21 December 2007
18 December 2007
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?
22 November 2007
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.
13 November 2007
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?
31 October 2007
"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.
13 September 2007
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!
31 August 2007
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.
21 August 2007
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.
11 August 2007
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.
05 August 2007
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.
02 August 2007
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.
24 July 2007
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?
16 July 2007
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."
06 July 2007
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.
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.