Tag Archive | Sub-Saharan Africa

Does Development Work? Observations on Gates’ Annual Letter

Infant mortality is down worldwide

Infant mortality is down worldwide

Asking a question like “does development work” is like asking “does policy work”: it depends. I seem to be fielding questions about development with increasing frequency. Mostly I find that the harshest critics don’t know a whole lot about development and haven’t been to many places in the world, complicating my ability to respond in an reasoned manner. Development is a complicated beast but, the truth is, that it didn’t come easy for us 1%’ers either.

Every year, Bill and Melinda Gates release a letter on the state of the Gates Foundation and the current situation of global development and health. This time Gates set out to dispel three common myths on development, namely that poor countries are doomed to be poor forever, foreign aid is a total waste and that development will just lead to overpopulation.

The first is the most cynical, but even for us development/public health folks, it’s easy to be discouraged. Pessimism aside, the data don’t bear out the assumption that developing countries are entrenched in poverty. Just about all Sub-Saharan African countries experience consistent economic growth throughout the 00’s and have seen rapid improvements in just about all of the common health indicators. People are living longer, fewer kids are dying and they’re making more money to pay for school and health care.

Over the past five years that I’ve been going to Sub-Saharan Africa I’ve seen this change on the ground. Cars are in better shape, there’s more goods on the shelves, kids are better nourished and security has vastly improved. Does this mean that all of the problems are magically going away? No, there are still vast challenges to infrastructure development, access to health care and affordable medications, educational quality, gender issues and basic business development. However, these improvements do signal that Sub-Saharan African countries are reaching a point where sustained development is possible.

I have a hard time disagreeing with Gates here, but I did find his “before” and “after” pictures of Nairobi a bit bizarre. Though Nairobi is currently going through a construction boom, I fail to see how it would look any different in 2014 than it did in 1969 after more than three decades of stagnation.

Gates second point and the hardest myth to dispel is that of the alleged ineffectiveness of aid. Bill Easterly has made a career out of aid bashing, and, unfortunately, given cynical politicians looking for policy scapegoats a point to scream to their angry constituents. In a broader sense, the screaming over aid is really a questioning of developmental policies themselves. Certainly, there are development failures. The neo-classically informed structural adjustment policies of the World Bank and the IMF during the 80’s and 90’s were, on the surface, colossal failures (Read Beyond the World Bank Agenda: An Institutional Approach to Development by Howard Stein for a great analysis). On a smaller scale, we can easily cherry pick misguided but well meaning development projects or plans that simply went awry for any number of unforeseen reasons. The recent takedown of Jeff Sachs (The Idealist: Jeffrey Sachs and the Quest to End Poverty) and the massive problems of the Millenium Village in North East Province in Kenya is a great example of the challenges a development project can face.

However, in ever insular post Iraq America, the question that is most often asked is why we should even care and does our presence merely serve to make things worse. The truth is, and the point most often overlooked, is that most development projects are international collaborations. Many projects are conducted with partners in target countries and, more often than not, projects often make up for shortfalls that hobbled governments are unable (or sometimes unwilling) to provide. Health care is one example.

Jeff Sachs wrote a nice article this morning on how effective free insecticide treated nets have been in reducing malaria incidence and mortality in Sub-Saharan Africa. Nearly half a billion free nets have been given out worldwide as of 2014 and a lot of kids are alive today who would have been dead had they been born ten years earlier. Malaria is 100% associated with poverty. Wealthy people do not get malaria, even in malaria endemic countries. Though some of the decline in malaria incidence has been due to increased affluence and urbanization of African countries, a major percentage of this decline has been due to aid programs which provide bed nets and have expanded access to life-saving malaria medications. Certainly, not all aid works, but nothing works 100% of the time, particularly when humans are involved.

Which brings us to the most cynical and offensive of Gates’ three myths. Some people truly believe that saving African kids is a bad thing. One day there will be too many of them and they will suck up the ability for the world to sustain life. Honestly, this view couldn’t be more wrong.

The poorest parts of the world are the areas which are seeing the most rapid population growth. The average Malawian woman has 8 children in her lifetime, often starting when she isn’t even yet 15 years old. It has been said that if Malawi continues on it’s current trajectory, that it will have a population equivalent to that of Japan’s by 2050. Women in water and food constrained pastoralist communities can have ten or more children. The most affluent areas of Africa are the places with the slowest population growth.

Even more incorrect is the assumption that poverty is less harmful to the environment than development. Malawi is almost entirely deforested due to extensive use of charcoal for heating and tobacco cultivation. Deforestation not only robs the earth of potential carbon sinks, but also reduces need biodiversity and directly impacts precious water resources. Africa burns unclean fuels such as charcoal and coal for heating, and the poor condition of vehicles make it a major potential source of greenhouse gases. The air in Nairobi on any given weekday is so filled with exhaust that one can become dizzy just walking around town. It is, of course, unreasonable (and stupid) to deny Africans transportation and cooking fuel, but well meaning though poorly informed armchair environmentalists in the United States would happily suggest doing just that.

Which bring me to my final point. The case against development is one that assumes that the status quo is somehow preferable to anything that might come after. The assumption is that Africans were just fine without Europeans and their planet destroying ways. There is, of course, little data on what Africa was like before Europeans started extracting resources from the continent. We do, however, know a lot about underdeveloped areas of Africa. There is evidence to suggest that some do fine. There is however, much evidence to suggest that other simply do not. The worst parts of Africa are the parts which are the least developed. They are the areas where the market doesn’t function. The areas where there is little education, no access to health care, no roads, no economy, kids regularly die, where old people are a venerated since they are so rare, where there’s violence and instability and people are entirely marginalized from any level of political participation. While development likely will never solve the worst problems (like those in Somalia), there is no case to be made that the current state of the ultra poor is acceptable on any measure, even to the poor themselves!

Alright, off to bed.

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What Determines the Price of Goods in African Markets?

DSC_0443I’m gearing up to write a paper on pricing of malaria drugs in private drug shops in Sub-Saharan Africa so the question is on my mind.

We know that things in shops aren’t free; there is a certain amount of cash money to be paid. However, even in rich, well studied America, the mechanics which determine how retailers set their retail prices remains somewhat mysterious.

Common wisdom (assuming that neo-classical economics can be consider as such) would suggest that prices are the result of a balance between supply and demand. Customers and retailers weigh out each other’s needs and assets and an equilibrium arises. The trouble with this thinking is that it assumes that customers and retailers operate with perfect information about markets on all the products and services available. It assumes that customers (and retailers) weigh out prices when deciding where to purchase an item.

An example, when people choose a bar they rarely consider the price of the drink. They have a fixed amount of money they are willing to part with, but the drinking, the establishment and the people they meet all take priority over the individual prices of the drinks. As Robert Nielsen noted in a recent blog post, bars don’t charge more when demand goes up at night and one the weekends, and don’t normally charge less when the place is empty (outside of happy hours).

My epiphany came to me as I was wedged at the bar where I had been waiting for half an hour trying to order a drink during Black Monday. Why didn’t the student bar just raise its prices to deal with the excess demand which they knew would occur (as it did every year)? Why did they opt for an option that any first year economics student is taught is highly inefficient?

The explanation could be that there is a price that customers expect to pay for a good or a service and retailers, worried only about percentage profit margins on individual goods rather than the business as a whole, are inflexible when assigning prices, ignoring methods which might efficiently react to market pressures.

But, really, nobody knows for sure. Whatever the method behind the madness is, the story isn’t simple and not many people agree on much.

In African markets, the factors which contribute to pricing are even more vague, mostly because people haven’t really looked at it. Anyone who has been to Africa knows how the informal sector works. Lots of people sell the same things for the same price right next to each other. For example, it’s not uncommon to see 50 people selling the same rice next to each other for the same prices. There’s so many retailers and so few customers, that is is improbable that anyone is making any money at all.

Worse yet, African retailers are hesitant to introduce measures which would increase efficiency, such combining shops. A sole proprietor loses business when away from the shop. Two proprietors can take shifts, allowing one to take care of daily business while still making money. They can combine capital to obtain a wide variety of products. Better yet, partnered shops can take advantage of bulk discounts, possibly passing savings on to customers and remain competitive.

The result is that this hyper-competition and inefficiency is potentially raising prices for customers. Increased market efficiency would allow for lower pricing, allowing customers to buy a wider variety of goods and still cover expenditures like school fees and health care. It’s possible that overall market inefficiency is complicating public health efforts to control and prevent disease and death through a lack of disposable income and even through exorbitant prices for drugs.

But, again, this assumes we know anything about pricing, which we don’t. Un-cracking this nut could help save some lives.

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