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.