Available now: USAvailable now: UK
Wednesday
Mar282012

Nice schools, nice roads

We described economics and politics in Colombia in two previous posts (here and here).

Thousands of people assassinated, political parties and candidates wiped out, local politicians stealing money and deliberately impoverishing people, shouldn’t somebody be doing something about this? Shouldn’t the government act?

But perhaps we are over-generalizing. Surely not all of Colombia is like this. Compare the nice paved street below outside the newly built health clinic in the city of La Danta, Antioquia, with the mud roads of El Carmen de Bolívar (see here). Here it looks like the local politicians actually deliver the goods.


Not just paved streets and clinics, check out this new school nearby in Piedras Blancas and a neighborhood of houses built specially for poor people, all connected to La Danta by a new road.

This doesn’t look like a failed state. But who was the state in La Danta? Who is the state in Colombia?

Actually, it wasn’t the local politicians or the government who paved the streets in La Danta. It wasn’t them who built the houses for poor people and the hundreds of kilometers of roads. It wasn’t them who paid the teachers’ salaries and bought the new musical instruments for the school. It wasn’t them who built the health center — or the Bullring or the sports stadium or the new school in Piedras Blancas or the one in El Porvenir.

In fact all this and a lot more was built not by the government but by a paramilitary leader called McGuiver (real name: Luis Eduardo Zuluaga), who got his nickname (we’ll write more on nicknames among paramilitaries soon) because of his resemblance to the US TV character. McGuiver was the commander of the José Luis Zuluaga Front, named after his murdered brother, of the Autodefensas Campesinas del Magdalena Media (the peasant self-defense forces of the Middle Magdalena) (ADMM) which ran this part of Colombia for 30 years. How did he pay for it all? He taxed people of course, just like the state would, he charged all the farmers and businessmen (including the drug dealers) a monthly tax and he even had tolls on the roads. He had a “social team” in charge of determining the most pressing needs of the community. He had a bureaucracy assessing and collecting taxes. He had laws (“estatutos”) which he enforced. He even had a radio station and a song.

So who is the state in La Danta? In Colombia?

Tuesday
Mar272012

Mr. Kim vs. the World Bank

The nomination of Jim Yong Kim by President Barack Obama to be the next President of the World Bank is generating plenty of controversy.

Lant Pritchett categorically stated that his nomination was a “terrible idea”. 

William Easterly has already accused him of being anti-growth (see also here).

Perhaps all of Mr. Kim’s critics prefer the status quo where the World Bank is run by ex-warmongers (Robert McNamara), bankers (James Wolfensohn) or career civil servants (Robert Zoelick). Wait wasn’t that the World Bank that they loved to criticize?

Now President Obama came up with a radical idea:  why not appoint someone with a track record in solving the problems of poor people in developing countries? Before turning to any of Mr. Kim’s theoretical books (quotes from which can be easily taken out of context), you should first check out Partners in Health, the extraordinary organization he started in 1987 with Paul Farmer, Todd McCormack, Thomas J. White and Ophelia Dahl.

Few people have as much to be proud of when it comes to tackling major problems in development.

If you want to see something that really works, how about the extraordinary new 150 bed hospital at Butaro in rural northern Rwanda:

Or for the brand new teaching hospital built by Partners in Health at Mirebalais in Haiti: watch this video

Sure, building hospitals will not miraculously turn extractive institutions to inclusive, unleash the growth potential of poor countries. But could any World Bank president do that?

Instead, it seems that Mr. Kim knows how to get things done and improve the lives of poor people. Now there is a radical notion for a World Bank president!

Tuesday
Mar272012

Reader Comment on Foreign Interventions

One of our readers sent the following comment:

In your book, you ignore the intricacies of international relations. The reason Latin America is so poor today is not due to colonial history, but recent U.S. foreign policy. It is no secret that the United States supported dictators like Batista (Cuba), Banzer (Bolivia), and Armas (Guatemala), so that American corporations could prosper in Latin America. 

This is the reason Africa and Latin America are so poor; aggressive U.S. foreign policy gave them bad institutions. Could it be then that the United States has very extractive institutions - not domestically, but internationally?

This comment raises an excellent point, which is perhaps insufficiently discussed in the book. The book gives several examples of extractive institutions set up by the British as they were establishing their inclusive institutions domestically. Much of this is discussed in Chapter 9, for example, in the context of British policies in South Africa and Rhodesia. The same themes can be seen from the discussion of British plans to set up an extractive penal colony in Australia (Chapter 11) and from the colonization of North America (Chapter 1). There should be nothing surprising here. Domestic inclusive institutions provide safeguards against elites enriching themselves at the expense of the population that has political voice, but provide little protection for the voiceless — put differently, it is just a question of who is included. So it should be no surprise that the French Revolution and Napoleon tried to suppress the Haitian revolt and reinstitute slavery, and British merchants benefited from Caribbean slavery.

It is also true (but discussed only in passing in the book) that the US supported some highly extractive regimes, partly in the context of the Cold War (e.g., Pinochet’s dictatorship in Chile and Zaire under Mobutu) and partly to protect major economic interests (e.g., Guatemala and Iran). Undoubtedly, this has contributed to the persistence of extractive regimes in certain countries.

That being said, it is difficult to pin all the blame on US foreign policy, since even in places without US intervention extractive institutions from colonial times and thereafter have persisted into the 20th century. In the context of Africa, for example, most rapacious regimes emerged and wrought havoc without any outside assistance (e.g., as we argued in this paper).

Monday
Mar262012

Who's afraid of development? The Colombian version

Colombians differentiate between the Tierra Fría, the ‘Cold Country,’ which is made up of three long cordilleras of  the Andes and includes the capital city Bogotá, and the Tierra Caliente, the ‘Hot Country’ at the foot of the mountains, stretching west towards the Pacific and north towards the Caribbean. In the north, close to the Caribbean, just inland from Cartagena, the great colonial port of Colombia, or New Grenada as it was then called, are the Montes de María (the Hills of Maria). The Montes de María is lush fertile country with steep verdant hills. Perfect for agriculture, easily accessible from the coast and crossed by the main highway north from Medellín to Cartagena, this ought to be one of the richest parts of Colombia. It isn’t. While the proportion of people in poverty nationally is 28%, in the Montes de María it is 68%. Nationally 8% of the population is illiterate, 27% in the Montes de María.  Instead, the Montes de María is famous for violence and massacres. 

                                    The hills of Montes de Maria

At the heart is the municipality of El Carmen de Bolívar where an astonishing 93% of the population is below the poverty line. Maybe this is just a consequence of endemic violence in this part of the country, fueled by guerillas and paramilitaries. This certainly does not help, but it is not the fundamental reason why El Carmen is so poor. The main reason is politics.

                                El Carmen de Bolivar

Last August Jim was doing fieldwork in El Carmen and asking about how the local economy worked. One farmer told him “look, there are three sorts of jobs here, working for the mayor, selling fried food (“vende frito”) and selling the lottery (“vende chance”)”. On every street corner in El Carmen are “chanceros” who allow people to bet on the last few digits of the departmental lottery numbers. Bets start for as little as 500 pesos, about 25 US cents. Apart from these jobs the only alternative is subsistence farming. But El Carmen has potential so, the farmer explained: big national companies like Nacional de Chocolates, which makes the most popular brands of chocolate in Colombia, and Alpina, which makes dairy products, proposed moving in and setting up processing plants. They would have offered local farmers contracts to grow and provide cocoa or keep dairy cows for the milk. Great for the local people, bad for the politicians who drove the companies out.

You might think that in such a poor place local politicians would value having big companies to extort money from. Not really. In this part of Colombia the major source of income for municipalities is transfers from the central state. And more or less all of this money, in theory supposed to be used to improve the lives of the people in El Carmen, vanishes. In the last few years US$12.5 million has been allocated to build acqueducts, but still the town has no running water (read this story in last weekend’s Colombian press). As jailed former national Senator Juan Carlos Martínez put it (see here),

“politics is a better business than drug-dealing,… the money you make after a mayorship cannot be made after a shipment (of drugs)” 

Unfortunately the logic of blocking development is simple (and all-too-familiar as we have seen in the Nepal case). If your only alternatives are working for the mayor or the informal sector selling friend food or lottery tickets, then you will be dependent on the politicians. This means they can tell you who to vote for and they do, and they can pocket all of the resources of the area and the task force from the central government. A politician in Sincelejo, the nearby capital of the department of Sucre, estimated that 75% of people in Sucre sell their votes at election time, with a price which can range from 10,000 ($5) to 20,000 ($10) pesos. A lot of money if your only source of income is selling fried plantain on the street. Alpina and Nacional de Chocolates would have provided a reliable and much better income, severing people’s dependence on the politicians. That had to be stopped. And stopped it was.

Monday
Mar262012

Further Reader Comments on Arab Spring

One of our readers sent the following comment:

I took some interest in the reader comment today about monarchy and the Arab Spring. Could it be that monarchies, to a greater extent than mere despoties, spend some time on justifying or clarifying the role of the royal family? And that such efforts may translate into what we can call a social contract?

If you look at European history, many royal families, and monarchies, still exists even in the face of democracy. The Norwegian royal family was even elected as late as in 1905, at a time were the country was rapidly transforming into a modern democratic state.

Without having any academic expertise on the issue of European monarchies, I have the feeling the traditional royal families managed to stay in power by changing the social contracts they had with their populace as times changed. Today they stripped of most constitutional powers, but still function as national symbols. The social contracts has obviously changed.

Which brings me to my point: The importance is, perhaps, not about monarchy vs despotism per se, but rather about the existence of a social contract or not, and how this contract is honoured and adapted to changing times and challenges.

The same idea may also spur an interesting debate on the issue of ‘democratic India’ vs ‘autocratic China’:

Could it be that, while India does, at least in theory, have free elections, freedom of speech and freedom of assembly, China may still have a more functional social contract? The democratic nature of the political and economic system in both countries should be questioned, of course, but is it sure that India would stand up to scrutiny and really perform better democratically than China?

Especially, there appears to be no such thing as an effective social contract in India, while there appears to be a rather clear social contract in China. In the absence of elections and the said freedoms, the government has still committed to honour a social contract: The creation of jobs and prosperity. Furthermore, criticism aimed at the inability of the authorities to honour hits contract is considered legitimate. Other criticism not so much, of course. Which also limits the space for re-negotiation of the contract, in case citizens have other aspirations than jobs and prosperity.

I hope I make myself understandable, even when writing in some kind of a hurry… And thanks again for the blog!

The issue of “social contract” is important and certainly could be investigated further. But perhaps the important question is this: what makes a social contract stick? Our perspective is that a social contract also needs to be backed up by political power. The British and Norwegian model, with the monarchy playing a figurehead role, is feasible precisely because these monarchies have been stripped from their political power, facilitating a social contract in which they respect the workings of electoral institutions. It would be difficult to imagine the same working out with the Stuart kings before the Glorious Revolution took away their military, economic and judicial power, and destroyed the social coalitions supporting them. For this reason, there are grounds to be skeptical that there is a social contract in China where the Communist Party will refrain from acting in ways that damages the economy. The Party controls the judiciary, the military, the bureaucracy and the media. So even if they claim their authority from a social contract, the moment this supposed contract strongly conflicts with the interests of those at the helm, the chances are that it will be worth not much more than the paper it’s written on.