Questions in Development

This site has moved to . . .

2011-03-13T20:37:00.002Z

www.rupertsimons.org

because Ethiopia doesn't allow Blogspot.

The Cancún accords

2010-12-12T01:06:00.000Z

I searched various news websites in vain for the text of what was agreed at Cancún. I eventually found them for download from the UNFCC. The text is dry and technical, but the document on 'Long Term Cooperative Actions' does contain some useful results:

1. Developing countries commit to emissions reductions in principle, to having them verified if they are funded by others and to
2. The funding commitment of $30b by 2012 is reaffirmed with a plea to make it specific and start spending it
3. REDD+ gets the green light, with safeguards to make sure that developing countries are in charge of the process, emissions reductions are verified and indigenous peoples consulted and protected. No doubt we will continue quibbling about the details, but now we can do so on the basis of funded pilot programs and research rather than speculation
4. Adaptation is given higher priority and actions are promised to sort out the funding for it, which in my experience is both slow and insufficient.

There are also some honest admissions: first, that the targets and commitments are still way too low and second that little of the money promised at Copenhagen has materialised so far. Maybe most worrying is that some developed countries now want to abandon even the pathetic commitments they made at Kyoto, which makes the chances of getting another legally binding deal look slim. (Japan? Seriously?)

Overall, a disappointing conclusion to another year of talking while the world warms, but a baby step in the right direction and an impressive achievement by the Mexican hosts to get anything at all. I am more convinced than ever that countries and cities need to move faster and that it is in our economic self-interest, even before the environmental consequences are taken into account, to do so, even if others don't.

Is anyone going to Cancun?

2010-12-01T00:10:00.000Z

I am not - it's too far for someone who purports to care about climate change and with most of Europe under snow I probably wouldn't make it over anyway.

For anyone who does head to Cancun, though, I would recommend this article in China Daily by Bruce Au and Thomas Hale (disclaimer: Bruce is a friend, but I had nothing to do with the article!). Their point is a an interesting variation on the "let the willing countries and cities get on with it" argument: namely, that there are willing cities and industries in China whom we would do well to engage in whatever global efforts we can, while governments fiddle and the US Congress contemplates the abyss.

Meanwhile, has anyone worked out what North Korea's emissions are?

Private investment in African agriculture

2010-11-14T22:34:00.000Z

I have been trying to estimate how much private investment is going into African agriculture. I can't find a comprehensive source, but on the private equity side, Reuters has a decent summary of private financial flows into agriculture.

The flows from institutional investors - sovereign wealth funds and the like - seem harder to track. I suspect that some small-scale investment by Chinese farmers is also dipping below the radar. This article in the People's Daily provides an interesting clue: 70% of Chinese investment in Africa is by private companies. However, I'm not sure I trust their numbers: can there really be only $32.3m of Chinese investments in Africa? Per day perhaps?

Theories of development and the World Bank's land report

2010-09-30T00:58:00.000+01:00

Two long, fascinating pieces caught my eye today.

The first is by Owen Barder on three theories of development (a propos the MDG summit): a 'big heave' story, a 'improve accountability' story and one that focuses on inequality. The central insight of the last theory is that enormous poverty remains in fast-growing countries like India - and may even remain, if the China example is a guide, when it is a middle-income country. I was astonished recently to discover that malnutrition rates in much of India, especially the eastern states, are as bad as the worst parts of Africa: the Green Revolution and general lack of armed conflict notwithstanding. Does this contradict Amartya Sen's point that democracies do not allow famine? No - these are not famines. They appear to be chronic, underlying malnutrition, in years of good harvests and bad.

The second is a write-up of the World Bank's new report on "Rising Global Interest in Farmland". It tries to be an even-handed review of land grabs. Their press release is neutral, cautious even, simply noting that the surge in large land deals, especially in developing countries, reported in 2008 has continued unabated. The Financial Times interprets the same as "World Bank backs farmland investment". In reality, many of the early deals have been disappointing to all concerned: governments, investors and local residents. The Bank reckons a code of conduct with seven principles (transparency, fair compensation, etc) will do the trick. I like the principles, but I doubt they will be enough: enforcement will be key and when the land is remote and its natural owners weak, it will be difficult for governments to resist the pressure to flog it to the highest bidder.

Two things surprised me in the Bank report. One, the yield gap in African agriculture is just as great in densely populated countries like Rwanda and Malawi as in thinly populated ones like Sudan or Mozambique. How can this be? Either there is little or no value assigned to non-agricultural land (as forest, fallow or pasture), so farmers prefer to clear land over intensifying; or intensification is technically too difficult. The latter seems unlikely, since densely inhabited regions of Asia (Java, southern China) have farmed intensively for centuries. So if high-intensity agricultural techniques (as simple as legume rotations and human or animal manure) have existed for so long, why have they been so slow to spread in Africa?

Two, while it is well known that 70% of the increase in agricultural production since 1961 has come from yield increases, it came as a surprise to me that two-thirds of the land expansion (concentrated in Latin America, South-East Asia and Africa) came from smallholder farmers moving into new areas. The huge soya farms of Brazil or palm oil plantations in Indonesia are quantitatively less important than millions of smallholder rice growers in Myanmar or Thailand clearing forest or maize growers in Zambia converting pasture. Do the land grabs mark a shift in this trend away from smallholders to large commercial estates? Or could those estates become the hubs of a mixed farming model in which smallholders follow their lead? If large farms help seed smaller ones, the land expansion might become an attractive development path.

Mapping ethnic segregation and hubs of creativity

2010-09-23T23:03:00.000+01:00

I just got back from a great trip to the US that left me feeling upbeat about life but downbeat about the US, at least in the medium term. One other consequence of my trip is a resolution to put up more frequent blog posts.

So here are two US-related snippets that caught my eye today. The first is a fascinating set of maps showing ethnic segregation in major US cities. Wonder why all your friends seem to live in the same part of north-west DC, central Boston or Manhattan? Because they really do all live there. Red is white, blue black, orange Hispanic and green Asian, are based on self-identification in the 2000 census, so are somewhat out of date (stand up Columbia Heights). Salt Lake City is 100% red, while you can actually see the city boundaries of Detroit. Most interesting to me are the spots of diversity among the seas of red and blue: Cambridge, Hyde Park, most of Brooklyn, the Bay Area. While the macro-picture is of socio-economic segregation, there are countless neighbourhoods that are mixed in unpredictable ways - not all of them around colleges. Rather than bemoan the segregation, shouldn't we look at the exceptions and figure out if they work and why? While we're at it, is Europe is really so much better. I realize there are legal and practical obstacles to replicating this analysis for Paris or Berlin, but I wonder if anyone has tried doing it informally?

The second is a slightly less obvious piece of analysis on density hubs. This seems to say that the most human capital and creativity (as measured by educated people, patents, etc) seems to cluster in a small number of mostly coastal cities. The trend probably isn't surprising, the magnitude is. I am also surprised at the outliers and the cities that are left out. Ann Arbor is a notable hot spot; but where are tech hubs like Raleigh-Durham or Austin? Maybe they are 11 and 12.

Again, I'd love to know how this compares for Europe. My hunch is that there has been bunching over time. Compared with, say, the 1950s, there is probably a greater preponderance of bankers in London, students in Bologna and bureaucrats in Brussels than there were, as the best-educated Europeans are more mobile than they used to be and more inclined to move in search of like-minded people, interesting work and excitement.

Could the US overtake Europe on climate change?

2010-06-09T22:26:00.004+01:00

I'm beginning to think the US may get its climate change act together sooner than Europe. This op-ed from the NY Times suggests that notwithstanding the poor show at Copenhagen and the cold winter, most Americans believe that climate change is happening and we need to do something about it. Sounds obvious, but a relief to know. Maybe the terrible oil leak in the Gulf, which has blown up the administration's "drill plus energy bill" tactic, could be a force for good in the long run, by reminding everyone what unpleasant stuff oil is.

In Europe, on the other hand, we may be losing it a bit. Especially the British (though I suspect this is mostly because British people enjoy being contrary for the sake of it). Fortunately the EU Commission is now proposing a 30% cut in our emissions irrespective of what the rest of the world does, when originally we only wanted to cut by 20%. Maybe if we can pass that and start acting on it we'll get taken seriously again. In the meantime, we can carry on selling solar technology to the rest of the world. A trip to Germany last weekend reminded me just how mainstream solar has become, if the subsidies are right. See picture above.

Collier versus Lovelock

2010-06-02T22:40:00.004+01:00

Two contrasting points of view on climate change and sustainability this week from two very different academics: Paul Collier and James Lovelock.

Last week, Professor Paul Collier spoke at the LSE about his new book: The Plundered Planet. I bought the book, but haven't read it yet. It sounded like a development economist's belated recognition that the earth may have a carrying capacity, that we may be exceeding that carrying capacity and that this may be a problem for future generations. He was careful not to describe himself as an environmentalist - indeed, he was keen to stress that his analysis would upset many environmentalists - but rather as having grasped that unsustainable use of resources is both unfair and inefficient. In effect, by 'plundering' we are stealing both from other people and future generations who have a claim to their benefits.

Collier's insight may seem banal to anyone who has been working on climate change, agriculture or environmental questions - but some of the conclusion bear closer examination. First, natural resources should belong to countries, NOT local residents who are entitled to compensation, but no more. (Good luck explaining that in the Niger delta). Second, sharing the resources with future generations doesn't imply keeping it unchanged, but ensuring that the BENEFIT is shared equally. So if you convert a patch of forest to farmland, that's OK as long as there is an income stream for future generations (and an offsetting emissions reduction somewhere else).

A week later, I saw James Lovelock speak at the Hay-on-Wye book festival. It was less of a presentation, more of a chat: but like Collier, he managed to infuriate the environmentalists by pleading for urgent investment in nuclear power and admitting that we may be too late to stop serious climate change. There is a paradox here. His Gaia theory, which describes the self-equilibrating interaction between the earth's ecosystems and its atmosphere, predicts that life will eventually adjust to climate change, through a combination of adaptation and corrective feedback. So life, in some form, will survive whatever we throw at the system. Our particular species need not, however. Or at least, not in our present number or form. Lovelock can sound blasé when describing a future in which we have all adapted - but he describes something that most of us would find disastrous: namely, a population crash to below one billion, drastic changes to food and lifestyles, no more skiing in winter.

To give both thinkers credit, I suppose I should read their books as well as go to their talks. Meanwhile here is a good review of Lovelock's talk and Hay in general from John Harris in the Guardian and a not so good review of Collier's previous book, the Bottom Billion.

Agriculture links to think about

2010-01-12T10:15:00.007Z

1. Is the world going to run out of phosphorus? (It's in all our bones and puts the P into NPK fertiliser). Answer: Probably not for 100 years, but we should look for supply shortages now and start recycling it before we get another disastrous spike in fertiliser prices.

2. 25 stories on African agriculture. Haven't read them all, but good news in no. 18 (Zimbabwe grows more maize), bad news for Kenyan horticulture in no. 9 (is that a climate-compatible industry?). The DR Congo award for "world ignores ongoing disaster" goes to no. 12 on Lake Chad drying up.

3. Interesting post on what to eat by a soil scientist. She has a few rules of thumb which she readily admits are imperfect and inconsistent and - because the budget constraint usually binds for grad students - "I can't always decide whether the cost of organics reflects the true cost of the food or whether I'm paying for the word 'organic'."

My rules of thumb are also imperfect and inconsistent: no beef, other meat or fish every other day not every day, seasonal fruit and vegetables because they taste better anyway. Organic milk, fruit and vegetables yes, free range eggs always BUT conventional wheat/rice/maize (where I think the yield benefit of conventional techniques outweighs the biodiversity loss - i.e., I'd rather have a factory farm next to the Amazon than no factory farms and no Amazon). Do I stick to them religiously? No. Do I try? Yes. Am I a hypocrite? Yes and so are you. If we were honest we'd all eat beans.

Thank you Sarah Holmes, Sue Murray and Etienne Pollard for pointing these out!

Eight ways the world should be spending its money

2009-11-25T10:21:00.003Z

The MIT Poverty Action Lab has a fantastically simple, compelling list of seven ways to help achieve the Millennium Development Goals. I'm going to print these and put them in my wallet.

My favourite finding is still that deworming kids in Kenya at 50 cents each adds a year to their schooling. It's widely known in the academic community, but not enough outside it (and are there any case studies outside Kenya?).

My nomination for an eighth high-impact way to spend money is REDD: Reducing Deforestation and Forest Degradation. If done properly this could make a big contribution to carbon emissions cuts and help improve the productivity of smallholder agriculture at the same time. I have high hopes that this will form part of whatever deal emerges at Copenhagen; paradoxically, it may be easier to get it through if the rest of the summit is a flop, because the world will be desperate for some good news (though beware countries who think they can buy their way out of climate change on the cheap. We still has to replace those coal fired power stations with something better) . See here for a new Economist article about it.

What doesn't make the list? Stimulus packages, the war in Afghanistan and bank bail-outs. Personally, I think all three of the above are necessary to avert worse disasters (after all a global economic collapse would also cut the amount we can spend on development) but the ease with which we shovel vast amounts of money down the banks' throats is still staggering.

Liberte, egalite et . . Francafrique

2009-11-18T04:18:00.002Z

Depressing article from NY Times on French quasi-colonial policy in Africa. Plus ca change, plus c'est la meme chose.

(I'm not being smug: US and UK aren't much better. Corrupt politicians not given US visas - unless they have oil and a villa in Malibu, of course)

Climate change in Australia vs healthcare in the US

2009-11-18T04:03:00.002Z

I’ve spent the last month in Australia, working on the role of forests in combating climate change. It’s hard to avoid noticing that Australia is the world’s largest emitter of carbon dioxide per head. Relying on coal for power and an energy-intensive lifestyle lead to emissions of 27 tonnes per person per year, higher even than the

. Australians have dragged their feet over climate change for years: they only signed the Kyoto Protocol in 2008 and while Prime Minister Kevin Rudd travels the world drumming up support for ‘global deal’, at home he is struggling to force through Australia’s first ever emissions trading scheme without watering it down to meaninglessness. Large chunks of the Liberal Party are oppose any kind of emissions trading and some of them happily proclaim they “don’t believe” in climate change.

There is a paradox here. Australians are among the most ecologically stressed people in the world. Every year, wild bushfires lay waste to coastal forests, but the fires in Victoria last year were the worst in living memory. The antipodean climate is harsh and unreliable: a decade of drought may be followed by torrential floods as the warm waters of the El Nino-Southern Oscillation wallow back and forth across the Pacific. European invaders cleared swathes of inland forest to make farms and pasture, but much of the thin soil is exhausted and the land has reverted to bush. Even the once-rich agricultural lands of the Murray-Darling basin are being abandoned as there just isn’t enough water to feed the fruits, vines and Adelaide at the same time. So how can any reasonable Australian doubt that climate change is a serious threat to their beautiful country and way of life? After all, most forecasts suggest that a warmer world will exacerbate the fluctuations of their climate even further.

Some of the people who should lose the most from climate change are therefore among its stoutest deniers – while the population of certain European countries, whose idea of a heat wave is a week above 30 degrees, are up in arms. Why this self-defeating short-sightedness? Are the people in the pockets of BHP Billiton?

The healthcare system in the USA is even more perplexing. The strongest opponents of healthcare reform in the US include many who should benefit from it: middle-class white people, whose employee-linked health benefits are more precarious than ever thanks to the recession, mass unemployment and spiralling costs. Almost any American, veterans excepted, risks losing their healthcare if they lose their job. Yet the right spent much of 2009 creating the impression that universal healthcare meant “losing your healthcare” – which is a bit like saying that a programme to end famine will make your family go hungry. I would love to find an unemployed Republican who cannot get insurance her- or himself, but continues to protest against the “government takeover” of healthcare.

Is this behaviour economically explicable? Selfishness does not explain why, in effect, people vote to increase the risk of bushfires or their chances of being undiagnosed with a disease for lack of insurance. Is it short-sightedness, a fear of uncertainty or simply a contrary instinct, one that assumes it is best to the opposite of whatever the government is advising? My current best guess is that it is to do with a long and tangled chain of causation. The link between burning coal in Australia and bush fires is evident, but as long as China opens two new power stations every week, an Australian might be rational in continuing to burn coal, as long as China does. How about Greenpeace stop trying to shut down nuclear power plants and blockade the port of Newcastle, the source of much of China’s coal, instead?

Can biotech cure world hunger?

2009-11-02T22:26:00.003Z

Last week we learnt that there are now 1 billion hungry people in the world, more than ever, albeit a smaller proportion of the population than in the 1950s. I found this debate from the New York Times a useful guide to how to respond. On the one hand, it would be absurd to condemn millions to malnutrition because we don't like high-tech farming in Europe. On the other hand, genetic modification has delivered very little for poorer countries so far: herbicide-tolerant maize and soybean varieties, yes, but none of the drought-resistant crops that the biotech companies promised.

Beyond the biotech dichotomy, most contributors recognized that the solution to the food crisis will involve a combination of technologies, including some that don't exist yet. High-input farming depends on natural gas, which won't be around forever; water is running short in many grain-growing regions; a strictly organic world food system would be a disaster for forests, but many techniques from organic farming are useful and should be spread. It would probably help if the NGOs and corporations stopped insulting each other and worked together for a change.

If I could contribute to the debate, it would be on prices and the signals they send. High food prices are in general a disaster for development, but we need higher prices for meat, fish and air-freighted vegetables for richer people (not just rich countries) to change their destructive eating habits. We need to tax water and energy use in such a way that basic grains and vegetables are cheap enough for everyone, but beef becomes an expensive luxury for the Americas, Europe and Australia just as it is for the rest of the world. A serious carbon tax would stop us agonising between strawberries grown in Dutch greenhouses or flown from Kenyan orchards: they will be too expensive to eat anytime they're not in season.

In the absence of carbon and water taxes, more information can help: just publishing the emissions associated with beef burgers led 20% of diners to switch to chicken or the veggie option, according to this photo essay. Ultimately, though, the most powerful information is provided by the price.

Measuring economic growth from outer space

2009-08-06T23:00:00.005+01:00

I love the satellite picture of the world at night - the one where Europe and America are seas of light, North Korea is invisible and the only lights visible in much of Africa are in South Africa and the oil flares in the Gulf of Guinea. Obviously, there is a strong correlation with economic development, or at least people having stuff to do at night.
J. Vernon Henderson, Adam Storeygard and Vernon N. Weil at Brown University take this insight a step further: why not use lighting levels to measure changes in development over time? This turns out to be a particularly useful method for countries where statistics are erroneous or missing, for example because of civil war. Governments can manipulate figures, but lighting never lies. Here are the two main findings (also summed up by the Wall Street Journal and Marginal Revolution):

1. Lighting is indeed a proxy for economic development and it goes down as well as up: there are some great pictures of changes in lighting levels in Eastern Europe in the 1990s. Whereas Poland experienced economic growth of 56% and an increase in lighting of 80%, neighbouring Ukraine saw its economic activity decline by 35% and lighting fall by 47%.

2. Increases in agricultural productivity (from high rainfall years)raise economic activity and hence lighting in nearby cities. Are these farmers rushing to sell their goods at the market, buy TVs with the earnings or simply celebrating their good fortune at the bar?

I'd love to see some further work on this data set. One question I have is whether the data might be distorted by certain high-light activities: mining, for example, or oil refining. This might matter for, say, DR Congo, where light levels seemed to increase in the 1990s, in the middle of a devastating civil war. I'd also like to see the impact of power cuts, such as California experienced a few years ago or South Africa in 2008. Most power cuts don't last long enough to show up in GDP figures, but their short-run effect might be severe: think of what happened in Europe this January when Gazprom turned the heating off. Next time that happens, we might be able to measure its effect from outer space.

Climate change migrants in Ghana

2009-08-03T22:46:00.002+01:00

When you travel north in Ghana, the climate becomes drier and the villages poorer, until you end up in the Upper East and Upper West regions - friendly, slow-moving places, dry for most of the year and becoming more so. In other words, exactly the sorts of places where you would expect climate change-related migration to begin.

Sam Knight in the Financial Times tries to unpick the climate change migration debat e. Is climate change migration something entirely new, or merely a continuation of existing trends? It looks like the numbers will be greater than we have been used (the Stern review suggests anything between 200 and 500 million people over the next 50 years), but that doesn't mean that starving farmers from Burkina Faso or Bangladesh will be pitching up in European capitals. More likely, the children of the rural poor will migrate to coastal cities and the educated youth of the capitals will migrate to richer countries, as they do now.

So what can we do about it? Beyond the obvious priority of containing climate change, I can think of two helpful policies:

1. Invest in agriculture in vulnerable areas - whether it's drought-resistant seeds, irrigation, new kinds of crops that reduce soil erosion or thrive in drier (or more volatile) climates
2. Improve transport links between coastal and inland regions: that facilitates seasonal migration, which keeps remote areas alive through remittances and periodic visits. It will also bring down the cost of living and make it easier for people in the arid areas to sell whatever they grow to richer urban consumers

On the other hand, these two are unlikely to work:
1. Trying to restrict migration - through passports, ID cards, quotas, . People will still move, only they will pay more for it and people traffickers will collect the difference
2. Bribing people to stay at home through welfare payments, social services, etc. Investing in health and education in rural areas is a great area, but it's more likely to promote migration than discourage it

Climate-induced migration is nothing new: we've been at it since the Sahara was green. It may be that the last few millennia were the abnormality and human migration patterns will end up looking more like they did before we invented agriculture.

Sustainable cocoa isn't all it seems

2009-04-13T11:05:00.005+01:00

The movement to certify cocoa has taken two steps forward in recent months. Consider these two stories:

1. Mars, which is the world's largest end-user buyer of cocoa, has promised to certify that all its cocoa will come from sustainable sources by 2020. Unfortunately, this article from the Financial Times does not tell us what a 'sustainable source' is, how it will be certified or why it will take over 10 years to complete the process. However, they do hint at the root of the problems of the cocoa sector: very low yields in West Africa, where two-thirds of the world's cocoa comes from. Mars seems to understand that since there is little primary forest left to cut down in Ghana or Côte d'Ivoire, the only way to increase cocoa production is to apply inputs to existing trees and replant them with higher-yielding varieties.

2. Cadbury, the UK's best-selling chocolate maker, has announced all its Dairy Milk bars will be certified 'Fair Trade' by the middle of 2009. The BBC reports this will mean tripling the volume of Fair Trade cocoa it buys from Ghana, to 15,000 tonnes. The more detailed press release points out that they are no longer relying just on Ghana's well-established 'Kuapa Kokoo' cooperative, but will help set up farmers' groups and cooperatives in other parts of the country.

Both Mars and Cadbury promise that chocolate prices won't rise, while promising higher farmgate prices for the cocoa growers. How can they do this without squeezing their profit margins? I can think of two ways. First, certified cocoa has been expensive in the past because it was a niche product. If certification becomes the standard, the economies of scale may make it cheaper to operate the tracing systems, audits and inspections required for certification. Two, Fair Trade (which Cadbury backs, but Mars doesn't) guarantees a minimum price to farmers, but when cocoa prices are as high as they are now, there is no difference between Fair Trade and the world market price. (There is a small 'bonus' for Fair Trade growers, but it's tiny and usually given to the cooperative for community projects, rather than individual farmers).

Will these schemes help cocoa farmers, then? I'd like to see more details of what Mars is planning, but there are some benefits. If certification works, it will make the supply chain more efficient and thus cut out some of the profits made by middlemen. If Fair Trade works, it will reduce the risk of a sudden crash in cocoa prices leaving farmers worse off. Neither of these schemes will do much to reduce poverty in cocoa-growing communities, however. To increase their income, they will need to raise productivity. Higher productivity will come from growing more and better cocoa on the same land, with higher-yielding trees and more inputs including fertiliser (sorry). You can do this through subsidised credit and government- or private-sector led replanting schemes; certification and higher prices alone will not be enough.

Interesting and disturbing food and agriculture news

2009-02-02T22:56:00.004Z

First, this thoughtful number from Senegal, on the see-saw of global price prices.

Second, a mysterious plague of worms riddles Liberia. There is still no certainty on what they are and many upcountry farmers feel frightened and abandoned - but even though the spray teams from the Ministry of Agriculture come late, at least there are spray teams.

Third, another story on middle income countries buying food through barter deals. This time last year, it was because food was too expensive. This year, food is cheap, but they can't get credit to pay for it.

Cocoa prices hit a 'record high' - or do they?

2008-12-24T14:38:00.007Z

The Financial Times reports a sudden increase in the cocoa price, as bad weather and black pod disease lead to lower-than-expected deliveries to ports in Cote d'Ivoire. Good news for cocoa farmers, if the price spike is passed onto them. My concern is, it won't be - the traders will take a profit and the underlying conditions that led to the price spike will return. In the medium term, prices are likely to fall anyway, as global demand for chocolate (and especially high-quality chocolate, such as that coming from Latin America and Ghana) flattens after years of steady increases. (See this from the same paper).

Viewed over the last 15 years, the current price of £1,820 per tonne certainly looks impressive:

However, the current price may be less impressive than it looks, for two reasons. First, this chart reveals a similar spike in 2002 (presumably a result of the civil war in Côte d'Ivoire) that was followed by a 50% drop in prices and a 5-year slump. That would now equate to a price of around £900. Second, cocoa futures are priced in pounds, but the biggest cocoa producers and consumers use euros. Since the pound's value has declined from around €1.40 a year ago to €1.10 today, a cocoa price of £1,800 today is equivalent to around £1,400 a year ago - namely €2,000. The effective export price in Côte d'Ivoire, whose currency is tied to the euro, is some 10%-15% lower now than in July, when cocoa prices peaked at £1,700 (then €2,200 or $3,000).

In the meantime, what might be the effect of cocoa prices on the second round of Ghana's presidential elections, scheduled for 28 December? Probably very little, since the Cocobod fixed its annual price in August. But with only a percentage point between the two candidates, small psychological factors could make the difference. To all friends in Ghana and friends of Ghana, I wish you a peaceful Christmas and an even more peaceful election.

What to do about Rwanda?

2008-12-07T22:33:00.004Z

Right now, if you're in development in Britain or America, Rwanda is a good place to be. Please note I'm not talking about economic growth or political stability (though it has both of those), but things like NGO presence, media attention, politicians visiting to show they care. If you have ever read accounts of the Rwandan genocide, or remember those dark days in 1994, Rwanda's peaceful reconstruction is surely something to celebrate. It even has the ultimate capitalist accolade: a business-school case study.

Unfortunately, there is a dark side to Rwanda: its role in the never-ending conflict in Eastern Congo. This disturbing account comes from the New York Times. Notice that the Rwandan officials do not deny that Rwandan citizens are crossing into DRC to fight, merely that their government is encouraging or paying them. But then who needs pay when mineral riches await?

I know very little about Congo and would not dare to take sides or argue that Rwanda's fears about Hutu extremists hiting in the jungle are unjustified. But I still feel wary about a country celebrated as a model of enlightended leadership in a troubled region intervening in its neighbour's affairs militarily. Yes, Congo is a threat to regional stability; yes, the Congolese government has failed to gain control of Eastern Congo or disarm the Hutu militia; but that is still not a pretext for unilateral military intervention, even by proxy. (As this guy, or this one, could tell their Rwandan friends).

It may suit Western governments to continue supporting President Kagame's regime (except for France); it may well be the best regime for Rwandans as well. But let's not allow the West's failure to prevent the Rwandan genocide become a pretext for inaction in the Congo, or get caught up in some stupid neo-colonial rivalry. We need a united approach and we need it now.

Rich countries buy up agricultural land: who benefits?

2008-11-23T21:30:00.005Z

I'm back from an exhilirating few weeks on the Obama campaign and haven't thought, talked or read about much else for the last month or so. But as the President-elect's team takes shape and the economic news has settled into a consistently - but predictably - gloomy pattern, I'm trying to find out what happened to some of the big issues from earlier in the year.

One problem that hasn't gone away is the global food crisis. The prices of key commodities may have begun falling, but the structural factors that led to their sustained increase over the last few years haven't gone away. A timely article from the Guardian sheds light on the practice of small, rich countries buying land in large, poor ones to safeguard their future supply of food.

The Guardian journalists do not hide their distaste for the deals, in which cash-hungry governments from Laos to Malaysia to Ukraine sell land to investors from Korea, Abu Dhabi, China and Saudi Arabia to grow food on a large scale. For smallholders who are turfed off their land, or don't have access to the advanced technology of the commercial farms, it's certainly a raw deal. But could there be a benefit to these deals that goes beyond food security for a few small countries?

In principle, there could be. Here is where the land is being bought. If the effect of introducing commercial agriculture to Sudan and Madagascar is a dramatic increase in productivity, the global supply of staple crops like rice and maize will increase and their price will fall. (The rice grown in Madagascar may go straight to South Korea, but South Korea will be able to reduce its imports from other countries commensurately). This could be good news for urban Malagasies, though not for the rural (rice-growing) majority.

A second benefit might come from technological spillovers. Small farmers in Africa and South-East Asia aren't an attractive market for new seed varieties or fertilizer, but large commercial farmers could be. I realize these spillovers are difficult to capture in practice, but surely having more commercial agridealers would be of benefit to everyone.

I don't want to suggest that these deals are good for everyone: some poor people will probably lose their land, the productivity gains may not be spectacular and the global price effect will be too small to notice. I just think we should look at each deal on its merits. Like the Chinese infrastructure deals, some are better than others. Like the Chinese infrastructure deals, we need more research into which ones.

Off to Ohio

2008-10-18T09:01:00.003+01:00

I'm taking a few weeks off to volunteer with the Obama campaign. I expect little or no time for blogging, but I do want to celebrate the dedication of people like Jesse, my friend and campaign organizer in Toledo, Ohio, who has got me over there. (See here for a report on a campaign rally in Toledo - Obama even thanked Jesse personally! What cool people I know).

If you have a few days or even just a weekend, the campaign needs people to knock on doors and make calls - the more face-to-face contact the better. This has got to be one of the biggest mass social movements in history.

Deaton on the randomistas

2008-10-10T09:18:00.001+01:00

Last night, Angus Deaton gave the British Academy’s annual Keynes lecture on ‘Instruments of Development?’. I expected it to be enlightening; it turned out to be witty as well.

Some questions recur in economic research again and again, without ever seeming to get closer to a resolution. “Does aid work?” is one. “Do children learn better in small classes?” is another. Frustrated by years of trying to identify ever smaller effects in ever more complicated regressions, we have resorted to two clever techniques: instrumental variables (in macro) and randomized controlled trials (in micro). Angus Deaton suggested that these apparently different techniques are closely linked and similarly flawed.

Economics, like any social science, has a problem with experiments. You can’t work out the effect of aid on development by randomly selecting one country to receive aid and another not to: even if it were moral, it wouldn’t be practical because there’s so much else going on. Instrumental variables are a clever technique to overcome this (see ‘Freakonomics’): basically, you have to find a factor that could contribute to the effect you care about (latitude helps determine prosperity) without any possibility of reverse causation (because the prosperity of a country has no effect on its latitude). Deaton argued, in short, that instrumental variables are no panacea, because they are not statistically exogenous and in any case countries differ in ways we cannot control. If economists set instrumental variables up as a gold standard, we doom ourselves to eternal methodological debates amongst ourselves and ridicule from everyone else.

Randomized controlled trials are even more popular in the micro development world. Want to know by how much a vaccination programme improves public health? Easy: just pick the counties you vaccinate at random and compare the outcomes. Leaving aside the ethical difficulties with this (who deserves to come first?), the technique only tells us the mean treatment effect; it doesn’t tell us whether the effect was distributed widely or limited to a few very special cases. Moreover, some of the randomizations are less random than they seem. Supposed you picked schoolchildren with surnames starting with A to take part in an experiment: would they really do better because of the experiment, or because they have always sat in the front row and got more attention from their teachers? Maybe, maybe not: we don’t know.

Deaton poked fun at the ‘randomistas’ (Banerjee, Duflo, Kremer and others) but was sympathetic to their quest for identification, as long as it has a theoretical foundation. He also argued we should avoid randomization to test very obvious propositions (“Do parachutes help keep people who fall out of planes alive?”) or those that pose grave ethical problems (“do HIV-positive people receiving anti-retroviral drugs live longer than those who don’t?”). Rather as with evidence-based medicine, the statistical evidence is only as good as its interpretation by the doctor, or the economist, who applies it to the patient’s condition. Randomized controlled trials, in this view, should take their place in the economist’s toolkit, as one useful tool among many rather than as the knockout argument.

I agreed with all of his points as far as economists are concerned. My worry is what the non-economists (and that’s most of us) are supposed to do. Are we really supposed to wade through umpteen regression models and meta-analysis papers? Are we supposed to get excited about some tiny coefficient that is significant at the 95% level? I fear that policymakers and donors, who might understand the finding of a random evaluation, will turn off as soon as regressions rear their head. Surely it’s better for decision-makers to have some scientific evidence than none at all. Let the economists work out the 95% answer; meanwhile the rest of us will make do with 80%.

Nicholas Stern on a global deal on climate change

2008-10-07T09:15:00.004+01:00

The publication of the Stern review two years ago helped shift the climate change debate from science to economics. Climate change sceptics can no longer argue that global warming is a myth or within natural variation: instead, their argument is that it is too expensive to do anything about it right now. Not exactly "wait and see", more "wait until it's cheaper".

Nicholas (now Lord) Stern addressed some of these issues yesterday in a public lecture at the London School of Economics. His timely message was that the current financial crisis is small compared to the havoc that serious climate change will wreak. What havoc? Many things, but the main effects are "all about water". A 5 degree warming (quite possible by 2100 under a 'business as usual scenario') is in the same order of magnitude as the difference between the middle of the last Ice Age and now. The combined effects of rising sea levels and retreating glaciers could force half the world's population to move. Apparently, India is already building a border fence around Bangladesh.

The main focus of the speech was on what a 'global deal' looks like and how we might get there. Stern suggested six components:

1. To stabilise carbon dioxide concentrations at a reasonably 'safe' level of 500ppm, a 50% reduction in greenhouse gas emissions (compared to 1990 levels) by 2050. This probably means an 80% reduction in developed countries and more in the USA.

2. By 2050, 8 billion of the world's 9 billion people will live in developing countries. So developing countries must lead the deal, because it will be their world. We cannot force them to cut emissions: they should be forcing us to show them how.

3. Markets and carbon trading will be essential to get reductions at the lowest possible cuts. There will be some exceptions at first to bring people on board (steel? aviation?) but we should aim to phase them out.

4. Whatever targets we set for emissions reduction, we need to stop deforestation quickly. There are lots of ancillary benefits to this (flood control, biodiversity) but it will have to be combined with development. "Climate change and development are deeply linked - if we fail on one, we fail on the other".

5. Technology: nothing should be ruled out, including carbon capture and storage (CCS) and nuclear power. This was controversial with the audience at LSE, but Stern held his ground: we need to try everything, fast, to figure out what works.

6. Adaptation: poor countries will be hit first and hardest. We urgently need to work out how to get low-carbon development in an increasingly hostile natural environment.

The rest of the speech concerned how to put together this global deal and the research programme needed to support it (this is a university, after all). "Surely the global financial crisis shows us what happens if we become aware of a serious risk and don't deal with it".

Some of Lord Stern's targets are being adopted by politicians. Barack Obama has spoken of an 80% reduction in greenhouse gas emissions by 2050; Gordon Brown has committed the UK to doing the same (though he's trying to wriggle out by excluding aviation - see here). What about the developing world? "Attitudes in China and India have changed a lot in the last 2 years, though there is still justified anger at the hypocrisy of the 'rich countries'."

It seems it always requires a disaster (Katrina? Lehman Brothers?) to shake politicians into action. Sadly, at the current rate we are going to need a few more disasters before the key players, China or the USA, take serious action on climate change.

Liberian cassava farmers profiled on the BBC

2008-09-29T09:15:00.007+01:00

I love this stuff . . . and there isn't a single man to be seen, except for a motorcycle taxi driver in slide 8.

In fact, in three months spent in Liberia, I never saw a man farming cassava. Rubber, yes and sometimes rice, but cassava farming is "women's work". Notice how the men in the picture below are 'supervising' (i.e., sitting around) while the women are busy.

Sometimes I imagine that the gender division of employment in agriculture will change as countries become more developed. But maybe not. I have been walking around rural Yorkshire in the last week, where there are a lot of sheep farms. Without exception, the farmers riding around the hills in Land Rovers and quad bikes are men. Maybe men only get involved when there are machines to play with?

Emily is back in Liberia

2008-09-28T11:17:00.004+01:00

The excellent Emily Stanger has gone to work for the Ministry of Gender in Liberia. Emily, please make sure you post regularly - your fans around the world will appreciate it!

Emily is working as a Scott Fellow (with support from the Nike Foundation), part of a scheme to bring young professionals (many of them Liberian) to work in the government there for a year, sometimes more. This seems to me is the right kind of technical assistance - not just a few months of consulting (something I have done in the past, but I have decided to steer clear of for a while!), but serious engagement, for a serious period of time. I wish her and the other Scott Fellows the best of luck.

With or without the US

2008-09-25T20:36:00.005+01:00

I've been enjoying reading Bono and Jeff Sachs' FT column from New York. Bono's ramblings might work better as rock lyrics, but he comes across as well-informed and genuine at least. Sachs, meanwhile, is passionate and provocative as ever:

"The UN meetings were abuzz that the US could find $700 billion for a bailout of its corrupt and errant banks but couldn’t find a small fraction of that for the world’s poor and dying. It didn’t make sense to the world community. The puzzlement was all the greater since the very banks being bailed out so generously had awarded themselves more than $30 billion in bonuses early this year, roughly the world’s entire aid budget for 800 million people in sub-Saharan Africa."

Amen. I wouldn't blame the financial crisis, entirely on the banks, but that's not the point. What is sad is how serious development issues drop off the news agenda as soon as there is a recession or 'crisis'. The same happened at the Gleneagles summit in 2005, when a terrorist attack send the TV crews scurrying to London. If we want to advance the development agenda at an international level, we need to work out a way of doing so even when the world's attention is elsewhere.

For the time being, a global financial crash is bad for emerging markets, as interest rates shoot up and 'risky' loans are called in. In the longer term, I wonder if it might be a good thing, for three reasons.

First, the USA and Europe no longer look like safe havens (OK, maybe Switzerland). A Brazilian, Russian or Chinese investor might therefore be keener to invest at home in the future.

Second, US banks and the US government are coming to depend increasingly on sovereign wealth funds, Japanese pensioners and so on for their capital. The result: the US will no longer be able to dictate terms to everyone else. The Washington consensus becomes the Dubai discussion.

Third, the reduction in US influence means we are no longer entirely dependent on US leadership in international economic matters. Not a bad thing when the world's largest economy is distracted by the election, bank bailouts and the like.

Indeed, Sachs praises Gordon Brown for continuing to push the MDG agenda at the United Nations. Brown doesn't have Bono's talent for PR, but if all world leaders took development as seriously as he does, we might make some progress - with or without the US.

What I miss about West Africa - and what I don't

2008-09-24T18:09:00.004+01:00

I'm spending a few weeks in northern England, preparing for a move to London. After a few days I am used to the weather again; but in other respects the UK feels quite alien. Here are a few things I have found myself missing about life in Ghana:

1. The way people dress. Wearing clean, colourful and well-tailored clothes seems to be a source of pride for Ghanaians everywhere; I am shocked at how little many Britons seem to care about their appearance, wandering around in dirty T-shirts and ill-fitting tracksuits.

2. Courtesy to strangers. In Accra, it's quite usual to greet other passengers in a share taxi or minibus with a low-key "good morning". Anyone doing so in a London bus would get embarassed looks in return and quite possibly a torrent of verbal abuse.

3. A nod and a smile. Walking down a street in Accra at night, I know I stick out. But if I walked past a group of young men, my instinct would be to nod at them, smile and maybe say hello in passing. I would expect them to reciprocate, even more so in rural areas.

Walking around parts of north London a few days ago, my instinct was quite different. I averted my gaze from passers-by and walked fast so as to indicate that I was "minding my own business". There aren't many young people hanging around on street corners, but those who are there exude an air of menace (they are usually harmless, of course - but perceptions matter).

There are other things I don't miss:

1. Tropical fruit - mangoes and papaya especially. This surprised me, because I love all tropical fruit and devour it in large quantities. But the apples and blackberries which are all over rural England in September are equally delicious.

2. Uneven streets and pavements. Walking along a typical street in Accra is an obstacle course of open drains, potholes and cracked slabs. It's worse for pedestrians than for motorists. I used to think UK pavements were shockingly uneven, but maybe they have got better, or else my standards have slipped.

3. The humidity. I'm a dry kind of guy. I like mountains and deserts. The UK isn't exactly dry, but at least I don't wake up in the morning drenched in sweat.

How long does it take to adjust? The plane from Accra to Heathrow was a mix of British, Ghanaians and British-born-but-still-partly-Ghanaians. Almost all spoke with 100% London accents. At least, they sounded a lot more authentically London than I ever will.

What's in a national motto?

2008-09-17T18:17:00.008+01:00

To the best of my knowledge, only Brazil and Saudi Arabia have a national motto (or whatever you want to call it) on their national flag. Many more have a motto on their official coat of arms, though and from there, it frequently gets onto passports, official documents and the currency.

So how does the motto get chosen? And what does that choice say about a country?

I suppose most mottos are chosen at independence, so the leaders of the nationalist or revolutionary movements are probably important. But can we learn about a country's history from a motto? Or, especially in Africa, the personality of its first President or 'founding father'?

Compare these two, for example:
"Unité-discipline-travail" (unity-discipline-work)
"Unité-progres-justice" (unity-progress-justice)

The first is Côte d'Ivoire: serious, conservative, in keeping with President Houphoët's non-revolutionary ideology. The second is its neighbour Burkina Faso: superficially similar (and following France's lead by doing things in threes) but more progressive-sounding, more socialist maybe, with a revolutionary tinge. Coincidence?

I don't think so. When Burkina Faso was Upper Volta, its motto was actually "Unité-discipline-justice". When Thomas Sankara renamed it 'The Land of Upright People' in 1984, he changed the flag, national anthem and motto as well. Out with discipline, in with progress. A subtle change, but a symbolic one.

Or how about these two in East Africa? Kenya has 'Harambee' ('Together') while Tanzania has 'Uhuru na umoja' (Freedom and unity'). Almost identical, you might think. But 'Harambee' wasn't just a slogan for Jomo Kenyatta, it became a defining ideology for Kenya: nationalism, economic development and the uniquely Kenyan institution of the 'harambee meeting', community fundraising events in which local dignitaries donate to worthy causes and politicians (pardon my cynicism) return some of the cash they have looted to the people. Meanwhile, Tanzania - then as now a lopsided federation - stresses unity. The word 'Uhuru' is important too: Tanzania's president Julius Nyerere published two collections of speeches with 'Uhuru' in the title ('Freedom and Socialism' and 'Freedom and Development')

As to why Kenya has lions on its coat of arms and Tanzania has a man and a woman, I am afraid to speculate, but the symbolic contrast is striking.

Some slogans are unintentionally ironic. Liberia's fine emblem (left) fails to mention is that only 2% or so of its population where brought there by "the love of liberty". The rest of them were probably as bewildered by the beautiful ship with the white sails as I would be if a bunch of white Baptist Americans showed up in northern England and announced they had come to settle there.

How about the choice of language? Do you choose a colonial language, or do you pick a local one (and thereby risk offending minority ethnic groups?). Most countries in West Africa seem to go with English or French, whereas Swahili rules in East Africa, maybe because it's a regional rather than a local language so there's less chance of offending someone. The British and the Dutch royal families both have French mottos, but nobody seems to care.

Sometimes national mottos resonate in unintended ways. Mali's motto is a super-idealistic "Un peuple, un but, une foi" ("One people, one goal, one faith"). At first I thought it sounded like a song by U2. Then I remembered where I had come across 'one people' before. The motto of Hitler's Germany was "Ein Volk, ein Reich, ein Führer". Thankfully, a motto does not always a people make.

The market versus the mall

2008-09-16T09:59:00.008+01:00

Whenever I travel out of Accra towards Ghana's central or west coast, I pass through Kaneshie station - which is really a large market with a bus station attached. It looks chaotic, but is actually very well structured: if you can bear the noise and the smell, you will be on a minibus to almost anywhere within a minute or two. The market sellers are organized too: all the plastic-sandal-merchants are in one corner, all the beef-and-goat-meat-choppers in another.

A few miles away is the Accra Mall: a new, air-conditioned shopping emporium as clean and bland as any other in the world. Between the stressed-out SUV drivers and lost-looking backpackers, upper-class local kids 'hang out' in the food court, because that's what kids do in malls.

Where is the future of African retail? For now, my money is on Kaneshie market. Their local produce is cheaper and better (never mind the cold chain: it was picked this morning) and their imported Chinese crap is as cheap and as crap as anyone else's. The problem is, there are no economies of scale and virtually no product differentiation. 500 people selling the same pile of onions equals 500 tiny profit margins. Fine if you are content for people to just survive. Not fine if you want some of these businesses to grow, employ others, maybe move into a proper shop so I don't have to trip over goat heads on my way to the beach.

So far, so much anecdotal speculation. Fortunately, when I got back from the beach I found this new paper by Rafael La Porta and Andrei Shleifer. (Thank you Dani Rodrik for pointing it out). Their question is: does a large informal economy help or hinder economic development? Their answer is: neither.

According to La Porta and Shleifer, there are three ways of viewing the informal economy. The first is the 'romantic view', associated with Hernando de Soto and a thousand microfinance outfits. According to this view, the sellers at Kaneshie market are all budding entrepreneurs. Give them secure property rights and some microloans and presto, within a few years we'll have a Kaneshie Mall with a plastic sandal supermarket and value-added goat head products.

Not much evidence for that, unfortunately: it turns out that almost all small businesses stay small even when you pump them up with microloans. So how about the 'parasite view', exemplified by this article from the McKinsey Global Institute? These guys say informal firms have a cost advantage in spite of their low productivity, because they pay lower taxes and rent than the formal ones. This prevents more productive formal-sector firms from getting off the ground. The solution: cut taxes on the formal sector and enforce them in the informal one. Then watch the Accra Mall outcompete the street markets, just like Wal-Mart does in Mexico.

This is a controversial view: who likes Wal-Mart? There's not much evidence for it either. Many city governments have cracked down on street vendors and markets, only to find them creep back months or years later. Zimbabwe's Operation Murambatsvina ('Drive Out the Rubbish') in 2005 destroyed the informal economy in Harare, but did nothing to alleviate food shortages. Rather than the informal entrepreneurs rushing to register their businesses, most just stop trading and are forced to find another livelihood.

The most interesting finding of the paper is that the formal sector does not grow out the informal sector, it replaces it. Most formal firms started off that way: they registered and paid tax from the beginning, using seed capital from friends, family or foreign investment (rarely banks). That lends credence to the third view of the informal economy, the 'duality view'. This view explains the productivity differences between formal and informal firms in the skills of their owners and managers. Skilled managers (usually those with a college education) go to work in the formal sector, where their productivity is rewarded with high wages. Less educated managers stay in the informal sector, whose meagre returns are commensurate with their skills. The formal and informal sector are different people selling different things in different markets. The South African running the Nike store in the Accra Mall would no more think of competing with the Hausa shoe trader at Kaneshie than she would of buying her biltong from him.

A good friend recently came to Accra to research the same topic and he described the informal sector as facing a 'mesh ceiling': there is no insurmountable obstacle to small businesses growing large, it just almost never happens. He found that even when market-traders and shopkeepers were selling the same product, their perceptions of the challenges and opportunities of the business were completely different. In particular, the shopkeepers, who usually have some access to credit, complained bitterly about high interest rates and stingy banks; the market traders, who have none at all, didn't even mention it.

The informal economy doesn't formalize when an economy develops, therefore: it just gradually becomes less important. In the USA, 95% of food is sold in supermarkets; in Latin America it's close to 50-50 and in China their share is growing fast. Shoprite won't put my local fruit seller out of business. But her grandson might get a job there.

Limits to aid: yes please, but not a cap

2008-09-12T09:50:00.006+01:00

Earlier this week I wondered about how to engineer a 'negotiated withdrawn' of aid to avoid fast-growing countries getting trapped in aid dependency.

Then I came across an interesting article in the Financial Times by Adrian Wood, Chief Economist of DFID. Wood argues that we should limit aid to a certain proportion of a country's budget - say 50%, or maybe 10% of GDP. Bill Easterly and Robert Wade provide trenchant commentary. (Nothing new here, says Easterly, but it won't work - the incentives for donors are to continue putting out aid come what may).

The debate continues at the Center for Global Development, with contributions from Nancy Birdsall, Jeff Sachs and Michael Lipton, amongst others. (Surely the problem is not too much aid, but too little? says Sachs - particularly when we have promised it and then not delivered, as is happening now).

I'm all for setting a limit to aid: but please let's make it a time limit, not a quantity limit. As Jeff Sachs points out, 10% of GDP for a country with a GDP per capita of $200 is $20 per person per year. That might be the upper limit of what a capacity-strapped or corrupt government can spend, but in post-war or desperately poor countries, much more will have to be directed at (re)building infrastructure, if necessary bypassing the government. To give an example off the top of my head, Liberia's annual budget is about $200m (itself the highest for 15 years), rebuilding their old hydropower station would cost at least $200m. I'd be curious to know what proportion of German or Japanese GDP was spent on rebuilding in the period 1945-50.

Rather than limiting expenditure per year, I'd like to see an aid agenda that says "We will work with you to achieve these targets and build capacity - but after 2015 we will begin cutting aid - and by 2025 we will have shut up shop, sold our Land Cruisers and our country economists will be out of a job. Over to you." Call it a surge, then a staged withdrawal.

"Aid is good, business is better"

2008-09-09T11:44:00.005+01:00

Last week's International Herald Tribune carried an article by two most unusual co-authors: the world's largest diamond miner and Africa's first woman president.

President Johnson-Sirleaf of Liberia and Nicky Oppenheimer of De Beers write: "Countries must be willing to make a change in mind-set from the idea that foreign programs and plans will lift countries out of poverty to a belief in their own vision for their future. Foreign aid should only temporarily support countries while they implement difficult reforms and get on their feet."

Fantastic. I wonder how long 'temporary' means, though? Ghana has had billions pumped into it over 50 years and there is no sign of it stopping anytime soon. In fact, Ghana is getting more aid than ever - partly because its government has the capacity to spend it. Even more deservedly, Liberia is (at last) getting the huge inflows it will need to build up its infrastructure and public services. Not much of it is channeled through the government yet, but that is beginning to change.

In the longer term, though, I wonder if it might be wise to plan ahead for when the aid money will stop? Cutting off aid from one year to the next is hugely damaging, but pretending that it will continue for ever is a recipe for continued stagnation and dependency. I'd favour a negotiated drawdown - somewhere between Obama's 2 years and McCain's 100 years.

Some countries will need help for longer than others. Post-war countries are a special case and so are small islands or landlocked countries without natural resources. But I'd argue the chances of, say, Kenya or Ghana becoming middle-income countries by 2020 would actually be enhanced if we could agree a plan for aid drawdown now. (It has been done: look at Botswana, South Korea, Taiwan, Mauritius, even India is now a net donor).

So, Madam President, will you be brave enough to announce the date when Liberia will be independent from aid?

Belated benefit from slave castles

2008-08-22T09:16:00.008+01:00

Last year a trip to Senegal opened my eyes to the evils of the slave trade in West Africa. More recently, I went to visit two of the 'slave castles' on the coast of Ghana. Both are carefully preserved and profoundly moving. I was impressed, as I have been throughout Ghana, with the knowledge and professionalism of the guides. They provided telling details of the greed and hypocrisy of the mostly British and Dutch traders. At Elmina (below), the governors used to have women they had captured parade in the courtyard and select one by leaning over their balcony. She was then dressed, washed and brought to the governor's quarters. If, at close quarters, she was found wanting, she was sent straight back to the dungeons.

The guides reminded us that these people operated with the connivance and support of European governments and many African rulers as well. Very few people are blameless in this sorry saga. So credit goes to the government, local authorities and Africans from the diaspora for helping to keep the memories alive.

In one respect, though, I felt that the slave castles were sadly unable to break from the past. Both the towns of Elmina and Cape Coast seemed extremely poor and unable to profit from their main attractions. I had expected to find legions of small hotels, restaurants and souvenir stalls, which might bring the people of these towns some belated benefit from their sorry history.

Instead, the dominant mode seemed to be "bus in, bus out". There are tourist hotels along the beaches, but virtually none in the towns. At Elmina, I only found one hotel catering to visitors; at Cape Coast, just a few budget backpacker places. Where there should be a bustling restaurant-and-souvenir complex, there is a ruin with a faded sign promising a 'visitor centre'. What went wrong? Where did the money go? Even the postcard and wood carving sellers, who are ubiquitous on Accra's beaches, were absent.

I would never suggest turning these lively fishing towns into slave coast Disneyworld. But fishing is a risky business and in decline, thanks to the European fishing fleets offshore. If big projects have failed, how about promoting small businesses? There are lots of little chop bars that no visitors go to: you could find a few ambitious ones and help them print English menus, maybe hire a kitchen help, put up some coloured umbrellas, then double prices. Or maybe set a fruit seller up with microloans to buy a juicer - I'd rather pay $1 for a glass of orange juice than try to peel my own for 10 cents. Or organize a fisherman's cooperative to offer canoe rides in the afternoon, for $5 per person? Set a fixed price, post it on a few notice boards and anyone shy of bargaining will jump at the opportunity.

Of course, if it were so easy, someone would have done it already. Would they?

The Great Illusion: Part One

2008-08-16T14:16:00.008+01:00

Paul Krugman has a thought-provoking piece in the New York Times. He compares the international situation now with 1914, when the last great wave of globalization ended and the world turned in on itself for more than a generation.

I am substantially less well informed to comment than Krugman or many others, but it seems to me he is right to highlight the end of Pax Americana (but didn't that end in 2001, if it ever existed?). He is also right to point out how quickly national selfishness and protectionism reared their heads in the food price crisis - with export bans and the like.

There are three crucial differences between 2008 and 1914, however, which make me hopeful that we are not about to see an end to globalization.

The first is that international institutions are enormously stronger now than in 1914. The UN Security Council may have been powerless to do much about Russia and Georgia fighting, but that's because Russia is a member of it. The League of Nations would have issued a nice condemnation, but that institution was useless precisely because the USA, USSR, Germany and Japan were not a partof it. Besides the powerful military and economic bodies, there are countless talking shops where even sworn enemies without diplomatic ties can talk to each other in private, with a mediator if necessary. Europe depends on Russian gas; but Russia depends on Europe's continuing custom: you can't re-route a pipeline.

Second, unlike the Great Depression, the food price crisis contains the seeds of its resolution. 'Crisis' is often taken to mean a disaster, when really it means a turning point: this crisis is also an opportunity, by giving farmers in food-importing countries the incentive they need to grow more food. Here in West Africa, the price of imported rice and cooking oil has gone through the roof; but local food and oil production are starting to rise. Behind the crisis talk on the World Bank's website, a press release celebrates the halving of rice imports in countries as diverse as Guinea, Nigeria and Uganda, thanks to high-yielding rice varieties!

Third, there are large areas of the world that are as stable now as they ever have been. Krugman reminds us that war is now unthinkable in Western Europe; I would argue this extends to all 27 EU member states. The Americas and most of Asia are not islands of stability, they are oceans.

Rather than the end of globalization, I am much more concerned about another great illusion: the idea that we can deal with climate change by burying our heads in the sand. More uninformed ramblings on that to follow . . .

Togo's first Olympic medal

2008-08-13T09:35:00.004+01:00

To be successful at the Olympics, it helps to be big, communist or preferably both. No surprises, then, that China is topping the medal table, followed by the USA. Meanwhile, North Korea and Cuba are 11th and 24th in the medal table respectively (as of Wednesday morning). Peninsular rivalry probably helps in the Korean case: the South Koreans are third overall. Just imagine how good a unified Korean squad would be. Or not: the unified German team is now further down the rankings than either of the two Germanies used to be.

So how can a small country without a well-resourced sports academy gain Olympic glory? One option is to find one sport you're good at and stick to it. 3 out of Ghana's 4 medals (mostly achieved in the 1960s) were in boxing. Kenya and Ethiopia excel at medium- and long-distance running. This is generally easier to pull off in the Winter Olympics, however, where Austria, Norway and Ukraine turn their climate to their advantage.

The final option, therefore: go random. Find someone who is good at a sport nobody else knows about. This seems to have worked for Togo, where Benjamin Boukpeti has become a national hero overnight for winning bronze in kayaking.

I wondered what led him to take up kayaking. Did he pick up a paddle to navigate the rushing mountain streams of south-west Togo? Did he pilot a pirogue around the mangrove swamps of his country's coast? Does Togo have a national kayaking academy, the relic of an unusually random far-sighted development project or an eccentric colonial administrator?

A little research revealed that Boukpeti's mother is French and he started off training with the French kayak squad, but switched to Togo in 2003. The competition was tougher in France, he said and they were worried I was getting too old. In fact, in spite of his dual nationality, he has spent the last 8 years training in Toulouse and only visited Togo once, as a small boy.

In my view, this shouldn't stop Togo from celebrating him as a hero: after all, they have the benefits of winning a medal without the costs of training him. It's the perfect technology transfer. With any luck, his success will inspire other young Togolese to take up the paddle (or find another little-known sport to excel at). I'm planning a hiking weekend in Togo's Kpalimé region next month; maybe I'll be able to fit in some watersports at the same time.

Doha and Firestone

2008-08-07T09:39:00.004+01:00

Two pieces caught my eye yesterday:

First, my old Professor Dani Rodrik's offers a characteristically acerbic critique of the Doha Round. A waste of time, he says; most of the benefits would go to rich country taxpayers. And why is it published in an English-language Egyptian newspaper? Maybe Egyptian cotton farmers were hoping to benefit from Doha?

Second, the Firestone Company has signed an agreement with workers in Liberia. For the first time in the 82-year history of the world's rubber plantation, the company has done a deal with elected workers' representatives. (The ILRF has a self-congratulatory press release, but I would give more credit to the workers' union, Liberian government and media for keeping up the pressure). I wouldn't expect the miserable working conditions in the plantation to change immediately, but higher wages, more schools and buses to take tappers to work and their children to school are certainly steps in the right direction. As ever, the difficulty will be in implementing the deal: after all, workers are already supposed to be limited to an 8-hour working day when in fact it takes more like 12 hours to reach the daily quota (see picture).

At first glance, these two items are entirely unrelated. But I began to wonder why we never hear about rubber in the global trade talks? Or, for that matter, cocoa, coffee or oil palm?

Probably because none of the commodities above are grown in the USA or Europe. The most egregious trade restrictions, the ones that protect a few rich-country farmers at the expense of millions of Africans, are in cotton and sugar. Even Rodrik agrees that farmers in West Africa would benefit from a more liberal trade regime in cotton - but the US blocks it because of a few thousand swing voters in Florida. Meanwhile, in Europe we still make sugar out of beet. Maybe we're afraid that pirates will cut off our supplies of cane from the Caribbean.

I certainly hope that global trade negotiators will find a way to salvage some useful parts from the wreckage of Doha. But let's not pretend that selling a bit more cotton or sugar will end poverty in Benin or Burkina Faso. Low productivity means poverty, whether your crop is freely traded or not.

Microfinance for the armchair investor

2008-08-01T19:41:00.006+01:00

I have been a big fan of Kiva since I stumbled across their website nearly two years ago (just before a NY Times article got them widely noticed). Late-night visitors to the Kennedy School of Government's computer lab found me perched on the edge of my stool, pondering the relative merits of investing in chickens in Kenya, a bookstore in Bulgaria and cassava-grinding in Colombia. It's strangely addictive, or would be if I could remember my PayPal password.

Lately, though, I've begun to wish there were more Kivas out there, for two reasons. One, Kiva doesn't pay interest. That's fine if you only have $100 invested, but put $1,000 in and you start to notice. Two, a lot of the businesses I lend to are very small, doing very similar things. I'm all in favour of food retailers, but there is a limit to the number of them a street or market can support. I have at least 5 vegetable sellers within a 5-minute walk of my house in Accra. (That's 5 times more than I did in Cambridge, unless you count WholeFoods). Any new one would probably compress the margins of the others.

So I was excited to discover MyC4 yesterday, Denmark's answer to Kiva (with loans in euros!). MyC4 is set up for bigger loans: they pay interest, usually around 10%. This cost is passed onto borrowers, but if the loans are bigger, the operating costs fall to compensate. Best of all, the interest rate is set by auction, so the borrower gets to borrow from whichever lender offers the lowest interest rate. It's a slightly different model - more wealth creation than poverty reduction perhaps - but a welcome one, in my opinion.

I bought €100 of credit and jumped straight in. So far, MyC4 only has partners in three countries, but one of them is Côte d'Ivoire, which is exciting because they don't get a lot of microfinance. Right now I am invested in 2 Ivoirien businesses and am waiting to hear if my bid to invest in one in Uganda has been accepted.

Even with the prospect of larger loan sizes, though, the most common business model on MyC4 is "X buys Y wholesale and sells it retail. The loan will enable her/him to buy more stock." Sure, but food and clothing retail is highly competitive in most developing world cities I know, so the potential for additional profit is small.

What am I looking for, then? Three things. One, rural lending. Microfinance seems to be as scarce in rural areas as it is common in the cities (how many Ugandan microfinanciers operate outside Kampala? maybe this Kiva fellow can tell me). Small loans for fertiliser and seeds would make a huge difference to many farmers. Two, product differentiation. Three, businesses that add value to commodity items. I can get delicious mangoes and pineapples all over Ghana, but no fresh mango juice. I'll bet if you wheeled a juicer around Accra you could make some good money and undercut Coca-Cola at the same time. Good for you, good for Ghana and great for my teeth.

Colleagues' blogs in Liberia

2008-07-30T09:51:00.003+01:00

While visiting Liberia last week, I was lucky enough to stay with three blogging colleagues: Laura Bacon, Diane Mak and Preya Sharma.

All three are working in various government departments and doing their best to understand and contribute, in some small way, to this small but important country.

Most people seem to be keen on the work they are doing or that we did last year; but of course it's not entirely costless and our impact is highly variable (my biggest impact seems to have been not my main project, but IT skills training I did in my spare time!). So I am wondering: what, if anything, have other governments got out of short-term technical assistance and internships? Are there any lessons that would be useful for Liberia? What can be done to bring in people from the diaspora, who can usually get up to speed quicker than well-meaning foreigners?

Liberia: the process is on

2008-07-28T17:08:00.005+01:00

Every time I visit Liberia, there are a few new buildings going up, a few more roads resurfaced, more private cars on the roads (and fewer UN LandCruisers, it seems) and another airline that has just started flights to Robertsfield.

It's slow progress, but it's progress. The atmosphere in Monrovia still feels tense, thanks to rising food and gas prices and continued problems with violent crime; but Liberia has so far been spared the 'rice riots' that have rocked Côte d'Ivoire this year or Liberia itself in 1979. Indeed, my former boss Minister Toe was instrumental in getting the World Bank to cough up $10m in response, including $3m to increase domestic food production.

Most positive accounts of Liberia begin with the government and that is my usual starting point too - but on this trip I tried hard to look for signs of life in the private sector.
On a road trip to Bong County, the graded roads and repainted schools are obvious - but also building materials stores sprouting everywhere. For now, this is mostly a reconstruction boom; but the service sector is growing too. More and better snacks available at the side of the road; more and better telephone, internet and printing services (though there are still no landlines); and best of all, insurance.

Why am I excited about insurance? I'm not, really: I have never worked in insurance and I hope I never have to. But my friend James, an old colleague at the Ministry of Agriculture, had just left his job to become a manager for an insurance company. I went to visit him and he introduced me to a colleague, who launched into a 20-minute sales pitch for their products. "Home and contents? We have it! Life? We have it! Automobile theft, collision damage, goods in transit, goods landed but not cleared, we have it! Liberians have grown to expect theft, flood damage, even losing their homes - no more!"

When he paused to catch his breath, I patiently explained that I was only visiting for a few days and my travel insurance policy was adequate to cover my few possessions. I wished them all the best in their quest to sell Liberians insurance and hoped that their brand-new office and freshly tiled floor would soon be ringing with the footsteps of risk-conscious clients.

Somehow, the very mundanity of this exchange encouraged me. Insurers may thrive on risk, but are naturally a risk-averse bunch. If African multinationals are investing in Liberia, they must believe the risk is manageable. If people buy their policies, they must believe that their claims will be taken seriously.

Over-eager insurance salespeople are tedious company. They are also an encouraging, a vital sign of capitalism. On my next trip, I hope I will be pestered by telemarketers and double-glazing salespeople. Now the post office is open, direct mail could be next. Liberians beware . . .

A really cool way to reduce fuel prices

2008-07-22T11:16:00.006+01:00

I'm generally in favour of letting the price mechanism operate. Fuel prices are rising because demand exceeds supply, so the rising prices are a necessary signal to help us adjust to using less fuel. Subsidising fuel will just lead to shortages and postpone the inevitable; it's generally a waste of taxpayers' money.

Still, when governments jack up fuel prices by 40% over the weekend, it blows a hole in commuters' budgets (and hurts anyone who needs kerosene for cooking or heating). This happened in Côte d'Ivoire two weeks ago and I saw how bus and taxi fares immediately jumped to reflect the higher costs. Still, transport operators staged a strike: they claimed the government wasn't letting them raise fares by enough to cover the cost of fuel.

The government's response was to cut ministers' salaries in half and curtail foreign travel for government officials. The money saved will pay for a reduction in fuel tax. Fuel will still cost more than before, but only by 30%, not 40%.

Cynics might call this an election-time gimmick, but I think it's fantastic. I doubt the ministers will be thrown into poverty by the cut and it probably won't last long, but it sets a great precedent.

Who should be next? Maybe Kenya, where the government had to raise taxes to pay for their hair-raising 40 ministers (that's power sharing for you). But I would start with the European Parliament, whose members receive probably the most ludicrous travel allowances of any organization in the world. They can fly to Brussels on Ryanair for €99 but charge the round-trip business fare on, say, Air France (€500? €1,000?) and pocket the difference. The EU has already imposed a travel ban on President Mugabe and his entourage; wouldn't it be nice if we imposed it on EU parliamentarians too?

A lower-case capital

2008-07-15T09:57:00.005+01:00

It’s not uncommon for countries to relocate their capital city: sometimes to an existing town or city, sometimes to a greenfield site. The cities thus created are as diverse as the reasons for creating them. At best, a new capital combines the vitality of any big city with a certain spacious self-confidence. Some of the world’s greatest cities (St Petersburg, Beijing) were designed as capitals, fully formed in the central planner’s (or emperor’s) mind. Washington DC may not have the lively churn of New York or Chicago, but its neoclassical grandeur sets it apart from other US cities. I have not visited Brasilia or Abuja: but whether you see these cities as bold visions of the future or a colossal waste of money, they are undoubtedly fully functioning capitals.

Other capital cities are still-born, capitals in name only. Tanzania’s parliament meets in Dodoma from time to time, but no ministries or embassies do. Burma’s junta recently relocated from chaotic, coastal Yangon (Rangoon) to a mountain village called Napyidaw, apparently at the suggestion of a fortune-teller. Strangest of all, perhaps, is Yamoussoukro, nominal capital of the Ivory Coast. 20 years after its designation, this bizarre city-village is a living monument to its creator and not much else.

Félix Houphouët-Boigny was certainly a master statesman. From the mid-1940s to his death in 1993, he was synonymous with Côte d’Ivoire, piloting his country from palm-fringed obscurity to the economic powerhouse of West Africa. The first African ever to sit in a French cabinet, Houphoët’s genius was to simultaneously convince the Ivoiriens that they were independent and the French that they were not. While Algeria, Kenya and Zimbabwe had to fight for their independence, Côte d’Ivoire was born without bloodshed. When neighbouring Ghana was convulsed by coups and economic collapse, the Ivorians took over as number one in cocoa. The national motto is hard-nosed: ‘Unité, discipline, travail.’

Houphouët ruled supreme for 33 years, buying off his opponents with cocoa farms and contracts. After he died, the falling price of cocoa and ever-growing corruption brought the Ivory Coast economic stagnation, political turmoil and eventually, tragically, civil war. But one aspect of ‘Le Vieux’s’ legacy is preserved: the largest cathedral in Africa and perhaps the world, rising out of the African bush in the middle of nowhere.

Yamoussoukro is a small village 200km north-west of Abidjan. It’s centrally located, on a main road, running through rolling hills with a pleasant climate. Houphouët was born near here in 1905 and that was why he designated this place to be capital. Nominally, it still is: the current government has no interest in the place but doesn’t want to touch his legacy. My bus from Abidjan suddenly burst onto a six-lane highway, completely empty apart from an army checkpoint, streetlights guarding both sides like silent sentinels. Outside the bus station, children and chickens played on a road as wide as the Champs-Elysées. Trucks laden with teak rumbled through on their way to the coast, lost in a vast expanse of concrete. Vast boulevards stretched in all directions, a few concrete bungalows stranded on the sides.

I saw a vast dome rising a mile away. My host, a local student and cousin of a friend in Abidjan, led me down the deserted avenue, past a mosque and a swampy lake where a teenage boy shook a single wriggling fish out of his net. As we crested the hill, the basilica loomed in front of us like a neo-Renaissance visitor from outer space. The guards were most welcoming: tour’s about to begin, they said.

The Basilique de Notre Dame de la Paix is the largest building in Africa and one of the hugest in the world. Its pews can accommodate 7,000 people, another 7,000 fit in standing. It has been full to capacity twice. The first was in 1989, when Pope John Paul II came to bless it. (At his request, the dome was made a few feet shorter than that of St Peter’s). The second was in 1993, at the funeral of its creator. On that occasion, over 200,000 people stood patiently in the grounds, which are beautifully maintained to this day. Only the Vatican and maybe Maracana stadium can compare.

The mind boggles at the megalomania that inspired this basilica in the bush and the sang-froid that permitted its financing. A simple plaque in the front pew commemorates President Houphoët ‘who gave this building to the nation’. God only knows what the nation gave him to build it. Our guide proudly recounted the details of its design (by a Lebanese) and construction (in three years, by French engineers). He did not tell us the price tag. In the past, I have marvelled at how much of Tibet’s GDP is tied up in temples or mediaeval France spent on cathedrals. But those monuments are alive: they are still at the heart of their cities, visited by the faithful as well as tourists. Save for a few weekenders from Abidjan, two young Germans (aid-workers?) and a French priest, the Basilique was empty. My friend had been a number of times; but he was Catholic. Most local people, he told me, ignored it completely.

And yet it’s staggeringly beautiful. Some dictators build mass graves or châteaux in France. This one at least gave the country something it can be proud of. Indeed, though Yamoussoukro was at the front line of Côte d’Ivoire’s ‘crise’ for 5 years, it was spared the shelling, rioting and looting. A battalion of Bangladeshi blue helmets live opposite; they didn’t look busy. Buses and trucks are running to the north again. The Hotel Président, a vast concrete pile on the edge of town, had a scattering of SUVs parked outside it. The market in the city centre was full of students eating at roadside stands. When I glanced up from my fried chicken and chips, the dome of the basilica stood in vast relief against the greying sky.

While the building may be unique, the ‘Big Man’ spirit that inspired it is not. When Houphouët died, his funeral was delayed by President Mitterrand, who reportedly had his Concorde circle above the airport for hours to make sure he was the last to arrive. Last week, President Kofuor hosted a sparkling awards ceremony for Ghana’s National Day, creating a brand-new ‘Medal of the Star of Ghana’. The first recipient: himself. As I write this in my hotel, Radio Télévision Ivoire has just devoted 30 minutes to what President Gbagbo did this weekend.

On the way back to Abidjan, my bus suddenly lurched to the side of the road. As we ground to a halt, I heard a wail of sirens and seconds later, a series of police cars flashed by at incredible speed, followed by three or four black S-Class Mercedes and a bunch of SUVs, indicators flashing. His Excellency on a visit to the North, or maybe his Prime Minister, the former rebel chief? The TV news confirmed it was the President on a 200km/h ‘peace-building’ tour. I wonder if he stopped at Yamoussoukro to pay his respects to Houphouët, who is buried in his palace, surrounded by a perimeter wall and moat. Once a day, a palace guard throws some fresh meat to the crocodiles who live in the moat. The Big Men continue eating, even after they die.

Cocoa processing in West Africa: addendum

2008-07-08T20:54:00.005+01:00

Thank you to readers for commenting on the question of cocoa processing - I stand corrected! In fact, Côte d'Ivoire isn't just the world's largest cocoa producer, but the third-largest processor (only just behind the Netherlands and the USA). Ghana, though much smaller with less than 100,000 tonnes of capacity right now, is catching up - ADM and Cargill have gleaming new factories under construction.

It seems that tax incentives do the trick, along with the comparatively cheap energy and transport out of the coastal ports - great news for anyone working there. I'd be interested to know what the CID folks make of this. Are the tax incentives a good use of resources? Presumably yes, if two conditions are met: (1) cocoa processing has positive externalities that give it a social benefit over and above the direct jobs/profits and (2) the processing wouldn't have happened without the tax incentives. I can see lots of good spillovers from cocoa processing, so this is probably a good deal for the governments concerned.

Why cocoa-growing countries shouldn't make chocolate

2008-07-04T15:35:00.003+01:00

It's an obvious economic development strategy: add value to your natural resources. After all, why should coffee growers only get a few cents when a cup of coffee sells for $3? Why should Liberians export their rubber raw to Ohio when they could earn more by making tyres? And why should Ghana and Côte d'Ivoire send most of their cocoa to Europe for processing? Isn't this just the legacy of colonial exploitation and underdevelopment?

Of course, adding value in the source country doesn't pay for multinationals, otherwise they'd be doing it. Now a team at the Center for International Development at Harvard show that it doesn't pay for the country either.

West African countries have lots of rain, cheap labour and an ideal soil for growing tree crops: in other words, a comparative advantage in growing cocoa. Processing cocoa requires entirely different factors: cheap power, semi-skilled labour, a stable environment for big capital projects and cheap transport links. Making chocolate out of cocoa butter is a different business again, calling for more specialized equipment and skills. There is one company making chocolate in Ghana, but it doesn't sell well even here. In fact it's highly unlikely that any country could have comparative advantage in such completely different activities. We shouldn't expect Ghana to specialize in chocolate any more than we would expect Belgian or Swiss chocolatiers to source their cocoa from European greenhouses.

Hausmann, Klinger and Lawrence conclude their paper as follows: "Policies to promote greater downstream processing as an export promotion policy are misguided. Structural transformation favors sectors with similar technological requirements, factor intensities, and other requisite capabilities, not products connected in production chains." (Policy brief here)

Now if only I could figure out what that actually meant in Ghana . . .

The cocoa story: part 1

2008-06-27T11:49:00.008+01:00

I have come to Ghana to work on a project to raise the incomes of cocoa growers - already the motor of the rural economy here and in several neighbouring countries.

Ghana is the world's second-largest cocoa producer and three-quarters of a million farmers make a living from it. Unfortunately, their productivity levels are well below what is possible, even before you think about replacing the trees. Better crop management and judicious use of fertilizer can double yields in one or two years. So why hasn't it happened?

The biggest problem seems to be that most farmers can't get credit. Banks are unwilling to lend to farmers, for good reasons: repayment rates are low and there is little chance of seizing the farms to use as collateral, since most farmers don't have formal title to it. Microcredit isn't much help: the interest rates are too high and loan periods too short for agriculture.

West Africa still dominates the world market for cocoa, but Asian producers are making inroads with newer trees and much higher yields. Could cocoa go the way of coffee and oil palm, in which prices are set by cheap, high-volume production in Vietnam and Indonesia? The solution seems to be, at least in Ghana, in a flight to quality. The best soil and climate conditions, apparently. I predict that in 10 or 20 years, chocolate buyers will pay as much attention to questions of origin as wine and coffee buyers do now.

Would a green revolution in Africa be bad for women?

2008-06-20T11:03:00.005+01:00

Most people would probably say 'no'. After all, most African women are farmers and so a green revolution should raise their incomes.

But what if improvements in farming technology shift control over food production (and hence income) from women to men?

The much-maligned Food and Agriculture Organization has a focus piece on this, which concludes that the Green Revolution in Asia benefited richer farmers more than poorer farmers and men more than women. Richer farmers, because not everyone could afford high-yielding seeds and fertiliser. Men, because
women lost the income they used to get from threshing and pounding grain when they were replaced by male-operated mills.

This is an important lesson for me, because I've been keen to see rice mills and other low-tech devices spread throughout Africa. I suspect the conclusion is less applicable to Africa, because wage labour is already rare among rural women and rice mills like the one in the picture employ women too. But it's a salutary reminder that we ignore the gender dimension of development at our peril.

Overall, I feel that any kind of agricultural development would be better for women than, say, a rural economy based around mining. My colleagues Emily Stanger and Molly Kinder just won an award for a paper that makes this point in the Liberian context.

Two even better articles on the food situation

2008-06-18T18:40:00.004+01:00

The Financial Times has two great articles on why we should have been talking about food ten years ago. (Thanks to Joost Bonsen for alerting me to them).

The first is by Javier Blas: 'The end of abundance.'

The second by Alan Beattie on Africa: 'Seeds of change'.

They note that: "Farmers, agronomists and development experts say that new technology alone, particularly in the short term, will bring no radical transformation. Quicker gains can be made improving markets and transport, which will help expand existing, under-used technologies."

Exactly. Roads and rice mills, then . . .

Rice is back

2008-06-17T21:14:00.005+01:00

The price of rice has stopped rising, for now, but the scramble to grow more rice has only just begun.

Agriculture ministers and scientists have been calling for a 'Green Revolution for Africa' for years. The Gates Foundation wants to fund it. Belatedly, the World Bank has agreed. The central focus seems to be on improved seed varieties, bred or modified for African conditions. A blog in the New York Times describes 'The Hunt for Super-Rice', a distributed computing project wherein unused time on personal computers is used to model genetic variations of rice. (This is the same technique as used to search for extraterrestrial intelligence and protein folding combinations).

By contrast, a friend has pointed out a low-tech approach to raising yields in today's edition of the same newspaper. Professor Norman Uthoff at Cornell University has developed a 'System of Rice Intensification' which relies on early and less dense planting. It may seem counterintuitive, but apparently yield can be raised without recourse to the flooded paddy fields or chemical fertiliser familiar from Asia. At a time when the cost of fuel (and hence fertiliser) has risen even faster than the price of the crop, this is welcome news.

As so often, however, the article skirts around the question of implementation. There may be isolated incidents of doubling or tripling yields, but techniques are even more difficult to disseminate than seeds or fertiliser: they need trained extension workers. Even if the System of Rice Intensification raises yields more cheaply or reliably than a 'Green Revolution', it will need a new army of extension agents to make it work. Unless it's so good that it can be spread by word of mouth. Maybe the best agricultural technology is the mobile phone . . .

Madam President wows Harvard

2008-06-13T14:30:00.004+01:00

Last week we celebrated our graduation from Harvard in style, with speeches from two female Presidents who have made history.

Harvard's President Drew Faust certainly has the most money at her disposal, but it was Liberia's President Ellen Johnson-Sirleaf who drew the most rousing applause.

Some fellow students found her speech a bit dry (what did they expect?), but I loved it for the telling detail that characterizes Madam President's approach to leadership. I particularly liked this line from her speech: “To be successful you will need to be prepared to go that extra mile to spend time to improve the structures and systems with which you will be called to work." I sometimes feel we put too much emphasis on charismatic leadership and not enough on the slow, difficult task of institution building.

Meanwhile, a new host of interns have begun working in those same institutions in Monrovia. Among them are two fellow Brits, Preya Sharma and Diane Mak. Both, I am happy to report, at the Ministry of Finance, which is probably the most exciting place to be in Liberia right now. Unless the Lone Stars manage to qualify for the next World Cup . . .

The impact of food price rises on trade balances

2008-06-04T12:42:00.005+01:00

As world leaders, UN officials and thousands of hangers-on gather in Rome to talk about food, the US Department of Agriculture has released a fascinating map showing how food price increases affect trade balances.

On the face of it, this looks like bad news for developing countries, especially in Africa. A few traditional food exporters, mostly temperate-zone countries like the USA and Argentina, stand to improve their trade position, while densely populated Asia and Africa will see their trade balances move towards deficit.

However, we should beware the mercantilist fallacy that a trade surplus is somehow a sign of virtue: in fact, it could be a sign of excess saving (Japan, after all, ran a trade surplus throughout the recession years of the 1990s). So maybe a slide towards deficit in countries like Nigeria or Peru, where high commodity prices have created trade surpluses and risks of 'Dutch disease', isn't such a bad thing.

The problem with this graph is that it doesn't tell us anything about the terms of trade between countries. Trade in food, like anything else, is determined by relative prices: so the real question is which countries stand to improve their terms of trade as a result of food price changes. After all, if your terms of trade improve, you can afford more imports for the same quantity of exports. You could conceivably increase your import volume while the value of your imports falls. That's a real welfare gain. A trade surplus is nothing of the sort.

Sushi

2008-05-31T07:10:00.005+01:00

The Washington Post reports that a new sushi bar has opened in Liberia.

So now there are two of them. If only the sushi were made from local fish (fresh and delicious), I wouldn't mind. But importing tuna and salmon to serve to aid workers, when the rest of the population can barely get enough rice (let alone fish), seems a little absurd.

Inspiring student leadership from Venezuela

2008-04-29T16:56:00.006+01:00

I suspect I am not the only person who is cycnical about student politics. My parents' generation demonstrated for free love and against Vietnam, but when the 1968 generation came to power, they were self-indulgent and spineless (Bill Clinton and Gerhard Schröder come to mind). The student union 'leaders' during my time Oxford spent 90% of their time debating arcane matters of student politics. The only two substantial protests they organized were against student tuition fees (a bad cause) and against the Iraq war (which the government ignored).

How refreshing, then, to hear from the leaders of a Venezuelan student movement who have, in the space of only a year, built a non-partisan coalition that is changing the face of Venezuelan politics. The students began by protesting against the closure of Venezuela's oldest TV channel, RCTV, in 2007. They moved on to President Chavez's attempts to abolish presidential term limits in a constitutional referendum in December 2007, which Chavez lost narrowly - his first electoral defeat since 1998.

There seem to be two reasons for the students' success. One, they avoid the sterile pro-Chavez/anti-Chavez debate by recognizing that "Chavez is a product of historic forces". In other words, he's the government, like it or not, and the questions is how to make life better for Venezuelans and safeguard freedom and democracy. Two, their non-violent tactics stand in contrast to their (initially) harsh treatment at the hand of security forces and 'Chavistas'.

The representatives from the student movement who spoke at the Kennedy School were impressively articulate, both in Spanish and English and deeply sincere. I was inspired by their example and hope they manage to avoid the cynicism and careerism that affects student 'movements' elsewhere. Two reservations, though. One, they still looked and sounded like members of the elite (not surprisingly, perhaps, given the high cost of tuition at good universities). Two, they were in the USA to accept the 'Milton Friedman prize for liberty' from the Cato Institute. One can't begrudge them the money, but doesn't this increase the risk that Chavez and others will denounce them as imperialist stooges?

Let them eat spaghetti

2008-04-22T15:02:00.003+01:00

When I last visited Liberia in January, there was much talk of higher rice prices and their impact on people's eating habits. After all, the Kennedy School's Nolan Miller has shown that rice consumers sometimes exhibit Giffen behaviour - that is, they consume more when the price rises, because they have had to cut back spending on vegetables, meat or other foods. (His paper is due to be published in the American Economic Review).

I had been hoping that Liberians would respond to the rising price of imported rice by switching to home-grown country rice, which tastes just as good but often has rocks in it and is difficult to find in the capital.

People often told me that "people in Monrovia won't eat country rice". But the Liberian palate may be more flexible than that! The BBC's Katie Price reports that restaurants in Monrovia have started serving spaghetti. A plate costs $1 - half that of a plate of rice. Could be good with a hot chilli sauce. I have eaten spaghetti in Somali restaurants, where the Italian influence on cooking lingers, but this is the first time I have seen or read about it being served in West Africa. Sadly, I doubt this will be a lasting response to the food crisis, because most Liberians don't eat in restaurants and the price of wheat has been going up too.

Now, how about making spaghetti from cassava flour?

Robert Zoellick visits the Kennedy School

2008-04-08T00:07:00.003+01:00

Last week, the World Bank's President Zoellick made a brief stop at the Kennedy School to address the Harvard International Development Conference. A few of us were also lucky enough to attend a small group meeting with him beforehand.

Zoellick is probably the most impressive Republican official I have ever encountered: smart, engaging and thoughtful. He spent an hour and a half asking each of us where we came from and what we were working on. In the picture above, he is quizzing my friend Carlos on the effects of the Colombia Free Trade Agreement (which Zoellick helped negotiate) on Carlos' native Ecuador.

It was left to Professor Dani Rodrik, sitting opposite Zoellick in the picture, to point out the inconsistency in the World Bank's attitude towards trade. (He did so in a different meeting, as we didn't let the professors say anything in the first one!). Essentially, Zoellick wants to conclude the Doha Round at the same time as increasing the supply of basic foods. But the Doha Round entails reducing the subsidies the USA and EU pay to farmers to grow these foods, which will raise their price in the short run, just when the world is facing record shortages of rice and other staples.

Is this a real contradiction, or will it disappear over time? I'm inclined to think that the supply response of farmers in Africa and Asia will ultimately outweigh the decline in US and European production. After all, the subsidies are most distorting in crops like cotton, which is not a food crop and not in short supply. The Bank's own research suggests that eliminating subsidies will increase global rice prices by 4.2% and wheat by 5%. That's much less than the current spike in prices. So what is the elasticity of rice supply over 3-5 years?

Driving up food prices

2008-04-02T16:26:00.006+01:00

The BBC reports that Cote d'Ivoire's president has reduced taxes and customs duties on food in response to rioting. As the prices of wheat, rice and other staples continue to rise, I wonder if we are seeing a new kind of 'beggar-thy-neighbour' trade policy emerging?

In the last few months, export taxes have been imposed in Argentina and export restrictions imposed in Thailand and Vietnam. A few months ago, I noticed the same thing in Ecuador. These measures may work to contain the price rise in food exporting countries, for a while; but they will drive prices even higher for everyone else. This hasn't had much effect in Cambridge, Massachusetts, where food makes up maybe 10% of our expenditure, but most of the poorest countries in the world are food importers and poor people spend over two-thirds of their income on food.

I teach a course on globalization and the parallel with the 1930s is alarming: at that time, the Smoot-Hawley tariff provoked retaliatory tariff increases by Europeans, South Americans and others. A tariff may be optimal for one country is detrimental to the world. Only this time, we are talking about restrictions on exports, not imports.

What are the options for dealing with this? Maybe the World Food Programme or FAO should convene an emergency food summit to try to persuade food exporters not to starve everyone else.

How to do a census, African style

2008-03-22T06:07:00.002Z

Liberia is holding its first census since 1984. This report comes from the BBC. I particularly like the special song composed for the census: "It's about development, not taxes!" I only wish the BBC played the whole track.

In the US or Europe, a census is a boring affair. The conscientious citizen completes a questionnaire and the less conscientious are filled in by statistical guesstimation. In Africa, a well-run census is a matter of civic pride. Liberia has trained enumerators to go to every village, house and shack in the country, however small. Most are volunteers. A few years ago, I was counted in the Tanzanian census when the enumerator came to the compound I was staying in. All she got for a hard day's work was a free T-shirt, saying 'Tanzania Sensa 2002'.

Soon we should know how many Liberians there are - 3.5 million, 3.8 million? I wonder if anyone is trying to count Liberian citizens outside the country?

The quickest route across the Atlantic

2008-03-14T04:41:00.003Z

A few months ago, I found myself trying to get from Colombia to West Africa. I had to fly around 10,000 miles, burn 5 tonnes of carbon and travel for 3 days to cover a point-to-point distance of only 3,000 miles.

Now I realize that there are, in fact, direct flights (on private jets) and even regular ships making this crossing. Cocaine dealers ship their product from Colombia to Europe via Guinea-Bissau. It seems this tiny country, wedged in between Guinea and Senegal, has become the best hub for the trade - precisely because it's a failed state. This fascinating report is from the Guardian.

Once again, we see the consequences that our 'war on drugs' has on the people and countries caught up in it.

Who wants to develop a low-cost rice mill?

2008-03-07T20:11:00.007Z

Anyone visiting a West African village will notice the distinctive sight and sound of women pounding food to eat - yams, cassava or rice. As combine harvesters spread across Europe and North America and the green revolution throughout Asia, farming and processing practices in Africa barely changed. Rice mills, such as the one shown below, are the exception, not the rule, in rice-growing countries like Liberia and Sierra Leone.

Does this matter? Not if pounding rice by hand yielded the same quality of rice as milling it - but it doesn't and it's hard work as well. The evidence suggests that African farmers continue pounding by hand because the alternatives are too expensive or simply not available. In some countries, women are actually going back to hand pounding, because their diesel-powered mills broke down or were sold for scrap to fuel a civil war.

There are various programs led by NGOs and the UN trying to change this, based on the belief that agricultural processing technology is essential if farmers want to move beyond subsistence and grow a surplus for sale. However, their efforts are generally uncoordinated, fall well short of what is required and may just hand out the same old technology that is inefficient and breaks down easily.

Now there are two exciting developments in this field. The first is a program sponsored by the Gates Foundation to create 600 agro-enterprises in Senegal, Mali and Burkina Faso using multifunctional platforms, essentially a diesel generator to which different machines (rice threshers or mills, peanut shellers and cassava graters) can be attached. It's a traditional grant-based program, but I'm optimistic because Gates is paying for it and they insist on value for money.

The second development - and one I am keen to join - is the spread of social enterprise models using new technology. New technology here means redesigning a product to make it simpler and cheaper: this is the One Laptop per Child model, not the MacBook Air! Typically these enterprises bring together engineers, designers and development practitioners and create some clever, cheap technology. The challenge, as always, is taking it to scale and getting people to pay for it.

There are some great organizations working out there: in the last few months, I have been introduced to the MIT D-Lab, the Extreme Affordability program at Stanford's d.school (d for design), KickStart and Design that Matters. Fortunately for me, Cambridge seems to be a hub for this kind of thing! I have also heard of Engineers without Borders and Practical Action. But nobody has developed a low-cost rice mill yet. Is nobody interested, or am I just not looking hard enough?

Kenya back from the brink?

2008-02-28T14:15:00.007Z

I'm listening to the BBC World Service as details of a political settlement in Kenya are emerging. If it's true, it sounds like a momentous agreement:
- An executive prime minister, appointed by parliament not the president
- A 50-50 split of cabinet ministers between Kibaki and Odinga supporters
- Best of all, an end to violence, if each side calls off their respective armed thugs

Having taken a Harvard course in 'Negotiations', I'm fascinated by the brinkmanship that led to this agreement, but I shudder at its human cost. If such an agreement had been made last month, over a thousand lives could have been saved. But then again, if the opposition had just let Kibaki get away with rigging the election, they wouldn't have got the agreement in the first place. Is this deal the beginning of a better Kenya? Or is this a flawed agreement, an old-fashioned division of spoils, power-sharing just a cover for business as usual?

For insight, I turn to two deeply committed, thoughtful friends. Wangari Kebuchi is a fellow student, a Kenyan in the USA. Jon Yates is a former colleague, a Brit working in Kenya for the Acumen Fund. Their witty comments are spiked with anger, but also optimism. Let's hope the putative agreement and its implementation justify it.

Bush and Butt Naked

2008-02-21T21:46:00.006Z

President Bush spent a few hours in the Lone Star State this morning - Liberia, that is, not Texas. Strictly speaking, the founding of Texas in 1842 predates Liberia by six years, but as we say in economics, that's not a statistically significant difference.

As usual with world leaders on tour, President Bush had an entourage of hacks a little less hard-bitten from the usual khaki-clad Africa reporter. Kevin Corke from NBC News was especially shocked at the state of the infrastructure. Fortunately, my friend Conor Hartman (a Scott fellow, working for the Liberian government) was on hand to give him some perspective! After all, the World Bank did just spend $27m fixing that same road.

The New York Times has a long and thoughtful article on Bush's trip; it perceives the 'strong but largely one-way emotional bound' that links the USA and Liberia. I wonder, however, why it is still necessary to prefix all such articles with references to General Butt Naked, President Charles Taylor or child rape. I don't mean to downplay the horror of the Liberian civil war, or the challenges of recovery, but I long for the day when the good news goes in the first paragraph and the challenges in the second.

Having said that, when Bush visited Rwanda earlier this week, every report described it as 'genocide-scarred' or 'post-genocidal', which suggests the Liberians have at least another decade to wait before General Butt Naked is out of the news!

New Rice for Africa

2008-02-20T02:30:00.004Z

Last week, I presented some of my work on agriculture in Liberia to classmates in the MPAID program. It's always nice to have a sympathetic audience, but there was some friendly criticism as well - not least, of my main suggestion that the fastest way to grow more rice is to provide traditional shifting cultivators with better seeds, rather than invest in rice swamps, irrigation and fertiliser. I cited Guinea as a country that has done so with some success, provoking some bewildered looks from my friends, since Guinea is still one of the world's poorest countries.

Imagine my surprise, then, to find that today's New York Times has a photo series celebrating rice cultivation in Guinea! Cultivating the 'New Rice for Africa' has, it seems, enabled villagers to grow 50% more rice without fertiliser and up to twice as much with it. Yet sadly, these wonder seeds (which are off-patent and non-hybrid, meaning farmers can keep some of their harvest for planting) are only being planted by 200,000 farmers in West Africa. This article tells you why. No surprises: it's roads, input supply chains and output marketing . . . again.

Back in Liberia: roads revisited

2008-02-09T16:12:00.001Z

I've just got back from another trip to Liberia, this time to do some research on the Poverty Reduction Strategy and the government's policy for agriculture. It was great fun catching up with friends and seeing the progress that is being made - as well as enjoy the hot, sunny weather, which we didn't see much of last summer!

The international airport is still a little ramshackle (though it's also the friendliest airport I know!), but the visitor experience has improved a lot, thanks to a new hotel in Mamba Point and the resurfacing of Tubman Boulevard in Monrovia. The Chinese-Liberian crews were working hard to finish this when I visited, in order to impress visiting dignitaries like World Bank President Robert Zoellick, who spent two days there last week. The road will speed up the journey into town for the thousands of commuters who pile into little share-taxis that crawl gingerly around potholes while the UN classes LandCruise past them.

But with a bill of $27m for just ten miles of road, is this really the best use of money? Of course, it's donors' money, but instead of fancy machines like the one on the left, I wish I had seen more gangs digging ditches, grading dirt roads and relaying bridges in the rural areas. The paved roads from Monrovia to Buchanan and Ganta are clearly improving, but there's a big difference between cutting an hour off the 6-hour taxi ride to Ganta and actually connecting places like River Cess and Grand Kru counties to the capital. The fascinating Liberia Market Review (2007) suggests that only half the communities in the country have road access at all, and even fewer in the rainy season.

This matters for agricultural development, because research in Asia shows that villages with roads produce one-third more crops per head than villages without. It matters for public services, because education and health workers find it hard to visit these villages, let alone set up schools or dispensaries. (That you can find teachers and health posts in some of them anyway testifies to the ingenuity and dedication of entrepreneurs and NGOs). Rural development comes from turning little tracks into all-season roads with drainage ditches. $27m would dig a lot of ditches.

The people of Liberia know this better than any economist. When the government consulted the counties recently on its Poverty Reduction Strategy, people in every one of the 15 counties cited roads as their top priority. If you really want to pave roads, a few extra miles here or there would make a big difference - say, on the border between Liberia and Guinea, shown below. The paved road ends just 3 miles before the border. Now, if only the Guineans paved the road on their side too . . .

Rice in Ecuador: price control or export ban?

2008-01-07T05:15:00.001Z

A few weeks ago, The Economist reported on the ever-rising price of agricultural commodities, including rice. What's good news for farmers is bad news for urban consumers and since cash crop farmers need to eat, they get hurt by higher food prices as well.

I've been spending some time in beautiful Ecuador visiting friends and picked up a copy of the local paper. Rising food prices are a major topic here as well, but the government's response is a little unusual: they simply banned rice exports.

Now, I could understand that if there were a real risk of people going hungry: Ireland famously continued exporting potatoes to England during the 'Potato Famine' of 1847. But since most of the poorest people in Ecuador are farmers, stopping them from selling their rice at the best price they can get seems like a bad idea.

On the other hand, banning rice exports will not lead to rice shortages in the short term, whereas price controls would, because any sensible farmer would just sell them abroad. So maybe it's the lesser of two evils?

Maybe, but beware the unintended consequences: Colombia, which used to import rice from Ecuador, has now imposed a ban on imports of other agricultural commodities! The same newspaper showed a farmer throwing lovely ripe mangos in a ditch, because Ecuador now has a mango glut. Simultaneous food shortages and other kinds of food going to waste? That's precisely what happens if you stop farmers from trading.

A refugee from New York in Liberia

2007-12-21T09:27:00.001Z

Would you ever send your son to a warzone to escape a housing project? One Liberian mother did. This fascinating piece comes from the New York Times.

Testing the Growth Diagnostics approach

2007-12-18T23:03:00.002Z

Bolivia is the poorest country in South America - its income per capita is not much above Ghana. A revolution, radical land reform, decades of foreign aid and structural adjustment have not changed this basic fact. The only dynamic parts of the economy are the natural gas and soy beans produced in the eastern plains, far from where most Bolivians live.

Bolivia is therefore a prime candidate for a Growth Diagnostic as proposed by Ricardo Hausmann, Dani Rodrik and Andres Velasco. Growth Diagnostics are appealing to policymakers for two reasons. One, they are empirically grounded, without sacrificing theoretical rigour. Two, they combine hard data with case studies - which makes life more interesting for the grad students as well!

I joined David Elmaleh, Naomi Krieger and Molly Kinder to read dozens of reports, run regressions and crank out charts. We soon became dissatisfied with the standard explanations for Bolivia's poor growth. If low foreign investment was the problem, why didn't Bolivia boom in the 1990s? If the people of the highlands were poor because they were excluded from power, why didn't the Bolivian revolution of 1952 or the election of President Evo Morales change that? If the IMF and World Bank were the problem, why didn't the massive debt cancellation of 2002-03 help?

The key to Growth Diagnostics is that you can't do everything at once. The key is to identify the binding constraint to growth - the market or government failure that is the most important cause of the many problems you observe. Our very tentative conclusion, based on the best data we could find, was that Bolivia is stuck in an informality trap. Small businesses can't get credit to grow or increase their productivity, because they are in the informal sector. But when they try to join the formal sector, they find the taxes, regulations and red tape they have to endure put them at a competitive disadvantage.

Meanwhile, gas and agricultural exports are booming, but those sectors don't employ many people and the profits are captured by multinationals and large landowners. The government of President Morales is trying to tax them to fund welfare and pensions, but the (relatively) productive eastern provinces have responded by declaring autonomy and threatening to dissolve the state.

In this tense environment, what could the Bolivian government do to promote growth and poverty reduction? Nothing, say the eastern provinces - we know what to do, let us get on with it! We humbly suggest another approach: by tackling bank monopolies, cutting red tape and reducing the legal burden on small businesses, the government will be helping its core constituency, the indigenous people of the highlands, to break out of poverty. Neighbouring countries like Chile, Peru and Brazil have realized that being pro-poor doesn't mean you have to be anti-business.

We hope that the government and provinces will be able to resolve the constitutional crisis and give growth a chance. The prospects are good: after all, everyone from Argentina to Venezuela wants to help Bolivia. Why not get the World Bank to build roads and Hugo Chavez supply free heating oil to the (freezing) altiplano?

Institutions matter. Especially in football

2007-11-22T05:32:00.001Z

My favourite economic cliche is any paper entitled "xxx matters". Governance, institutions, latitude, size - you name it, it's statistically significant in someone's regression.

Last weekend I watched Harvard thrash Yale in New Haven. I was surprised at our victory, but even more surprised at the good humour and complete absence of violence in the crowd before, during or after the game. If you have ever been to, or near to, a football (soccer) match in Europe, you will know what I mean. Any politician who laments the culture of violence in modern society should try putting on a Harvard shirt and walking through New Haven an hour after defeating the local team. We didn't get so much as a whistle from the locals.

So why are otherwise peaceful people like the Brits or Italians so eager to start a fight when it comes to football, while it's a family day out in New England? It can't be a greater police presence: they have them in Europe to. It can't be lack of alcohol: that was freely available at the pre-match tailgate. It can't be weapons: the US in general, and New Haven in particular, has lots of them. Maybe the huge geographic mobility of US society holds back the local pride and partisanship you find elsewhere. But when the Red Sox won the World Series a few weeks ago, I detected a fair bit of local pride at their victory parade.

I think there is a cultural norm at work here: football is a game for the family, so crowd violence is unacceptable. How this norm evolved is anyone's guess, but once it's there it's very hard to change. British police trying to deal with hooliganism in the 1980s had the same problem in reverse: the culture of violence had become an institution, an informally accepted way of doing things.

Social norms underpin economic behaviour wherever you look. Consider fare evasion on the subway. In London or New York, you have to pass through a fare barrier to get to the platform. In Paris, the barriers are as large and heavy as doors, to stop people from vaulting them. In law-abiding Vienna, there are ticket-stamping machines but no barriers. The city transport authority decided it would be cheaper to employ roving inspectors levying on-the-spot fines than build fare barriers in every station. Why do buses travel faster in Berlin than in Boston? Because passengers can use any of the doors to get on the bus, not just one - the driver takes it on trust that they have a ticket.

On a more serious level, business and government is a lot cheaper in high-trust societies. Imagine how much it would cost to send all your business mail by DHL or FedEx because the postal service is insecure. Try keeping a stash of $5 top-up cards in the petty cash box and giving them to your staff one at a time to make phone calls, because you can't get a telephone credit account. Or if you're a retailer, how about counting the inventory in your store at the end of every day to make sure nobody is stealing it?

Institutions matter, in sport as in everything else - we're just a little late to realize it.

Will your exports make you rich?

2007-11-13T17:24:00.000Z

Rich countries make rich-country things. Poor countries make poor-country things. According to the theorem of comparative advantage, you should specialize in whatever you have relatively low costs - but we also know that over time, countries grow rich by changing and upgrading what they produce.

But why have some developing countries grown into diversified, mature economies whereas much of Africa is still stuck growing or mining a few basic commodities?

This answer comes from Cesar Hidalgo, Bailey Klinger, Laszlo Barabasi and Ricardo Hausmann, who just got it published in Science (or see here for the full version):This diagram shows the 'product space'. Imagine international trade as a forest, with individual products making up the trees. Firms are like monkeys swinging through the trees. The closer the trees are together, the easier it is for firms to move from one tree to another. Thus firms and countries specializing in products in ‘denser’ areas of the forest can diversify more easily. Countries tend to move into the centre over the time - but the denser the part of the forest where they start, the quicker they will get there.

Where does Liberia fit within this product space? It turns out that most of Liberia’s exports are within the sparsest part of the forest: rubber, cocoa, iron ore and palm oil all have extremely poor links to other products. See where tropical agriculture is in the diagram above . . . and compare it with garments, say, or vehicles and machinery.

The implication of this is that export diversification will not be easy in Liberia, because the economy has specialized in products that are very remote from other products. It takes 7 years for a rubber or cocoa tree to become economically useful. Rubber or cocoa plantations are therefore a huge ‘sunk cost’ and difficult to change. On the other hand, neighbouring countries like Ghana and Nigeria show the perils of trying to develop industries in which you don't have a comparative advantage. Maybe fruit, vegetables and low-tech food processing (canning, juicing) are a way forward.

If you go to the authors' website, you can download the map and the data for your country. A blinding insight or another example of economists restating the obvious in a more complicated way?

Back on the farm: the World Bank's view on agriculture

2007-10-31T12:17:00.000Z

Last week the World Bank published its 2008 'World Development Report'. This weighty report, whose colour graphics alone must cost a small country's GDP to produce, sums up 50 years of experience in supporting (and not supporting) agriculture with a simple message:

"Agriculture is good for growth and even better for poverty reduction - but it is only effective with the right public policies and in many cases aid."

This may not seem particularly surprising, but it's welcome nonetheless. Since the report was commissioned under former President Wolfensohn, it will be interesting to see if Robert Zoellick (during whose time as US Trade Representative the US increased its huge, trade-distorting subsidies to cotton growers) follows up the rhetoric with loan dollars.

The report is at the World Bank's site but for a quick summary, see this from the New York Times.

A brief postscript: the costs of the slave trade

2007-09-13T16:17:00.000+01:00

By coincidence Professor Dani Rodrik has been thinking about the slave trade as well, needless to say in a more rigorous, dispassionate way than I have . . . see this post on how the countries that exported the most slaves are now the poorest in Africa, even though they were probably richer before.

On a personal note, I'm back in the USA, trying to remember the taste of fried fish with cassava greens and the warm, welcome rain of Liberia, so unlike the cold, hostile showers of Massachusetts . . . I have to confess that I have been looking at travel planning websites to see if I can afford a trip to Monrovia in December to do some more work on agriculture. The answer is probably 'no' but if anyone knows of any great fare deals between the US or London and Liberia around then, please let me know!

Four stations on the slave trade

2007-08-31T14:39:00.000+01:00

Last week I travelled from Monrovia to Dakar, Senegal and then to Brussels and Lisbon. This unusually indirect itinerary (the product of indecision and obscure ticket conditions) has made me think about something that rarely occupies a white European: slavery.

We spent two months living in the Baptist Compound, Congo Town: named after the ‘Congos’, as the freed slaves who founded Liberia were called. Monrovia was built by them, funded by their guilty ex-masters and grew rich on enslaving the locals in their turn. The Americans who settled in Liberia created plantations whose rubber still contributes half their country’s exports. Only one of Liberia’s presidents was not Liberian-American: Samuel Doe, a semi-illiterate brute whose vindictive rule so incensed the elite that they helped fund his removal. He was succeeded by Charles Taylor, a pale-skinned, white-suited Baptist preacher. Taylor’s concrete palace, freshly painted, is right opposite the Baptist Compound.

I flew to Dakar on Slok Air. Its clapped-out 737 performs the West African stopping service the Royal Mail steamers used to. We stopped at Freetown to take on passengers. Across the river, a peak shone in the late afternoon sun. You could make out scattered houses on it: this is Hill Station, where the ‘Krios’ who founded Sierra Leone built their bungalows well above the malaria-infested ‘native settlement’ down below. The Krios were freed slaves too, but after 50 years of self-government the British decided they were getting ‘uppety’ and took over on the pretext that the Krios were excluding the natives of Sierra Leone from power. You guessed the next bit: a century of resentment and rivalry, boiling over in a bloody civil war . . .

Senegal is a complete contrast. It is the model of a self-confident Africa: it celebrates its French administration and bread as much as its Islamic heritage and vibrant music. A little offshore of booming Dakar, the Ile de Goree welcomes visitors. I went on Sunday, along with thousands of Senegalese, to delight in the colonial architecture. One of the prettiest buildings is called ‘La Maison des Esclaves’. Each room has a label: ‘Hommes’, ‘Femmes’, ‘Jeunes filles’ and so on. An arched door leads straight into the Atlantic ocean. Through this door, it is estimated that some tens of thousands of slaves were packed into waiting ships. There were many such houses on Goree, which was so lucrative that it changed hands repeatedly between 1650 and 1815, captured and recaptured by Dutch, French and British navies. Just like the Portugese, Arabs, Germans and British fought over Zanzibar.

What the guide on Goree didn’t tell us was that Mauritania, 300km to the north, tolerated slavery until 1981. Indeed, while I was in Senegal, the parliament of Mauritania voted to make slave trafficking a crime, so as to be able to prosecute it (see this article in Jeune Afrique, or the BBC for background). Mauritania’s democratically elected president – its first since 1960 – had made the issue a central pillar in his campaign.

I flew to Belgium on SN Brussels, a fading relic of empire whose Airbuses are still the best link to Kinshasa and Kigali. Belgium was the last European country to get into slavery. To make up for lost time, they kept the slaves right in the Congo where they came from. The pompous palaces of Brussels were paid for with Congolese copper and diamonds. In Tervuren, near the airport, King Leopold built the ‘Royal Museum of Central Africa’. It is still open, but when I visited in 2004, the ivory tusks and photos of happy natives dancing were being replaced with maps and mementoes of slaughter: for when Mr Kurtz died, he took an estimated 5 million Congolese with him.

Finally to Lisbon, from where Europeans first set sail for Africa and the Carribbean. Portugal was the first country into Africa and the last out: Angola and Mozambique didn’t attain their independence until 1974. The picture below shows the Cap Sao Vicente, the most south-westerly point in Europe. On the cape is an old fort: a naval college built by Prince Henry the Navigator. Its style reminded me of a fort in Mombasa, on the Kenyan coast some 5,000km away: not surprisingly, since that too was built by the Portugese. When Portugal abandoned East Africa in the 16th century, the Arab traders took it over.

What, if anything, links these four stations?

First, it turns out that the slave trade was the largest mass movement of people in human history. Some 12-15 million Africans were shipped across the Atlantic between 1500 and 1900. 5 million went to Brazil and another 5 million to the Carribbean – mostly Cuba and Hispaniola. Less than half a million ended up in the USA. In countries like Jamaica, Haiti or Guyana, Africans essentially replaced the native population. Yet it is estimated that FOUR OUT OF FIVE captured slaves died before they got across the Atlantic – half of them didn’t even make it onto the ship. This puts the total captured at something closer to 25 million. To that add millions sent through Zanzibar to the Arab world or bought and sold in countries like Mauritania. (See here for details on the Atlantic slave trade or here for the Arab - though they were really part of the same phenomenon).

Second, nobody escapes from blame. All maritime powers were involved in the slave trade and many African rulers connived in it. Christian preachers like William Wilberforce and David Livingstone fought against slavery, but the slave traders of Lisbon, La Rochelle and Liverpool were Christian too. The great Arab historian Ibn Khaldun, writing in the 14th century, described Africans as “the only race who willingly accept slavery, owing to their low human state and closeness to animals”.

Third, slavery doesn’t end with being freed. The sad stories of the three republics founded by freed slaves – Haiti, Sierra Leone and Liberia – should make that clear. Haiti spent 100 years trying to pay ‘damages’ to France and the next 100 years oscillating between dictatorship and chaos. Haiti is the poorest country in the Americas and Sierra Leone the poorest country in the world. In the early 20th century, Liberia exported slaves to the Spanish colony of Fernando Po (now Equatorial Guinea) to work on the cocoa plantations. The League of Nations censured it for this in 1929 and when President William Barclay came to power in 1931 he largely ended the practice.

Growing up in Central Europe in the 1990s, my history teachers focused on the twin horrors of the 20th century: the Holocaust and the Gulag. The slave trade deserves similar attention: not just in Africa or America, but in Europe and Arabia as well.

The lighter side of Liberia

2007-08-21T21:23:00.001+01:00

Expatriates and visitors to Liberia often become disillusioned: by the persistence of poverty and slow pace of change. Such sentiments are common, even predictable, in Africa and even more so here. As the government and UN agencies begin to count, survey and enumerate their people, the grim realities of life are crystallized from anecdotes into statistics. Like a road accident victim recently admitted to intensive care, completing the diagnosis in its full horror is an essential step to recovery.

Our small Team Liberia has had its moments of disillusion around our dinner table in the Baptist Compound, but we have tried to keep our frustrations to ourselves. Most Liberians I know have little time for them. Our friends, colleagues and casual acquaintances – not a representative sample I know – are always ready to share a joke about "this is Liberia" and display a healthy skepticism of government and other authorities; but they are also cautiously optimistic. Anyone asking "How can you live like this?" would deserve a terse reply: "You should have seen it 5 years ago."

Government posters tell us "the process is on", but actions speak louder than words. Actions like those of our driver Ernest, pictured above with his family, who is building a house complete with zinc roof (the zinc is very important). Actions like my friends from the Ministry and CARI, some of whom are pictured below, who are preparing to leave Monrovia and reclaim their old offices in Suakoko where 15 years ago Charles Taylor trained his boys. Actions like those of Sampson, a friend from Buchanan who is travelling through villages that were depopulated only a few years ago, selling anti-malarials and antibiotics that might just keep a few more children alive.

The confidence of Liberians goes beyond their deep religious faith. I have not encountered the fatalism that I found so prevalent in (peaceful, stable) Tanzania. Nor have I met anyone who wanted to emigrate like in (peaceful, stable) Cuba. Many Liberians have emigrated or fled in the past and now want to stay put. I am writing this in Senegal, along with Nigeria one of the main sources of the thousands of young Africans who die from drowning or dehydration trying to get to Europe overland. I have never heard of a Liberian taking this route.

It has been a tremendous privilege to witness the rebirth of a nation at close quarters. I hope that future visitors to Liberia will be able to see beyond the grim statistics and experience the lighter side.

Management or policy?

2007-08-11T10:52:00.000+01:00

Thank you to various readers for posting comments: I have been pleasantly surprised at your level of interest in what a bunch of graduate students are trying to do in one of the world's smallest, poorest countries!

On the question of improved rice varieties, Africa got left behind in the Green Revolution but is catching up. I share an office with the Central Agricultural Research Institute (CARI), a highly dedicated, enthusiastic bunch of people who have worked in agriculture all over Africa. They are introducing improved varieties of rice, cassava and yams that have been developed by researchers in Nigeria and Benin. These are not the super high-yielding varieties found in Asia, as those require heavy fertiliser and pesticide use. But they have been bred for African conditions and when grown in swamps yield 2-3 times as much as the traditional 'red rice'. When Zach and I visited CARI's research station, we were excited to see how much they are doing - especially as UN soldiers from Bangladesh occupy most of their site (below)!

One reader mentioned Professor Dani Rodrik's work. Let me clarify: none of us have been able to do anything like growth diagnostics, or formulate a growth strategy - even if we knew how, Liberia doesn't have the data. But I will hazard a guess at what the binding constraint to Liberia's development is: not tariffs or taxes or prices or interest rates, but management.

The Center for Global Development's Peter Timmer lists the policies that are required for agriculture to grow. There are four main ones: One, a stable macroeconomic environment. Two, open trade policy (including a competitive exchange rate). Three, publicly funded agricultural research - like what my friends at CARI are doing. Four, rural roads, so that goods can get to market. Get these right and all else follows. We have the first three of these and the government is doing what it can to build roads. The World Bank has allocated $30m to repair the 500km of paved highways and regrade rural feeder roads, but only $3m has been spent. This isn't a problem of policy - it's a problem of management.

In West Africa, the rainy season is so long and intense that you can't build roads for 6 months of the year - they would wash away before being sealed. Last year, the Bank missed the dry season window because they couldn't procure the equipment in time. There were essentially no mechanical road graders or surfacers in Liberia, so the Ministry of Public Works arranged to buy some in Nigeria. By the time they finished their tenders, approved the funds and cleared the shipment from Lagos, the rains had started. Last week, President Sirleaf called an emergency cabinet meeting to get updates on 'dry season deliverables' - all the projects the ministries must implement before April 2008. They are already a month late, because we only just got our budget (click here for Molly's gripping account of that sad tale).

Liberia has excellent macroeconomic policies, a budget surplus, a stable currency and rapidly improving security. It has always been West Africa's most trade-friendly country (ever noticed that half of Europe's shipping fleet is registered here?). Donors are pouring money in and supplying hundreds of technical experts and policy advisers, many of them returning Liberians. The problem is: how do you build hundreds of schools, clinics, offices and roads, all at the same time? How do you monitor what teachers and community nurses are doing if the only way to reach them is by helicopter? How do you motivate people who are paid $30 a month and have not been challenged, praised or coached for 25 years?

Management is two things: people and processes. There are very few skilled people in the government or private sector; many of the best are with the UN or NGOs, and the rest are under-used and under-paid. The Minister of Agriculture is doing a good job of identifying who his best people are and deploying them where they are most useful - but all of them need coaching and development and we need many more them. Processes are what I have been doing: how do you write a budget? how do you hire people? how do you buy procure pickups quickly and cheaply? how do you run a meeting? how do you schedule diaries? how do you do an overtime calculation in 10 minutes in Excel that would take 2 days to do by hand?

Apart from the excitement of policy work, the most useful things we have done this summer are really, really basic things. Taking minutes and following up at meetings. Sharing policies between ministries. Creating a standard budget template. Inviting the right people a training workshop. Creating a vehicle register. It doesn't sound like a lot, but if you multiplied this a few thousand times, you would be getting somewhere. How to do that, and finding the people to do it, is a management problem.

Let's start at the very beginning

2007-08-05T20:30:00.000+01:00

The picture above shows some of the children of the village of Nyaluai, Gbarpolu County, Liberia. Nyaluai is 150km north of Monrovia. To get there, you drive 2 hours on a paved, but potholed road and then 2 hours on a dirt road which peters out into little more than a track by the time it reaches the St Paul River. The final stage in the journey is to cross the river by dugout canoe and then a ten-minute walk to the village. We were met by the village elders, who dispatched runners to neighbouring villages to invite more elders. The women and children were on their farms and came back at nightfall to find some curious white-skinned giants who were inexplicably excited about taking pictures with them!

Molly and I are tall: but more importantly, these kids are short. They grew up in refugee camps a few days' walk from the village, near the main road where the UN soldiers protected them against the fighters roaming the bush. Food was scarce in the camps, because the aid they were sent was diverted and sold before it reached them. Vitamin A deficiency and anaemia are endemic, kwashiorkor (swollen belly from protein deficiency) universal. 40% of Liberia's population are substantially, 80% partly malnourished. As the camps have closed and people move back to their villages, they are able to grow their own food again: but even if there were enough, kids can't live on rice alone. They don't, our guides assured us. Sometimes, they get greens and palm oil to mix with the rice. Once a week if you're lucky, once a month if not, they get some stringy chicken or bony fish.

Nyaluai has always been poor: the superficial boom years of urban Liberia passed it by. The difference between the 1980s and now is this: then, there was a rice mill in a neighbouring village, so the women didn't have to pound rice all afternoon. There was a district health post a few hours walk away, so childhood bouts of malaria were less likely to be fatal. Then, a few children got scholarships to attend a town school. Two of them ended up at university: Moses and Henry, founders of an NGO that aims to help their home region improve its living conditions, our friends and guides. When the war broke out in 1989, these services collapsed. When the village was abandoned in 1993, the rice fields were swallowed up by the bush. Charles Taylor's rebels burnt the huts - how does a mud hut burn?

Now, Nyaluai is at the most base level of economic life: it is literally subsisting. After 12 years in the camp, the villagers returned in 2005 to rebuild their huts and employ the tools and seeds the UN gave them - distributed by my Ministry - to restart agriculture. But the most basic level of economic life - growing slightly less food than you need to survive, but surviving anyway - is not the most basic level of human life. For the people of the village, things are looking up. They don't have to rely on NGOs for food handouts any more. They are back in their own homes, which they have rebuilt with thatched roofs because zinc roofs cost $100. The war is over: the children with guns have left the bush. They sleep well at night. I slept on a straw mat on the mud veranda of a mud hut. With the full moon, and without the whirring of a generator or distant sound of traffic, I slept better than I ever do in the city.

What motivates, what drives these people who have suffered so much to return to a life of such incessant toil? The women of the village had arms like steel pistons: they spend all day either planting rice, or weeding it, or pounding it to separate the husk from the grain and cook it. Their daughters fetch water and mind the babies. The men's work is less regular, but gruelling: every year, they have to clear the bush to create new fields. Shifting cultivation means: you spend two months thinning the brush, a month felling the trees and another month burning the stumps and grubbing the small roots. The big roots stay in the ground, because even the strongest man cannot pull them out. Then you plant rice and get a harvest, if the birds and groundhogs don't eat it all. The following year, replant and harvest again. Then, you move on and let the field lie fallow for EIGHT YEARS. Small wonder that the end of the war also marks the end of a 15-year reprieve for Liberia's dwindling rainforest.

Yet the villagers do this, because the alternative was worse. Living in refugee camps, or the hellhole slums of the capital, they were cut off from their land and their livelihoods. The children of the war may scratch a living hawking peanuts and cassette tapes, but the elders and farmers have reclaimed their land, their poverty and their dignity. They were not proud of their living conditions, but they were proud - so they told us - of their traditions and their resilient spirit. They were proud to present us with a few chickens, which we gave our driver, Ernest, to thank him for taking us across flooded tracks and the raging rivers to the remotest village any of us have ever been. We brought them a sack of rice, a sack of salt and a box of soap. We gave them 50kg of rice, which will enable them too save more of this year's harvest for replanting. This is the grim essence of economic growth: starve yourself this year and if you survive, there will be more next year.

They have plans: they held a 2-hour village meeting to talk about them and exchange gifts. The chief elder told us about his dream of getting a rural health post like he used to run. The women asked us whether we could use our contacts in the Ministry of Health to get them some training on safe birthing practices. (More Liberian women die in childbirth - often after days of agony - than almost any other country in the world). Moses and Henry briefed us on their scheme to develop one of the swamps for rice cultivation. They asked me if I could get them any help from the Ministry of Agriculture. No, I said: the Ministry can't come where there are no roads. But if you cultivate a swamp by working together and grow enough rice to sell it on the market, they will want to know how you did it.

As we drove home, we spent hours discussing with Moses and Henry what we had learnt. We plan to buy tools and seed for them to develop the swamp, as well as vegetable seed to diversify the diet. Nobody asked us for a handout: this is an investment to feed those kids and maybe a small surplus to buy drugs and send a few of them to school. We are also looking for a small, manually operated rice mill. Any ideas?

Nyaluai is the poorest place we had ever been, but it is far from hopeless. There are thousands of villages like it that are rebuilding, working all hours to try to reclaim their old life and maybe one day improve it. Development happens one rice field, one clinic, one child at a time, but it happens. The government's slogan says it all: the process is on.

A tribute to two Team Liberias

2007-08-02T14:41:00.002+01:00

Last week, Liberia celebrated its 160th birthday, making it the second-oldest state in Africa after Ethiopia. We were fortunate enough to be invited to the official ceremony in Buchanan, some 150km south-east of Monrovia. It was a memorable occasion: glamorous dresses, over-elaborate protocol, a fiery speech by Kimmie Weeks, a youth activist originally from Liberia and an inspiring one from the President, whose calm confidence never fails to impress me. Madam President thrilled - and humbled - us by mentioning in one passage "people from all over the world who are flocking to help us, including interns from Harvard University in this very room".

Working for the Liberian government has indeed been a humbling experience: it has shown me how a few dedicated leaders, like the President and her key ministers, can turn their country around. It has also reminded me, if I needed reminding, of my own inadequacy in the face of such enormous challenges. Finally, it has confirmed my belief in the power of teams - of two teams in particular.

The first Team Liberia is on the picture above: the family of interns. It has been great fun living with the family, but it has also been a privilege to learn from them. A few highlights: watching Yue Man pilot a multi-million-dollar grant application through the Ministry of Health. Emily's perfectly judged speech to the elders of the poorest village I have ever seen. Molly's inextinguishable enthusiasm for late nights in the Finance Ministry hothouse. Thank you Zach and Yesenia for late-night chats and encouragement, Jesse for opening all doors to us, Jeff for being the voice of reason and Colleen for surpassing Graham Greene in charm, talent and tolerance. (Hopefully your essays on Liberia will surpass his sales figures too).

The second and immeasurably greater Team Liberia are the dedicated people we have worked with in government. The President is one of many Liberians who have given up high-flying careers in the USA to go home and rebuild their country. Many have followed her personal call. Even more heroic, though perhaps less celebrated, are the ordinary Liberians who lived here throughout the war and refused to give up hope. Molly has a fantastic post on this, to which I can only add: if the returning diaspora and the survivors can pull together, this country will go far.

To the family, who leave this week: thank you and safe travels. To our generous friends and hosts: you have inspired me. This, too, is Liberia.

Systems or grassroots - which one are you?

2007-07-24T17:59:00.000+01:00

5 years ago, I spent the summer in Tanzania working in a children’s home. I played with the kids, taught some basic English and tried to help the founder with her finances and medium-term strategy. The beneficiaries were the 15 children living in the home. We volunteers provided labour, but above all money so that LOHADA (http://www.lohada.org/) was able to move to a bigger home in 2004 and last year opened a primary school for 60 children. Walking to work every day, I breathed the fresh air of the African highlands and admired the sugarcone summit of Mount Kilimanjaro.

This summer, I am in an air conditioned office in Monrovia. I travel to the Ministry of Agriculture every day in the family van. The workers on the picture are the closest I have got to Liberian farmers. The direct beneficiaries of my work are bureaucrats, civil servants, members of the tiny Liberian middle class. So far, so unsatisfying.

I have had ample time this summer to read reports from friends ‘in the field’ – from Colombia to India – and I envy their ability to see the impact of what they do every day. Their stories bring back my Tanzanian experience: the fun, but also the frustration I felt at only being able to help 15 children. Without any relevant education or experience, I felt like a complete amateur, powerless and confused. So one evening I typed “Master’s Degree International Development” into Yahoo (we didn’t use Google back then). The first link took me to the Kennedy School website and the MPAID program. 3 weeks later, back in Europe, I applied. It took a few years to raise the money, but they let me in eventually and I am now half way to becoming a technocrat.

I don’t mean to suggest that working at a systems level and at the grassroots are mutually exclusive: but there seems to be a difference in ethos and lifestyle. In Tanzania, I remember waving at UN officials in white LandCruisers, with 2 little kids on each arm. Now I hurry past the kids, wearing a suit, clutching a PowerPoint deck on “Risk management”. If my project goes well, the Ministry will qualify for more donor funding and spend it wisely. Liberian farmers will be more productive and citydwellers will eat better. It’s just hard to see the connection sometimes.

Maybe I should buy a farm, so I could try out high-yielding cassava varieties and swampland irrigation for myself. Otherwise, I am looking for people and organizations who manage to ‘bridge the gap’: people who start small and go huge, people who change the system so that others can change their lives. Please give me some ideas. Are you bridging the gap?

It's all about rice

2007-07-16T14:57:00.001+01:00

The Law of Demand is one of the most basic rules in economics: when the price of something goes up, demand goes down. Professor Nolan Miller, my tutor in microeconomics at the Kennedy School, has just found the first exception to this rule: rice in China. The paper is at http://ksgnotes1.harvard.edu/Research/wpaper.nsf/rwp/RWP07-030.

It turns out that some people in Hunan, Southern China, spend so much of their limited income on rice that if you raise the price, they consume MORE rice. This is because raising the price of rice, in effect, reduces their income. The only way to avoid the gnawing pain of an empty stomach is to spend less on pork and vegetables, and fill up on rice instead.

Economists call this 'Giffen behaviour', after a Victorian economist called Robert Giffen who asserted that poor people in Britain ate more bread when the price of bread went up. Nobody has ever verified that example, or found any other, until now. Professors Miller and Jensen comment on the irony that economists have spent the best part of a century convincing themselves that Giffen behaviour was a theoretical curiosum, only to find it in the staple crop of the world's most populous nation.

Interestingly, the result only holds for rice, among very poor urban households in southern China. Rural households grow their own rice, so a higher price is good for them. In northern China, a similar relationship holds for wheat, but it is weaker for two reasons. One, wheat can be consumed in different forms: as flour, or processed into buns and noodles. Two, rice is relatively cheaper in northern China than wheat is in the south, so a substitute is more readily available.

My own experience in China makes me think that this phenomenon won't last forever: transport costs are falling all the time, the poor in China are getting richer and regional differences in taste are less pronounced than they used to be. I was able to eat noodles in the south for only 1 or 2 yuan more than they cost in the north.

Sadly, I don't have the data to investigate this relationship for Liberia. Liberia is several decades behind China in development: while even the most isolated Chinese village has a regular bus service, many counties in Liberia are virtually inaccessible at this time of year. Rice production is only half of what it was in 1990, when the war began. Some farmers have switched to growing cassava, others are so hungry that they eat the rice seed the UN donates them instead of planting it. But it is in the city that rice is - pardon the mixed metaphor - a political hot potato.

In 1979, increases in the price of rice (mostly imported from the USA) led to riots in Monrovia. The government tried to put them down, using the army. But a 28-year-old sergeant, Samuel Doe, decided to put the government down instead. His coup ushered in 3 decades of bad government and eventually civil war. Small wonder that the new government has put growing more rice at the top of its agenda. But let the Chinese have the last word:

"If you are planning for a year, sow rice; if you are planning for a decade, plant trees; if you are planning for a lifetime, educate people."

Why are Liberian farmers so poor?

2007-07-06T18:33:00.000+01:00

Working in Africa is a good way to see economics in action. The need to make a living is so urgent, so insistent in a country like Liberia that people are alert to every possible opportunity to make money. If they don't take an opportunity, it's not because they are lacking initiative or entrepreneurial talent: something is stopping them!

These three questions (thank you Drew Kinder!) that cut to the heart of the matter:

If Liberia is so fertile, why can't its farmers even feed themselves?

I have been puzzling over this since I got here. Sure, during the civil war it was too dangerous to live in the country, so farmers fled to the city and lived on handouts, but now they back on their farms, so what stops them? Do the economic tools I have been imbibing for 10 years yield any answers? I'll try:

Technology: most farmers here are using production techniques that went out in Europe sometime between 1200 and 1400, namely, shifting cultivation with hand tools. They are too small and poor to afford to buy better tools, so nobody bothers selling them.
Thin markets: the roads are so poor that many crops will rot before they get to market. This is a classic poverty trap, otherwise known as a Catch-22: there are too few markets to make it worth producing a surplus, but because nobody produces a surplus there is nothing to sell on the market.
Inputs: there was never a green revolution for Africa. Liberian farmers get about 1 tonne of rice per hectare. Hybrid seeds in India or China yield 7 or 8 times as much. You need to use seeds adapted to local soil conditions, but Liberia (like most of Africa) was too small and poor to ever develop them.
Social capital: Most Liberians grow upland rice. They could more than double their yield by growing lowland rice in swamps, using irrigation. But it takes a whole village working for several weeks to prepare a swamp for cultivation. Decades of civil war and long-standing inequalities (especially the role of women) mean that villagers don't trust each other enough to share effort like this.
Risk: rice and cassava are low-value crops, but they are low risk. Pineapple and palm nut are high-value, but high risk. Would you rather give your kids one meal a day, or shoot for three and end up with none? With no functioning insurance or credit market, I would go for the safe bet.

I hear Liberia exports a lot of rubber. Can't it just grow more?

Yes, absolutely. Liberian soil and rainfall conditions are perfect for rubber trees and labour is cheaper than Brazil or Malaysia, the main competitors, so rubber should be the perfect cash crop.

Two problems, though: One, it takes at least 5 years for a rubber tree to start producing. We visited the Firestone plantation last weekend. It was the only plantation that kept producing during the war and even there, many trees were damaged and rubber workers shot, beaten up, etc. So while people are busy replanting rubber trees, they will take several years to grow to maturity.

Two, Liberia only exports raw rubber. It gets made into tires when it reaches Ohio. Firestone told us last weekend that this was because the local market for tires was too small. However, the Chinese are calling their bluff: they are building a rubber processing plant about 60km north-east of Monrovia, in the heart of rubber country. This should create some jobs (better than tapping trees) and give Liberia a new export. Funny how it takes the Chinese to teach American capitalists about capitalism . . .

Why do we need to wait for the government? What can private enterprise do?

Dani Rodrik has some interesting things to say on this in his blog. Ironically, the guys in my office (West African farmers, but more economically literate than most PhDs!) just had the same debate: should the government try to intervene? Does it 'crowd out' private enterprise by doing so?

Most entrepreneurs in Liberia are micro-scale: literally, women selling peanuts. They are constrained by the same market failures as the farmers.

There is a business class in Monrovia: mostly Lebanese. Like Lebanese everywhere, they monopolise trade because they have the capital and international network. We gladly pay them $10 to import a jar of peanut butter. So why should they bother trying to score a few papaya from farmers on the 1% chance that you can get WholeFoods to buy them?

Liberia is stable as long as the UN is here, but after that all bets are off - so the supermarket buyers who flock to Kenya and Zambia won't be coming here.

As with so many things in Liberia, a lot of hopes rest on the returning Liberian diaspora: the educated exiles who spent the war in the USA and are now coming home in droves to develop their country. Many of them are in the government, but one or two are interested in commercial farming. Let's hope we find a lot more.

Yesterday, our Ministry arranged a 'cassava workshop'. They got an international cassava expert from Nigeria to show us all the delicious things you can make from cassava - which is an even more secure than rice. That is the sort of thing the government can do well: make the connections and set an example with a few smart initiatives. Now let's see if the Chinese can sell those papaya to WholeFoods.

Sheltering from the rain

2007-07-06T10:35:00.000+01:00

I'm spending the summer in Liberia, West Africa, working for the government as an intern. The connection is through my university: a number of Liberians have been educated at the Kennedy School of Government, including the new President, Ellen Johnson Sirleaf. Seven of us (me, Molly, Emily, Zach, Yesenia, Yue Man and Jesse) were sufficiently curious to follow her call to do some government work over the summer. We are joining the large Liberian diaspora that has returned to rebuild the country, at the President's personal invitation.

Liberia is the wettest country in Africa and we are here in the rainy season. The capital, Monrovia, gets 4,000mm of rain annually. (London gets about 800mm, Boston 1,500mm and Manchester maybe 2,000mm.) Last weekend I went into town to have lunch with a friend. 5 seconds after getting out of thecar, the heavens opened. Within 30 seconds, the streets had turned into rivers. I had to borrow his umbrella just to cross the road. Where the drains are blocked, vehicles plow through half a foot of muddy water. Poor sanitation and a complete lack of waste disposal have contributed to Liberia's catastrophic public health: 135 children out of every 1,000 do not live to see their 5th birthday.

I'm working in the Ministry of Agriculture. I am not trying to teach Africans how to grow cassava. Instead, I am helping to develop the budget, financial and administrative systems of the ministry sothat they can spend their money wisely and honestly. This is crucial if we ever want to reduce the 2/3 of the population that is malnourished. The Ministry's budget is currently $3m, i.e., about the same as,say, the X-ray department in your local hospital. The government spent $140m last year, or about the same as your local hospital. Income per head is about $150 a year. The UN and NGO expats who took over most government functions earn more than that in a day.

Still, I have come to respect the 15,000 UN troops and 1,000 or so UN/NGO expat workers, because they provide the security that makes reconstruction possible. Professor Paul Collier, a former World Bank official now at the University of Oxford, has worked out that 50% of African civil wars break out again within 5 years of their supposed end. Liberia has had 4 years of peace and every passing year strengthens the capacity of the Liberian government and the resolve of its people not to let the war break out again. As we recoil from the disaster in Iraq, it's worth remembering that foreign military occupation can sometimes be a good thing. Even if the annual bill for the UN peacekeepers is greater than Liberia's GDP.