Theories of development and the World Bank's land report

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.

Eight ways the world should be spending its money

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.

Rich countries buy up agricultural land: who benefits?

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.

Emily is back in Liberia

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

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.

The market versus the mall

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

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"

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?

Liberia: the process is on

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 . . .

Cocoa processing in West Africa: addendum

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

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 . . .

Two even better articles on the food situation

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

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 . . .

Who wants to develop a low-cost rice mill?

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?

New Rice for Africa

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

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 . . .

Testing the Growth Diagnostics approach

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?

Management or policy?

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

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.

Systems or grassroots - which one are you?

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?