Archive | September 22, 2013

We are not rich because Africa is poor (and vice versa): Part 1

GDP growth by year, Botswana compared with mean GDP of all SSA countries.

GDP growth by year, Botswana compared with mean GDP of all SSA countries.

A few days ago, I became embroiled in a discussion where someone suggested, to paraphrase, that “the developed world is richer than we need to be because we exploit developing countries.” Of course, the converse here can also be said, “developing countries are poor because we are rich.”

I took serious issue with the statement, tried to make my case, but was unable to convince the participants that Africa’s poor economic performance cannot exclusively be blamed on western exploitation. I consider the statement to be completely uncontroversial. Someone even suggested that I might be a racist (!) after I insisted the point.

So, I make part of my case here, with the caveat that I am going to talk about Africa. It’s debatable whether all “developing countries” can be generalized through Africa, but it’s not debatable that there are a lot of developing countries within Africa.

Going that route, we have to subject any conversation about Africa to a bit of skepticism. Africa’s diversity rivals that of even diverse Europe or Asia. Home to thousands of languages, one of the most diverse ecologies on the planet, a large landmass with a non-uniform distribution of resources, a multitude of governmental systems, histories and peoples, Africa is probably the most difficult to generalize area of the planet.

Not unlike Asia, what the countries and peoples of Africa do share, is a history of warfare, political upheavals and colonization. In contrast to Asia, the economy of the continent as a whole has fared poorly for much of the past 50 years.

I will not develop a deep history of the continent and its economic woes. I will, however, in three posts,

1) dispel the common myth that Western exploitation is exclusively to blame for Africa’s generally poor progress using Botswana as a test case,
2) show that growth in East Asia in the past decades has not resulted in a depressive effect on developed economies, showing that the West does not lose when others gain,
3) finally, argue that the west loses more from a poor Africa than it gains.

So here we go. Though I feel that I will gloss over a lot of points (for space), I also recognize that this can get really long and windy, so forgive me.

Rather than focus on Africa’s failures, which, on the surface, seem entirely deterministic in nature, let’s for a moment focus on its successes. This approach will make sense, since we can learn a lot about failures from the things that people get right.

Botswana

Botswana

I want to take us to Botswana. Bostwana was born facing some serious challenges:

1) it’s landlocked so it has trouble trading goods
2) it’s mostly desert so it can’t really grow anything
3) it has hardly any people so it can’t draw on large amounts of human resources.

Botswana was formerly colonized by the Brits, gained independence in 1966 and, at the time, held the dubious distinction as one of the poorest countries on the planet and even Africa (per capita GDP of $70 (current)). At independence, it was in the bottom ten of all economies in the world, had only 12 km of paved roads, and a nearly 80% illiteracy rate.

Worse yet for Botswana, is that is cursed with ample reserves of diamonds and other minerals. But where other resource rich countries such as Angola descended into warfare and economic chaos, Botswana claims consistent growth since the time of independence and is now an upper middle income country with a per capita GDP of nearly $16,800 in 2012, 6000km of paved roads, and a nearly 90% literacy rate. Bostwana’s Gini index is still quite high and it’s been hit hard by HIV, but despite the negatives that every country has, it can still claim to be one of the most successful countries on just about every indicator in all of Africa.

How did Botswana maintain consistent economic growth while (almost) every other country in Africa has approximately the same GDP in 2013 as it did in 1960?

A *really, really* simple list:

1) It reinvested its money. Bostwana leveraged its diamond resources to develop infrastructure and human resources all across the country.
2) It created systems which fortified property rights among its citizens, reducing the likelihood of conflict.
3) It maintained a policy of saving of surpluses to hedge against inherent volatilities in commodity prices.
4) It actively encouraged the development of other sectors, making the assumption that one day, the diamonds will run out.
5) It managed its banking sector to benefit its population. The Bostwanan central bank lends considerable amounts of money at favorable terms to encourage various sectors. It can do this because of 2) (collateral) and 3) (money to lend and decreased risk to the state’s finances) and which supports 4) (diversification of the economy).

Note that all of these are policy decisions. Even if Botswana were receiving unfavorable terms from mining companies, Botswana, with its policies of transparent banking, government reinvestment and the maintenance of savings would still have allowed it to maintain consistent growth over time. Remember, Botswana started from the bottom. ANY gain, even at the most exploitive level of terms, would have been an improvement and would have led to consistent growth.

It’s worth also noting, that, since the Botswanan government is more effective, that it can also leverage better terms with potential investors. It’s also important to note that Botswana’s resource boom didn’t come until the 80’s, when it signed a contract with South African diamond mining giant De Beers. It had more than 14 years before its diamond boom to get it right, and it did.

The moral here?

1) African countries are not doomed to poverty.
2) Pro-development government policies are possible, even in economies which rely on resources.
3) Most salient, even if De Beers had offered the most awful and exploitive of terms, Botswana’s economy would still have grown consistently over the past five decades due to Botswana’s pro-development government.
4) Assuming the successes of Botswana can be extrapolated to the failures of other resource rich countries (like Angola and the DRC), resource exploitation is not the reason African countries’ economies have been (mostly) stagnant for past decades.

I’m convinced that metal is associated with economic growth (you need electricity to have metal) and Botswana has it.

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Assault at Westgate Mall, Nairobi, Kenya

Today I’m reading the new reports on yesterday’s gun assault on Westgate Mall in Nairobi. The numbers killed and injured keep rising. Last I checked, there’s around 50 dead and nearly 200 injured.

This was a horrible, inexcusable event. Al Shabab, a Somali terror/warlord group aligned with the collection of groups we refer to as Al Qaeda, has claimed that the massacre was in retaliation for Kenya’s cooperation with the Somali Army to out Al Shabab from the territories it occupies. It is unclear how this strategy is to work, given that Kenya entered Somalia in response to a series of terror attacks by the group.

It is likely that As Shabab intend this as evidence of their continued existence and a way to obtain recognition from other groups that might support them. Admittedly, my knowledge of the complex dynamics of Islamic terror groups is lacking.

The shooting as Westgate was particularly depressing to me. I’ve spent time in Kenya, and grew rather fond of Nairobi this past summer. I have many Kenyan and Japanese friends and colleagues in the area.

In Africa, only certain people can go to upscale places like Westgate. On any given day in Westgate, Ya Ya Centre, or any of the other upscale malls, you might be sharing space with Kenyan politicians, a prize winning African literary figure, brave human rights and relief workers, corporate kings, diplomats from all around the world, and a host of others.

Kofi Amoonor, Ghanaian literary figure

It has already been announced that Ghanaian writer and former ambassador to the UN Kofi_Awoonor is among those killed.

It is really easy to be cynical about an upscale mall in a developing country from afar. I’m positive that disparaging comments have already been made, but I will not search for them.

Places like the Westgate Mall, however, are sanctuaries in a place like Nairobi. Though I only rarely visit malls in the United States, Westgate is a place where people like me can escape the stigma of “otherness” and constant objectification, be free of the constant touting and begging that unfortunately occurs far too often in Nairobi and be in a place where one doesn’t have to look over one’s shoulder at all moments. It may sound quite awful to hear a wealthy, educated and white American complain, but in Nairobi, sadly, all of these things are a given. It becomes extremely exhausting and places like the Westgate happily provide them (along with excellent bookstores).

The worst outcome of this shooting will be that security will become even more intense. The divisions between the wealthy and the poor will become ever clearer. On the one hand, a secured area creates safety, on the other, it creates awful divisions. Nowhere is this clearer than the United States, whose history is filled divisions.

I am wishing the best to all in Nairobi right now. I’m sure that everyone I know in Kenya knows one or more people that were in that mall yesterday.

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