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Monday
Mar122012

Who's Afraid of Development?

Surely even the most kleptocratic dictator would be in favor of economic development. Economic development means greater income, greater taxes and more stuff to grab, so what’s not to like about it? But actually, it often doesn’t work that way.

In the early 1980s in Takasera, a village in Rukum District in western Nepal, a group of locals decided to begin a development project and bought a Swiss-made water mill which would power machinery such as a press to make oil and a saw mill. The community sent a group of men to Kathmandu who learned how to dismantle the machinery and then put it back together again. The machinery was brought back and successfully put into operation. In 1984, a government official wrote saying that in autonomously undertaking this project the community had “usurped the role of the king” and the mill would have to be shut down. When the locals refused, the police was sent to destroy the mill. The mill was only saved because the villagers were able to ambush and disarm the police.

                            Rukum part of the Maoist heartland. A coincidence?

So why was the Nepalese government opposed to the mill? The answer is that the monarchy and the elite surrounding it, who controlled the government, were afraid of becoming political losers. Economic progress brings social and political change, eroding the political power of elites and rulers, who in response often prefer to sacrifice economic development for political stability.

The mill in Takasera was not the first time in Nepalese history that Nepal’s rulers had tried to block development. Historically, the Nepalese political elite have clearly preferred political stability and the political status quo to development and this had inhibited them from taking the actions which were needed to promote development. In the 19th century a position of hereditary prime minister, known as the Rana, became the real power in the country and Chandra Shamsher, the Rana between 1901 and 1929, told the British King George V that the British faced the opposition of Indian nationalism because they had made the mistake of educating Indians. He closed down as many as 30 schools in Nepal, not wanting to face a similar opposition in Nepal. He went further and deliberately tried to keep his country isolated, for example by refusing to build a road linking the Kathmandu valley to India in the 1920s. The son of Mohan Shamsher, the last Rana who ruled from 1948 to 1951, infamously argued,

“we cannot possibly take steps which in any way may be subversive of our autocratic authority.”

and this included economic development. So economic development was out.

We’ll see in the next blog that opposition to new technologies is the tip of a much larger extractive iceberg.

Friday
Mar092012

Is the one percent the same everywhere?

Allan Meltzer’s article raises a lot of interesting issues. The main argument is that top one percent has increased its share of national income pretty much everywhere, and this underscores that the causes of this trend should be sought in global trends. It is true that there have been important global trends — in particular, skill-biased technological change and growing international trade — increasing the demand for skills. See for example Claudia Goldin and Larry Katz’s magnum opus on this, or this discussion of their book, or this article on technology and inequality. None of this is (very) controversial.

But Meltzer claims more than this — that these trends account for the increase in share of the top one percent in the US. This is much more controversial. First, the book on the share of the top one percent, has been written by Anthony Atkinson, Thomas Piketty and Emmanuel Saez’s careful and painstaking work, see here. They show that the US — to some degree together with the UK — stands apart from others in terms of the extent of the increase in the share of the top one percent in national income. The next chart, which uses their data, summarizes this pattern and shows that the top one percent’s share increased little or not at all in several European countries (but caution: one has to be careful about how capital income, which is not available in every country; so it is definitely useful to read their paper carefully). 


                   Data from Anthony Atkinson, Thomas Piketty and Emmanuel Saez (source).

 

Second, cross-country differences are even more jarring when one looks at the bottom of the income distribution. Here is the US picture:

 

There seems to be no equivalent of the 40-year stagnation of median wages in Europe.

Third, it is not clear how the changes in the demand for skills explain the pay explosion for the very very rich. Have technological change and trade with China really increased the demand for the skills uniquely possessed by bond traders and Enron executives all that much?

In summary, there are significant cross-country differences in the trends in inequality, and it is far from obvious that all of these changes are explained by global trends. There is therefore a prima facie case that other factors — and yes, domestic and political ones — have also played a major role in increase in top inequality in the US. This theme is discussed in this interview, and we’ll return to it in another blog soon.

 

 

Thursday
Mar082012

Warfare in Africa

Sierra Leone is not the only African nation that has been ravaged by civil war. They have been all too common, and any explanation for African poverty that does not come to grips with these all-too-frequent civil wars is bound to be incomplete. Though the number and death tolls of African civil wars have been declining, they are still ongoing in many parts of the subcontinent, including in various parts of the Niger Delta, the Democratic Republic of the Congo, Uganda, Sudan, South Sudan, and of course Somalia.

                      Child soldiers in the Congo

A recent book by William Reno, Warfare in Independent Africa (see here), is a must-read for anybody wishing to understand the never-ending cycle of civil wars in Africa. Among the many useful theses in the book the most notable concerns the transformation of the nature of civil wars in Africa — or more appropriately in sub-Saharan Africa. Reno identifies earlier movements as anti-colonial and majority rule rebels, who fought colonial powers throughout the subcontinent and minority rule governments (e.g., in South Africa, Namibia, and Zimbabwe). Consistent with the vicious circle of extractive institutions and the pattern in Sierra Leone we saw in an earlier blog (see here), the successful rebels simply took control of the extractive institutions themselves. Thus it was natural that another round of rebellions, led by what Reno calls reform rebels, aimed at replacing these regimes would follow.  Typical examples include Yoweri Museveni in Uganda and Meles Zenawi in Ethiopia. But the vicious circle was not to be broken so easily, and these rebels, when successful, did not change institutions underpinning poverty and the widespread inequities in the subcontinent.

But over the last two decades most civil wars have been fought by what Reno calls warlord rebels (and on which a key reference is Reno’s own book Warlord Politics and African States; see here), and parochial rebels. These rebels have little ideological commitment. Sometimes, like Charles Taylor in Liberia or Foday Sankoh in Sierra Leone, they are fighting to line their pockets. Sometimes, like Joseph Kony whose Lord’s Resistance Army has been killing indiscriminately in Uganda, the Democratic Republic of the Congo, and Sudan, it is not clear at all what they’re fighting for. Like both sides in Sierra Leone’s conflict, many of these warlord and parochial rebels use child soldiers (because they do not have the ideological basis to attract a regular force) and are responsible for many of the recent atrocities. Reno deserves a lot of credit for putting the spotlight on these rebels and helping us understand their breed.

The deep explanation for the emergence and persistence of such rebellions is still unclear, however. Reno writes (p. 246):

“One of the core messages of this book is that warlords and parochial rebels do not fit easily into a simple scheme of state collapse and ungoverned spaces. The argument in the preceding pages is that the regimes in Africa that base their authority most thoroughly on the manipulation of access to patronage opportunities, have been very effective in disrupting the organizing strategies of ideologues, and have made deployment of rebel commissars considerably more difficult than under colonial or apartheid regimes.”

But ultimately this argument is not totally convincing. Take Sierra Leone, where the civil war erupted under Joseph Momoh who followed Siaka Stevens as president. It is difficult to imagine how Momoh could have had greater ability to disrupt the organizing strategies of ideologues than did the apartheid regime in South Africa; Momoh did as little as Stevens to build state institutions and could not control any part of the country against ragtag rebels. A more plausible explanation for the emergence of warlord and parochial rebels would again be the vicious circle of extractive institutions. The corrosive effect of years of extractive rule is both to create a large army of highly discontented young men and an environment in which state institutions are so weak that they can easily be taken over by rivals, thus motivating ruthless opportunists such as Taylor and Sankoh. If so, in contrast to Reno’s claims, the emergence of this new type of rebels would have a lot to do with state collapse — both as cause and consequence.

President Joseph Momoh’s mansion after it was burned by the rebels in Sierra Leone’s civil war

Another fascinating question that Reno poses is also central for understanding the nature of civil wars in Africa and the future of the subcontinent. While civil wars have been exceedingly common, national wars have been rare. Rebels have contented themselves with seizing national institutions, with no appetite for expanding their control beyond national borders, even though these borders are artificial, only drawn haphazardly by colonial powers, and generally only weakly defended. What explains this peculiar and historically unique pattern? Reno links it to the all-too-quick willingness of international organizations, including the Organization of African Unity, to recognize rebels such as Charles Taylor who took control of (some) national institutions, and to their hostile attitudes to any change in borders — perhaps because of an implicit domino theory maintaining that once some borders come down, all of them are at risk. Yet Reno offers no concrete evidence supporting this intriguing theory. At the end, an alternative and simpler explanation remains equally if not more plausible: warlord and parochial rebels can leverage the weakness of African states to wage deadly civil wars and sometimes even take the capital city; and the same state weakness makes organizing an international war, and holding on to territory once conquered, much more difficult.

At the end, Reno poses two vital questions, one on the origins of the new types of rebels roaming many parts of sub-Saharan Africa, the other on the peculiar sacrosanct nature of international borders coexisting with frequent civil wars. Even if his answers are not fully convincing, this book should be widely read and should have a durable impact on future studies for the new questions it raises and the new hypotheses about one of the most important problems facing the world’s poorest region.

 

Tuesday
Mar062012

Why is Africa poor?

We have now posted several blogs on Sierra Leone. The economic and political problems we have highlighted are not peculiar to Sierra Leone; they are pervasive in Africa and are at the root of its poverty. Though we’ll soon return to this topic, here is a paper that discusses the causes of African poverty from this perspective.

Tuesday
Mar062012

Schooling in Egypt vs. Schooling in Uzbekistan

An Egyptian friend reacted to our blog on schooling in Uzbekistan (see here) saying that schools under Mubarak weren’t all that different.

When he was 10, five hours a day for months were spent not in the classroom, but preparing a dance show for Suzanne Mubarak’s annual visit. This was not an isolated event. There would be such a visit almost every year, and a large chunk of the school year would be spent on this. Not as bad as picking cotton, though probably contributing not that much more to useful knowledge. (For more on Suzanne, see here)

                    A school visit by Suzanne Mubarak and Laura Bush

Not that things were that much better when they were in the classroom. Key assignments included writing letters to President Mubarak thanking him for all his tireless work for Egypt; designing a logo for Mubarak’s campaign in elections (no matter that the elections were already fixed); drawing scenes of loyal Egyptians gathering in the streets out of their love for Mubarak. You get the picture.

You might think things may have changed after Mubarak’s fall. And yes they have. Now key assignments include writing letters to the Supreme Council of Armed Forces, thanking them for their tireless work for Egypt. Bonus points are given to those students who emphasize that this tireless work includes defending Egypt against foreign-financed revolutionaries and their puppet masters masquerading as NGOs.