Development Economics

Cote D’Ivoire and the “Big Man” in African Politics

The big news in West Africa (and the rest of the world) is the election crisis in Cote D'Ivoire, the next-door neighbor of Ghana. I have talked to a lot of people about what's happening and have tried to learn as much as I can about the issue. Basically, Cote D'Ivoire recently held a presidential election. The incumbent, Laurent Gbagbo, is a former history professor who took became president in 2000 in a contested election. Despite losing the most recent election to Alassaine Ouattara, a technocrat and economist from the predominantly Muslim north, Gbagbo is refusing to step down. Both men have been sworn in as president, though Ouattara is holding court in a hotel surrounded by 700 UN peacekeepers. Meanwhile, the entire world has condemned Gbagbo and called for him to step down. Gbagbo, the consummate "big man," has no intention of leaving anytime soon. Most recently, the new Ivorian UN ambassador (appointed by Ouattara) told the international community that Cote D'Ivoire is on the brink of genocide. 173 people have already been killed, and, unfortunately, that is probably just the beginning. My first reaction was that what is happening in Cote D'Ivoire is, for lack of a better word, cliche, given the historical precedent of tainted democratic elections in Sub-Saharan Africa.  The more I read, the it became clear that I am not alone.  There are exceptions to this rule, of course.  Ghana is a great example of a stable democracy.  So much so, in fact, that President Obama chose Ghana as the site of his first speech to Africa.  But why don't these proverbial big men just step aside?  The whole world is against you, you are broke and hanging on by a very thin thread, and refusing to capitulate to the will of your own people will likely result in the deaths of thousands of your people and will set the development your country back decades.   So why not step aside? (more…)

Agriculture

Money and Politics in the USA

There is a great disparity of wealth in the United States right now.   Over the last two decades, the invisible hand of the market has re-oriented the global economy in such a way that labor-intensive industries have moved overseas, along with the middle and lower-middle class jobs from the States.  As the number of manual labor jobs has declined, the demand for skilled labor within the service and financial sectors has increased, and salaries have risen.  The end result: in 2009, the top 5% of earners saw their average incomes increase, while the rest of the country saw their average incomes decrease.  The top 1% of the country owns 24% of the wealth – the highest percentage since the Great Depression.  We are like a banana republic (the country, not the store).  In a nutshell:

This is what the political scientists Jacob Hacker and Paul Pierson call the "winner-take-all economy." It is not a picture of a healthy society. Such a level of economic inequality, not seen in the United States since the eve of the Great Depression, bespeaks a political economy in which the financial rewards are increasingly concentrated among a tiny elite and whose risks are borne by an increasingly exposed and unprotected middle class. Income inequality in the United States is higher than in any other advanced industrial democracy and by conventional measures comparable to that in countries such as Ghana, Nicaragua, and Turkmenistan. It breeds political polarization, mistrust, and resentment between the haves and the have-nots and tends to distort the workings of a democratic political system in which money increasingly confers political voice and power. (more…)

Agriculture

Crisis in Cote D’Ivoire: How Political Instability Alters Trade Patterns

The big news in this part of the world (West Africa) is the recent democratic election in Cote D'Ivoire, which saw the anointing of not one but two presidents.  The incumbent president, who has led the country for 10 years and is constitutionally barred from seeking a third term in office, is refusing to step down after a decisive 54-46 loss to Alassane Ouattara, an economist and technocrat who also happens to be both a Muslim and a leader of the rebel groups in the north.  The international community has unanimously rallied behind Ouattara and called for Gbagbo to step aside.  The World Bank has suspended aid to the country, and Ouattara has called for the Central Bank to stop releasing money as a way to "starve the beast," and turn hungry soldiers against the incumbent president. Unfortunately, with 173 people killed so far in the post-election violence, analysts are predicting the country is going to slide into another civil war. (more…)

Development Economics

The Dark Realities of Agriculture Economic Development

The ADVANCE project, which I am currently working on, seeks to "improve Ghana’s agricultural sector by increasing competitiveness in domestic, regional and international markets."  The way to do this is to give smallholder farmers (defined as those with 1-2 hectares of land, or renters) better access to fertilizer and chemicals, better access financing and seed varieties that the market demands, and more efficient machinery.  This process is called "upgrading," and it is the key to import-substitution for the rice, and export competitiveness for soya.  The end goal is food security, and the means is the commercialization of the agriculture sector. But there is another way of achieving this end, and, unlike a market facilitation approach like that of ADVANCE, it is decidedly not good for the poor:

Across Africa and the developing world, a new global land rush is gobbling up large expanses of arable land. Despite their ageless traditions, stunned villagers are discovering that African governments typically own their land and have been leasing it, often at bargain prices, to private investors and foreign governments for decades to come. Organizations like the United Nations and the World Bank say the practice, if done equitably, could help feed the growing global population by introducing large-scale commercial farming to places without it.
But others condemn the deals as neocolonial land grabs that destroy villages, uproot tens of thousands of farmers and create a volatile mass of landless poor. Making matters worse, they contend, much of the food is bound for wealthier nations.
Ever since the 2008 world food crisis, wealthy nations have seen the dangers in becoming reliant on other countries for food production and, in anticipation of the next one, have begun scrambling to buy land in Africa.  Likewise, hedge funds see the writing on the wall and are participating in the feeding frenzy too.  The concern is that people will be displaced en masse from their lands and left with nothing to show for it.  On the other hand, many of them are technically squatters, with the actual deed for the land belonging to the government or a major landholder.  Then again, one might find it difficult to impress this on a third-generation farmer living on the same piece of land as his grandfather. (more…)

Development Economics

An aggressive and pernicious economic competitor with no morals

I am still uncertain on where I stand regarding Wikileaks, but the most interesting releases so far have been the diplomatic cables, which are basically individual case studies in geopolitical dynamics.  The ones regarding Africa policy have been particularly fascinating.  Take this one from the U.S. Assistant Secretary of African Affairs, Johnnie Carson, about China's role in Kenya:

The U.S. is closely monitoring China’s rising influence and engagement in Africa, according to U.S. diplomatic cables released by WikiLeaks, a nonprofit media organization that specializes in leaking classified government information. The U.S. believes the emerging Asian donor is in Africa primarily for its own interest, one of the leaked cables said. “China is a very aggressive and pernicious economic competitor with no morals. China is not in Africa for altruistic reasons. China is in Africa for China primarily,” a February 2010 cable from the U.S. embassy in Lagos, Nigeria, said. The cable also stated that China is using its engagement in Africa to “secure votes in the United Nations from African countries.”
This gets to the heart of the debate about China's role in developing nations.  The United States and the West are often very critical of China's economic interest in Sub-Saharan Africa and their "ask no questions" approach to dealing with certain nefarious figures in African politics.  Supporters would say that China is actually treating Africa as a partner in development, offering countries an opportunity to grow based on mutual economic benefit through bilateral trade.   (more…)

Development Economics

The Development Matrix: Wake Up

Two World Bank economists scientifically prove that first-world countries pay more than third-world countries:

Ask most people to name the most effective means of raising incomes of people in poor countries, and what would they say? Microfinance? Perhaps not after the recent experimental assessments. Deworming? It increased primary school participation and improved health, but in the short-term at least seems unlikely to raise household income. Conditional cash transfers? This might be a popular answer, with evidence from a number of countries that they have increased household expenditure , schooling, and health outcomes. But even though Governments devote significant resources to such programs, the absolute annual increases in household income and expenditure are still at most US$20-40 per capita for participating households. I bet that facilitating international migration is not very high up the list of interventions people think of. But it should be. In a new working paper, John Gibson and I evaluate the development impacts of New Zealand’s new seasonal worker program, the RSE. The figure below compares the per-capita income gain we estimate to those from microfinance, CCTs, and from my previous research giving grants of $100-200 to microenterprises. It is simply no contest!
Really?  The finding here is that seasonal migrant workers who move to developed countries make much more money than they could were they to participate in economic development projects?  The fact that this is even worth the ink it is printed on seems crazy to me.   (more…)

Development Economics

My Role in Technoserve and ADVANCE in Ghana

I have explained how the agriculture supply chain works and talked about the state of the agriculture sector in Ghana.  It is time to talk about the specific challenges of agriculture in the West African context and explain a bit more about how my work fits into this picture.  I am working on the USAID-funded ADVANCE project, which seeks to improve the agriculture value chain and increase competitiveness in domestic, regional, and global markets.  There are two specific challenges for Ghana: achieving food self-sufficiency, and becoming competitive in the global marketplace.  The first is largely achievable for most crops.  The latter is achievable for some crops (and already achieved, in the case of cocoa and certain fruits) and impossible (or near-impossible) for others.  I'll explain why in a minute. ADVANCE employs what is called a "market facilitation approach" to agriculture sector development.  For the last half-century, aid and development in agriculture in Africa has focused on providing technical assistance and giving things away for free.  Building warehouses and processing facilities, subsidizing the cost of seed and fertilizer, offering low-interest loans, and providing cost-sharing for mechanization purchases have had the adverse impact of decreasing industry competitiveness and making private sector investment unattractive (can't compete against the government and Big Aid).  There has been a long parade of agriculture development projects that treat Africa like an academic petri dish, without much understanding of the crippling effects hand-outs have on the competitiveness of an industry.  To be fair, the cards are stacked against developing countries when it comes to agriculture.  The United States and Europe exhibit socialist tendencies by heavily subsidizing their agriculture industries, while at the same time demanding that the recipients of World Bank and IMF loans (read: poor countries) undergo "Structural Adjustment Programs."  SAPs, as they are called, call for the wholesale adoption of neoliberal trade policies, including dropping all import tariffs, removing government subsidies, and allowing foreign imports.  The hypocrisy is a little mind-blowing, but you can type "Food Aid" and "Africa" into Google and find all the information you need. (more…)