss out on routine immunization and lack access to health care when they fall sick,” said Beigbeder. “On top of that, a weak health system, insecurity, community mistrust of vaccines and vaccinators and logistical challenges all contribute to a huge number of unvaccinated children at risk of contracting the disease.”

Two doses of the measles vaccine are recommended and roughly 95 per cent of the population needs to be vaccinated to ensure immunity and prevent outbreaks, according to the World Health Organization.  In DRC, measles immunization coverage was only 57 per cent in 2018.

Emergencies like these are reminders of the unfinished business of state-building in most of the Continent, and not just post-conflict states the DRC.

State-building under ISIS

The New York Times has an interesting piece on everyday instances of stateness under ISIS. From the article, it appears that in addition to its macabre coercive powers, Al-Baghdadi’s caliphate managed to develop significant levels of infrastructural power and  bureaucratic capacity. Below are some examples.

On the provision of public goods and services and regulation of social life:

ISIS built a state of administrative efficiency that collected taxes and picked up the garbage. It ran a marriage office that oversaw medical examinations to ensure that couples could have children. It issued birth certificates — printed on Islamic State stationery — to babies born under the caliphate’s black flag. It even ran its own D.M.V.

On differentiation from the Iraqi government:

The documents and interviews with dozens of people who lived under their rule show that the group at times offered better services and proved itself more capable than the government it had replaced.

On being able to graft itself atop preexisting administrative structures:

Screen Shot 2018-04-05 at 8.11.12 AM.pngThey also suggest that the militants learned from mistakes the United States made in 2003 after it invaded Iraq, including the decision to purge members of Saddam Hussein’s ruling party from their positions and bar them from future employment. That decree succeeded in erasing the Baathist state, but also gutted the country’s civil institutions, creating the power vacuum that groups like ISIS rushed to fill.

A little more than a decade later, after seizing huge tracts of Iraq and Syria, the militants tried a different tactic. They built their state on the back of the one that existed before, absorbing the administrative know-how of its hundreds of government cadres. An examination of how the group governed reveals a pattern of collaboration between the militants and the civilians under their yoke.

On extractive capacity and revenue source diversification:

One of the keys to their success was their diversified revenue stream. The group drew its income from so many strands of the economy that airstrikes alone were not enough to cripple it.

Ledgers, receipt books and monthly budgets describe how the militants monetized every inch of territory they conquered, taxing every bushel of wheat, every liter of sheep’s milk and every watermelon sold at markets they controlled. From agriculture alone, they reaped hundreds of millions of dollars. Contrary to popular perception, the group was self-financed, not dependent on external donors.

….. It was daily commerce and agriculture — not petroleum — that powered the economy of the caliphate.

Read the whole thing here.

Patchwork Leviathans? Pockets of Excellence in Otherwise Dysfunctional States

This is from Erin Metz McDonnell:

Within seemingly weak states, exceptionally effective subunits lie hidden. These high- performing niches exhibit organizational characteristics distinct from poor-performing peer organizations, but also distinct from high-functioning organizations in Western countries. This article develops the concept of interstitial bureaucracy to explain how and why unusually high-performing state organizations in developing countries invert canonical features of Weberian bureaucracy. Interstices are distinct-yet-embedded subsystems characterized by practices inconsistent with those of the dominant institution. This interstitial position poses particular challenges and requires unique solutions. Interstices cluster together scarce proto- bureaucratic resources to cultivate durable distinction from the status quo, while managing disruptions arising from interdependencies with the wider neopatrimonial field. I propose a framework for how bureaucratic interstices respond to those challenges, generalizing from organizational comparisons within the Ghanaian state and abbreviated historical comparison cases from the nineteenth-century United States, early-twentieth-century China, mid- twentieth-century Kenya, and early-twenty-first-century Nigeria.

…… Monolithically dysfunctional administrations are the exception, not the rule— albeit the exception that has long captured popular and academic attention (Evans 1989; Helman and Ratner 1992). Instead, many states regarded as uniformly ineffectual have great internal variation, with agencies spanning a continuum from ineffectual quagmires to competently achieving organizational man- dates in the public interest. These state “leviathans” are patch-worked: they are cobbled together from scarce available resources, with organizational diversity sewn loosely together into the semblance of unity. In such states, adapted Weberian-style bureaucracy exists in interstices—niches within predominantly neopatrimonial administrations.

The sociology of state and nation building, and development in general, is underrated.

Read the whole thing here.

Demography is Destiny (or why two heads are better than one)

Bradford DeLong has a fantastic blog post on the relationship between population size and economic growth and development. He writes:

In Kremer’s model, population will grow and eventually population will be high enough that research and development will proceed fast enough to push income per capita high enough to trigger the demographic transition and thus break the Malthusian proportional link between resources and technology on the one hand and population on the other. After that link is broken, economic growth will predominantly take the form not of Malthusian increases in population but rather Industrial Revolution and Modern Economic Growth increases in living standards and labor productivity.

The breakthrough to an Industrial Revolution, Modern Economic Growth, and our present prosperous global post-industrial economy is therefore baked into the cake. It is an all-but-inevitable event in human history produced by the simple fact that when it comes to generating useful ideas two heads are better than one: “the fundamental nonrivalry of technology as described by Paul Romer (1986)…”

DeLong then tests an alternative theory in which the economic takeoff of WENA countries after 1750 could have been a fluke, and concludes that the British industrial revolution at most saved the world 150 years — that is, “if you take the association between global populations and global economic growth back before the British Industrial Revolution seriously, as a causal relationship.

The whole post is worth reading. The empirical bits are clear and easy to follow. See also here.

In my Political Economy of Development class I make sure that my students understand the relationship between demography and human development — (i) the impact of demography on state development; and (ii) the impact of state development on markets and economic growth and development. To that end I often use these three illustrations.

Up until the mid 1990s tiny Europe had more people than all of Africa. In the next 30 years Africa’s population will grow by about 800 million people. By 2050 the Continent is projected to have 2 billion people; and half of the children being born in the world will be African. There is no reason to believe that the African experience after these demographic changes will not follow established correlations between population size, state development, and technological change.

Rwanda, 20 Years On

Caution: This is not an apology for President Kagame and his autocratic tendencies that have resulted in carnage and death in the DRC, Rwanda and elsewhere.

At a conference last year a US State Department official told a group of us that Rwanda was so polarizing that even at the Consulate in Nairobi the DRC crowd did not get along well with the Rwanda crowd.

It is not surprising why that might have been the case, or why the present analysis on the commemoration of the 20th anniversary of the 1994 genocide remains polarized.

rwandainfantmort

If one just looks at the improvements made in advancing human welfare since President Paul Kagame and the RPF took power (see graph, data from the World Bank) it is hard not to arrive at the conclusion that ordinary Rwandese are unambiguously better off. The country is the least corrupt in the region and has also been consistently ranked top in the ease of doing business. But there is also the side of the Kigali government that most reasonable people love to hate: the murderous meddling in the DRC and the oppression and occasional murder of dissidents at home and abroad. Those who admire what President Kagame has done tend to emphasize the former, while his critics tend to emphasize his autocratic tendencies which have made Rwanda the least democratic country in East Africa (see below, data from Polity). Many wonder if the post-1994 achievements are sustainable enough to outlast President Kagame’s rule.

So is Mr. Kagame a state-builder or your run of the mill autocrat whose achievements will vanish as soon as he relinquishes power?

ImageIn my view, I think that Rwanda is the best success story of state-building in Africa in the last 20 years. I also think that this (state-building) should be the paramount consideration for those who care about the Rwandese people and want to help them achieve greater freedoms. The fundamental problem in states like CAR, Sierra Leone or Liberia has never been the insufficiency of democracy. Rather, it has been the problem of statelessness. The contrast between Rwanda and Burundi is instructive (see both graphs, the two are neighbors with similar ethno-political histories. Rwanda has historically had a stronger state, though. See here and here). Despite the latter being the second most democratic state in the region, it has consistently performed the worst on nearly all human development indicators. Part of the reason for this is that Burundi remains a classic papier mache state confined to Bujumbura and its environs.

May be I am too risk averse. But I am scared stiff of anything that could lead to a recurrence of the horrors of the early 1990s stretching from the Mano River region to the Horn. As a result I am always skeptical of activism that takes state capacity (including coercive capacity) for granted.

With this in mind, the fight against autocratic rule in Rwanda should not come at the expense of the state-building achievements of the last 20 years. The international community and those who genuinely care about Rwandese people should be careful not to turn Rwanda into “democratic” Burundi in the name of democracy promotion. Interventions will have to be smart enough to push President Kagame and the ruling elite in the right direction, but without gutting the foundations of political order in Rwanda.

Absent a strong state (even after Kagame), the security dilemmas that occasioned the 1994 “problem from hell” would ineluctably resurface.

Lastly, I think the level of discourse in the “Rwanda Debate” could be enhanced by the extension of the privilege of nuance to the case. For example, if all we focused on were drones killing entire families at weddings in Yemen or the horror that is the South Side of Chicago we would probably get mad enough to ask for regime change in Washington. But we don’t. Because people tolerate the “complications and nuance of American politics.” The same applies to less developed countries. Politics is complicated, everywhere. And those who approach it with priors of good-or-bad dichotomies are bound to arrive at the wrong conclusions. One need not be a Kagame apologist to realize the need for a delicate balance in attempts to effect political change in Kigali.

Before you hit the comment button, notice that this is neither an apology nor an endorsement of autocracy in Rwanda. It is a word of caution regarding the choices outsiders make to accelerate political change in Rwanda.

Tyranny is not the panacea to underdevelopment. But neither is stateless democracy.

For background reading on the 1994 genocide in Rwanda see Samantha Power’s Problems From Hell; Mahmood Mamdani’s When Victims Become Killers; and Philip Gourevitch’s We Wish to Inform You That Tomorrow We Will be Killed With Our Families.