If you liked Jared Diamond’s Guns, Germs, and Steel, you will find a thorough continuation of his analysis in David Landes’ 500-page tome, The Wealth and Poverty of Nations (the title, of course, being reminiscent of Adam Smith’s seminal work).  This book is not specifically about Africa – rather, it recounts the economic history of the entire globe – but it is highly educational in that it takes an historical perspective on modern developmental issues.    

David Landes is a Harvard economic historian who seeks to answer the weighty question, why are some nations rich and others poor?  He explores the underlying reasons behind such inequality, tracing the distribution of wealth back to its historical sources.  Landes explores in depth how today’s advanced western nations (particularly the US and the UK) became rich through an examination of the industrial revolution, technological innovation and invention, geographic exploration, empire and colonialism, politics, war, culture, and religion.  

He explores the economic history of Europe, the US, China, and Japan in great detail, sometimes to the point of boring even the most dedicated of readers.  In his analysis, Landes emphasizes the role of culture and religion in development, sometimes at the risk of sounding biased and racist (particularly when he makes seemingly blanket judgments against Islam and Middle Eastern culture).  He also highlights the limitations of China, pointing out the fact that China discovered many technologies before the West (e.g. the clock and expert sea navigation) but failed to realize their potential and turn them into a benefit for the masses. 

Landes recognizes the limitations of classic trade theory and the frequently underlines the irony of today’s advanced nations advocating free trade when they previously used protectionism to develop.  He points out that comparative advantage is not fixed and “Today’s comparative advantage may not be tomorrow’s.”  Wise words. 

On July 6, 2009, the UK Department for International Development (DFID) released its white paper on international development, entitled “Eliminating World Poverty: Building Our Common Future.”  It presents the UK government’s strategy on poverty reduction and sustainable development. 

The white paper opens with addresses from Gordon Brown, the Prime Minister, and Douglas Alexander, the Secretary of State for International Development.  The report notes the progress that has already been made to lift people out of poverty and asserts DFID’s ongoing commitment to development and the Millennium Development Goals despite the current economic client at home.  

DFID’s philosophy is that aid should be used to fight poverty, not for political and commercial self-interest.  Since the June 17, 2002 International Development Act, which made poverty reduction the focus of DFID, tied aid has been outlawed in the UK.  This is in marked contrast with other leading bilateral donors, such as the United States Agency for International Development (USAID), which ties its aid to the purchase of US goods and services. 

The DFID white paper emphasizes the interdependence of today’s world and the role development plays in international security.  The white paper prioritizes development in fragile and conflict states whose troubles have flowed over into the international arena; witness the pirates in Somalia and poppy-growers in Afghanistan.  This, along with the rapid spread of the financial crisis worldwide, and the common problem of climate change, means that reducing poverty and promoting development is in the UK national interest.  

The main goals as outlined in the white paper include: achieving sustainable growth in the global downturn, with measures to promote free and fair trade; pressing for an equitable global deal on climate change at the upcoming UN Climate Change Conference in Copenhagen in December 2009; focusing new aid on conflict states and investing in security, justice, and peace building; keeping UK promise to reach the UN target of .7% of national income devoted to aid by 2013; increasing money to international institutions such as the UN, subject to performance, and pressing for reform in the World Bank and IMF; and improving transparency and independent evaluation within DFID.  

DFID has also rolled out its new UKaid logo, which is desigend to make it easier for the public to see when and where DFID is spending money on development.  A copy of the white paper can be found at the DFID website. 

Source: DFID White Paper, Overseas Development Institute

Global Witness, a policy and advocacy organization that campaigns to expose and put an end to corrupt exploitation of natural resources and resource-fueled conflict, released a report last week regarding the contribution of foreign companies to the ongoing conflict in North and South Kivu in the eastern region of the Democratic Republic of Congo near the border with Rwanda and Burundi. 

Here a number of minerals are mined, including gold, coltan, and tin ore, from mines that are controlled by armed militias, be they rebel or government soldiers.  Both groups have been accused of using extortion and forced labor in the local communities to extract minerals from the mines in the most primitive fashion.  The proceeds from these activities fund the armed groups and contribute to the ongoing conflict.  

Global Witness identified a number of foreign companies that use suppliers who are trading with warring parties.  By trading in war minerals and thereby providing funding to armed groups, these companies are contributing to the violent conflict.  Two of the companies named are London-based companies: Amalgamated Metals Corporation Plc, which owns Thaisarco, a Thai tin smelter, and Afrimex, which has been accused of making payments to rebel groups and buying minerals mined using forced labor and child labor. 

The UK is the largest bilateral donor to the Democratic Republic of Congo, so there is a certain irony in the fact that DFID is working to reduce armed conflict in the region whilst some British businesses profit from the conflict.  The situation in Congo is a good example of the so-called “resource curse,” whereby developing countries with an abundance of high-value natural resources (particularly oil and minerals) tend to have slower economic growth and a higher likelihood of armed conflict.  

Rather than engaging in productive economic activities and having to depend on their citizens for tax income, resource-rich states lose accountability and become rent-seeking societies, with rival groups competing to gain access to the resource rents.  Efforts have been made in recent years to counteract this process from the outside by instituting sanctions against certain commodities originating from conflict zones, most notably the Kimberly Process established in 2003 to regulate the diamond market and stem the flow of so-called “blood diamonds” out of the likes of Angola.  

Democracy is taking a downward slide in Niger, a landlocked Saharan country with a population of 13 million.  Niger’s president, Mamadou Tandja, is 71 years old and has been president since 1999, when he was first elected; he was peacefully re-elected five years later in 2004.  The Nigerien Constitution has a legal limit of two terms for the president. 

However, Tandja is seeking to change this, to the chagrin of the Nigerien people.  Tandja has proposed a referendum on August 4^th for the people to vote on his proposed third term in office.  The referendum was opposed by the Constitutional Court, who ruled against it, leading Tandja to dissolve the Court.  His actions have been dubbed a “slow moving coup d’état” by the opposition. 

Tandja has shut down opponents in the free press, arrested opposition leaders, and put a stop to an “illegal” strike called by the opposition.  There have been widespread protests in Niamey, the capital, and his opponents are proposing a boycott of the August 4^th referendum. 

The US and EU have condemned Tandja’s moves, the EU has suspended some of its aid to Niger, and ECOWAS (the Economic Community of West African States) has threatened Niger with sanctions.  These current events illustrate the fact that democracy equals not only free and fair elections governing the attainment of power, but also effective checks and balances regulating the exercise of power.  Many African nations are weak on the second point.   

Source: BBC and New York Times

On Saturday, President Obama made a one-day visit to Ghana, in which he strongly emphasized the responsibility of the African people for the future of African nations and discouraged blaming the legacy of colonialism for Africa’s ongoing problems. Obama asserted that Africa needs strong institutions and good governance and said “Africa’s future is up to Africans.”

African responsibility must accompany US aid money, which itself must be reformed. In his speech, Obama said: “By cutting costs that go to Western consultants and administration, we will put more resources in the hands of those who need it, while training people to do more for themselves… Aid is not an end in itself. The purpose of foreign assistance must be creating the conditions where it is no longer needed.”

Source: New York Times and BBC.

President Obama is being received in Ghana by President John Atta Mills.  This is Obama’s  first visit as US president to Sub-Saharan Africa and his second visit to Africa (he visited Egypt in June).

 Obama, speaking to the Ghanaian Parliament, will emphasize the importance of democracy and encourage the African continent to follow Ghana’s democratic example so that the US can help them develop.   Ghana had a successful, non-violent democratic election in December and has often been cited as a success story on the continent because of its political stability. 

 People may have expected Obama to choose to visit Kenya, since his father is Kenyan, however last year’s post-election violence was viewed as “backsliding” on the democratic process.   Instead, Obama chose Ghana for his African visit in order to “highlight its adherence to democratic principles and institutions, ensuring the kind of stability that brings prosperity.” 

The US has always placed great importance on democracy, free and fair elections, good governance, and human rights in its relations with African nations and has often made its foreign aid assistance conditional on these factors. 

Source: BBC and the New York Times.

I recently re-read some of Paul Collier’s research on Africa’s unique physical and human geography and its impact on development.  Collier’s theory is that Africa’s “dilemma” – namely, its failure to grow since 1980 while other developing regions have experienced accelerated improvements – is due to the interplay of its human and physical geography and its inherent disadvantage therein. 

Africa is relatively land-abundant, with some countries being resource-rich and others resource-scarce.  Collier points out that a large proportion of African countries are landlocked, more so than in any other region.  “In the developing world other than Africa some 88% of the population lives in the coastal resource-scarce countries [of which there are many Asian examples], around 11% in resource-scarce countries, and a mere 1% in the landlocked resource-scarce countries.  In Africa the population is approximately evenly spread between the three groups.” 

Proportionately speaking, far more Africans live in landlocked, resource-scarce countries than in any other continent (look at a map and you will see).  This is precisely the category of countries with the poorest economic growth globally.  In effect, because of the artificial and arbitrary European partitioning of Africa, countries that never should have become countries did.  The result is slower growth for Africa compared to other regions.  

Landlocked countries have the short end of the stick because it is difficult for them to access export markets.  Moreover, in the case of Africa, the neighboring countries are often so poor that regional markets do not exist (unlike Switzerland or Liechtenstein, who are landlocked but have wealthy neighbors they can easily export to).  If a Ugandan manufacturer wants to export textiles, it will spend more money getting them from Kampala to Mombasa than from Mombasa to Hong Kong.  And if you look at an African country’s trade statistics, it will strike you how a large portion of exports and imports go to European or American trading partners, with only paltry percentages going to African neighbors. 

Collier also cites Africa’s “human geography,” meaning the ethnic diversity of its population.  Although the Western press far too often explains away African conflicts with the overly simplistic and borderline racist phrase “tribal conflict,” it is true that a number of African countries are characterized by a small population with extraordinary ethnic, linguistic, and religious diversity.  Collier argues that this leads to a higher incidence of civil war and makes democracy more difficult.  

Collier is of the opinion that Africa “missed the boat” that Asia commandeered, namely the globalization-driven, manufactured-export-based growth that has fueled economies and raised living standards in a number of countries in southeast Asia.  The only country in Africa that caught this wave was Mauritius, an island economy in the Indian Ocean.  Because Asia got a head start, it now has massive agglomeration advantages (e.g. external economies of scale) that prevent  manufacturers from relocating to Africa even if labour costs are cheaper.  

History matters – Asia got in first and got ahead fast.  Collier advocates using proactive intervention to boost Africa’s chances of boarding the boat – enforced protection of African exports from overly competitive Asian markets.  Mauritius benefitted from this with the Multi-Fibre Agreement.  Programmes in place today include the US’s Africa Growth and Opportunity Act (AGOA), for African apparel exports, and the EU’s Everything But Arms (EBA), focused on the least developed countries (LDCs).  However, Collier argues that these programmes fall short of what is needed – more should be done to give “Africa a second chance by leveling the playing field through preferential market access that offsets economies of agglomeration.” 

Source: “Africa: Geography and Growth” by Paul Collier, Centre for the Study of African Economies, Oxford University, August 2006.

The London-based Royal African Society (RAS) has launched an online blog written by its director, Richard Dowden.  His first post relates to the recent Chinese “aid” to Africa which I wrote about earlier this week.  You can visit the new blog at: http://www.royalafricansociety.org .  Enjoy!

Tendai Biti, a Finance Minister appointed by Morgan Tsvangirai, Zimbabwe’s Prime Minister, claims that China approved $950 million of credit which will be used toward infrastructure projects and commercial investments on the condition that a portion of the money is spent on imported Chinese goods such as fertilizer.

This support from China comes at a time when Western countries have been reluctant to loan the Zimbabwean government money as long as Robert Mugabe remains in power, due to his history of human rights abuses. Currently Morgan Tsvangirai shares power with President Mugabe in a deal brokered between the MDC and ZANU-PF five months ago. Since Mugabe cannot travel to the West because of travel sanctions instituted against him, Tsvangirai was the one to go on a three-week fundraising tour of the US and Europe.

The humanitarian assistance the West has provided to Zimbabwe has been distributed through charities and international organisations, rather than through budget assistance direct to the government. China, on the other hand, often makes loans and grants to Africa that are not conditional on any political, governance, or human rights loans; for this reason, China has recently been undercutting Western development banks on a number of projects.

Source: New York Times.

Earlier this month, the East African Community met for Budgets Day on June 11^th, bringing together the budget planning of Kenya, Tanzania, Uganda, and the two new members which joined in 2007, Rwanada and Burundi.  During the meetings, Kenya’s Finance Minister Kenyatta spoke about how the global recession has affected Kenyan exports (especially in the horticultural sector) and tourism.  

The East African countries are looking for ways to mitigate the exogenous shocks from the global crisis.  The African Development Bank estimates that Africa’s export revenues will decline by $250 billion this year.  Moreover, remittances, which are usually resilient, are declining.  This is an ominous sign for some of the poorest countries in Africa, where remittances finance some of the very poor and form a substantial chunk of GDP.  

Because of the fall in foreign aid due to the recession, the East African states are increasingly relying on domestic sources for budget funding.  James Musoni, Rwanda’s Minister of Finance, said that grants represent 20% of budget revenue, external borrowing 8%, and domestic revenue 51%.  Uganda is also relying more on itself; whereas before more than 60% of funding was foreign, now 67% of the total budget is financed locally.  

Meanwhile, Western countries are falling short on their aid promises.  In a recent report backed by Bill Gates and the Archbishop Desmond Tutu on how much aid the eight leading economies give to Africa, Italy and France are criticized for not meeting their promises.  In 2005, Italy made ambitious pledges at the G8 Summit, but since then it has actually cut aid.  Italy promised $21.5 billion to Africa by 2010, but only $7 billion has been paid over.  

Oftentimes developing countries have difficulty planning their budgets, because so much of the aid that is pledged is not forthcoming; it is delivered with significant delays and is less than promised.  For this reason, budget planners in developing countries often have to discount aid pledges by as much as 40%.