Ghana on the Rise

            In response to Annelise’s most recent blog post, I also found it refreshing to hear African leaders and political figures speaking against government corruption and in favor of distributing their natural resource wealth. Throughout the semester in my research, I’ve repeatedly come across the ramifications that corruption and the natural resource curse create in Africa. As Ghana had the fastest growing economy in the world last year, having good governance is absolutely crucial if they are to stay on the rise.

            As Annelise points out, Akufo-Addo says that he will make secondary school free with the funds from the booming oil industry. This directly correlates to the TIME article, as the population in African countries is very young. While many take this as an indicator for success, unless funds are invested in education and industry, the young population will not be able to develop Africa as is currently hoped. Once the booming oil industry is handled correctly, Africa has a much better hope of developing although most countries are not making these claims of better investment strategies. Furthermore, Paul Collier points out that African countries must only promise political and economic reform to gain support and attract investors, so we must still be wary that all Ghana is promising will become a reality.

            Annelise also says that Ghana is “encouraging foreign extraction companies to buy products from Ghana and employ Ghanaians,” which I fully support, but can’t help but wonder how they are doing this. As African countries typically have little say in global governance and FDI implications, I’m not sure that only encouragement will work. In addition, these claims were made in debates, so could it just be rhetoric? While I do believe that Ghanaians and their politicians truly want development to occur, as we have recently seen in the natural resource sector, I question whether they have the means to redirect foreign investment.

            Nonetheless, when looking at the Economist article that Annelise refers to, there are multiple remarks about good governance. Mr. Rawlings is “rallying against corruption” and Vitus Azeen of the Ghana Integrity Initiative challenges the people to “take action against those who are alleged to be responsible for corrupt acts” especially in the political party. The convicting words of Ghanaian leaders do give more hope than Collier gives to most African economies. Their challenge to the people and politicians implies that Ghana may hold itself and its citizens accountable for their actions unlike previous African states have.

            While Ghana will have many more hurdles on its path to development, establishment of a just oil industry, and creating opportunities outside of natural resources, it is well on its way with the foundations it is currently setting. If these statements prove to be more than politician’s rhetoric, Ghana has a much better change of continuing its massive GDP increase of 2011 and not become another natural resource curse failure. 

Africa: Rise or Uprise?

While at home for Thanksgiving, I flipped through the newest TIME magazine and stumbled upon a two-page spread with only the words “Africa Rising”; this caught my attention. The following page begins with the story of Boniface Mwangi, a previous photographer turned guerrilla art attack leader in Kenya. He realized that he was creating his wealth from capturing the corruption and failed promises of Kenyan leaders, so began to rebel across Nairobi. His actions directly parallel Paul Collier’s depiction of Africa. He claims there is bad governance and that the region has succumbed to many curses, and one of the best things for industrialized nations to do is support the rebels, such as Mr. Mwangi. Rebels and other African citizens are walking a fine line between “Africa rising and Africa uprising,” as they endeavor to develop Africa and escape the abject poverty that many currently live in.

            However, although there is much turmoil in the country, the article points out that in the past decade, “six of the ten fastest-growing countries in the world were African,” and that 5 African countries are expected to outgrow China this year. This is not only startling in relation to the stigma of the African economy, but for my research paper I have been exploring this very thing. I have found that Africa lags behind China and Asian success is the exact reason for this. The sources I am using are predominantly from 2007-2010, possibly exhibiting how quickly and drastically Africa has been on the rise. On the other hand, this drastic growth could continue to be from oil and other natural resource revenue, something that I wouldn’t exactly indicate as sustainable growth.

            The article readily addresses this, specifically by returning to the “predatory inequality and clownish tyranny” that Collier addresses in his book. The article claims that rulers are now held less accountable than they were in the past to good governance because of their material improvements. Because the numbers show growth, political deterioration is often overlooked. In response to this, Africa’s best hope may not be through current rebel groups, but from its extremely young population. “The average African is 19” and because of foreign aid, 108 million more African school age children are expected to be educated in the next decade. Because of the current corrupt political regimes, I am assuming that this aid is conditioned or given in the form of education rather than purely cash money.

            Over the last few years, aid has surprisingly been outpaced by investment, and in 2012 investment now doubles aid in Africa. While this investment is in the business sector, there is also a “concurrent interest in Africa’s natural resources, led by China,” so an unstable economy may still come from all of the current hype on Africa’s rise. There are a lucky few who have entered the business world and given Nairobi the nickname of the “Silicon Savanna,” but most are not so lucky. With the substantial increases in revenue from investment, mainly in oil and other resource sectors, “governments are failing to convert growth into jobs” which presents a huge problem for this rising, young population once they aren’t school age, but working age.

            The article correctly states that “the answer lies less in Africa’s traditional extractive industries,” as these often feed more corruption and inequality and discourage investment in education and trades. However, if this is not explored the “disconnect between government and people” could prove devastating, paving the way for an uprising destined to happen if nothing is done. Marginalization is an area I’ve explored in my essay, something Padraig Carmody and Collier both readily address, but mostly from an economic perspective. The article addresses the inequality it creates, but it also explores how it aggravates existing “tribal, racial, and religious fault lines,” thus tying in the social issues with political and economic ones.

            The article then takes a twist, as it shifts towards the entrepreneurial spirit that Africans exhibit, as well as outside governments looking in. China indeed taken the lead in Africa, specializing in “infrastructure-for-resource swaps” while other countries are usually interested only in natural resources. However, it seems to paint China is too good of a light for my liking. While China does invest more in infrastructure than many other countries, it still enacts the marginalization and extraction that the article spoke of earlier. Countries are predominantly self-interested, and as China continues to be on the global rise, it attempts to better its own standing, which means exploiting Africa and its week states.

            Carmody speaks of the scramble for Africa happening again, this time in a scramble for natural resources. Carmody and other authors are wary of this scramble and the possible re-colonization it could cause, as Africa is being taken advantage of once again. However, the article stresses that this scramble “should leave Africa as the big winner” because Africa has things other countries need. However true this is, the first scramble for Africa also needed things in Africa and that didn’t exactly leave the continent prospering. The article correctly states soon after with the right governments, Africa has opportunity for success, and this would make their previous statement true. However, little is currently being done by Africa or other entities to better the governance of Africa and its countries.

            Africa possibly has the most hope right now of all the continents, with Ghana even having grown 14.4% in 2011 and Kenya exhibiting a mobile banking boom, but this alone is not indicative of growth. Africa may have an entrepreneurial spirit and many possibilities with a young, educated population, but unless countries start investing in industry and not natural resource extraction and African states starting putting more emphasis on non-extractive industries, Africa will be on the path for an uprising and not a rise. 

Incumbency Implications for Trade

In a recent article by the Economist, the reelection of President Obama is questioned as to what this means for future trade policy. On the one hand, “there are hopes that a second-term president might inch closer to European views on the Middle East or climate change” because incumbents no longer have to put on a façade to keep the voters happy.  However, they address that Europe’s supposed declining status could put a damper on things. If Obama claims that sanctions have failed in the Middle East, as we discussed in class earlier in the term, he may not have enough support from Europe to become even tougher. The situation is similar in China, as the US may not have support from Europe to enact its intended policies.

            Regarding Europe specifically, the article urges European countries to “refrain from throwing Greece out of the Euro and move towards deeper integration,” thus making things even tougher on Germany, as we discussed today in class. President Obama does not advocate for “everlasting austerity” domestically or internationally, which is, I think, an interesting application considering most austerity we have spoken of involves development. It is obvious that austerity can be applied amongst developed countries, but it takes a slightly different connotation in this light, as it is more a matter of cooperation and good relations than the survival of a country.

            Setting aside their disagreements, America and Europe still maintain the “closest and richest” relationship in the world, accounting for almost half of global GDP and almost 1/3 of trade. This being said, their alliance is critical, and the Economist pushes for a “free-trade agreement” between the two entities. The European Commission indicates this would increase trans-atlantic trade by almost 50% even though tariffs are already very low.

            First off, this raises the question of non-tariff barriers, which the Economist addresses, but is very dismissive about. Non-tariff barriers were addressed extensively in the Coughlin reading, and regulations specifically would be a major setback if trying to establish free trade.

            However, the biggest concern this raised for me was one of morality. I’m not entirely sure the process countries go through when establishing free trade, but it seems as though our country’s efforts and funds would be better spent towards developing countries. If President Obama is truly not practicing austerity, the government should redirect its attention to lessening austerity on underdeveloped areas. The US is obviously aware of the current success of China and the setbacks it has created for the underdeveloped world, and the US and Europe both have the capacity to lessen this enormous gap in development. While we should not swoop in to save these countries, we must give them the opportunity for success. Now that it is Obama’s second term in office, he does have more leeway in his actions and has the opportunity to focus on international issues on a larger scale. As he does so, I can only hope he doesn’t get completely caught up in European agreements and sets some of his efforts aside towards countries that would benefit much more from free-trade or simply lower tariffs than the most developed nations in the world. 

The Developed and Developing Flip-Flop

Today’s headline for UN wire is “Developing Economies to be Bigger than Developed in 50 Years,” a striking title to say the least. They claim that China will become the world’s largest economy in the next four years, setting the stage for developing countries to surpass developed countries. They also anticipate the incomes of citizens in developing countries to quadruple. The OECD claims that inequality will persist, as  “living standards in the emerging countries will still only be 25%-60% of the level enjoyed by those in the US.” This is still significant, as many underdeveloped countries exhibit negative absolute growth rates; their relative growth rates are simply plummeting.

Let’s start with China and India, countries many of our readings have been focusing on. These two countries benefitted greatly from the 1980’s surge in globalization and are now taking over the economies of previously developed areas. China is expected to surpass the US by 2016 and India is well on its way to surpassing Japan and is “forecast to pass the eurozone in about 20 years.” China’s world GDP as of 2011 was 17% and is expected to grow to 27.8% by 2060; India’s was 6.6% and is expected to grow to 18.2%. The guardian takes the claims of the UN even further, claiming that China is on the rise now, but India and Indonesia will have the highest growth rates by 2020. Productivity is the main driver of this growth, as technology and human capital is spreading rapidly.

In light of Collier’s, The Bottom Billion, he claims that for underdeveloped countries to truly benefit from the current surge of globalization, they need conditioned protection from Asia (similar to the infant industry argument that Crystal and Wood advocate against). If China and other areas in Asia truly are growing at these unprecedented rates, the price gap will form that Collier states is necessary. Once this price gap is created, underdeveloped countries such as those in Africa, Latin America, and Southeast Asia will have the opportunity and capability to develop their economies. However, unless Asia provides some protection for these areas, the price gap they create may not be enough to create the massive rise in economies that the UN, OECD, and the guardian anticipate.

If the increase in productivity actually does occur in underdeveloped areas (indicating developed economies), trend unemployment is expected to return to pre-crisis level and global growth is expected to be about 3% per year. We must keep in mind though that this positive number must be taken in consideration with the very high numbers that China and India provide; we cannot assume that sustainable growth will be occurring in all developing areas. This makes me wonder how prevalent Professor Anderson’s talk is to this situation. He claims that the percentage of Chinese in a country is a large indicator of their economic growth, so I question whether the rise in China’s economy will have multiplied effects on areas with a large percentage of a Chinese population or if the relative success of China does not effect the Chinese diaspora abroad.

As the Chinese continue to have near exponential growth, we must closely watch and monitor underdeveloped areas and we cannot assume that they will experience the four-fold growth the guardian speaks of. The success of China will undoubtedly create the opportunity for growth, but without some protection and global governance, the corrupt regimes and natural resource dependence that is indicative of many stagnant areas will prevent sustainable development.

http://www.guardian.co.uk/global-development/datablog/2012/nov/09/developing-economies-overtake-west-2050-oecd-forecasts

http://www.smartbrief.com/getLast.action?mode=last&b=un_wire

Your Next Language: Spanish or Chinese

After speaking with and listening to Steve Vetter, I have been presented with some striking stories and career path proposals regarding immigrant and international development. Experientially, Steve has worked extensively with the immigrant population from Latin America in Annapolis, Maryland and he shared a disheartening story of an immigrant man he works closely with at home. To make a long story short, the man came to America for hope for his family back home, sent $.85 of every $1 he made back to his family, and returned home with $1,700. By the time he reached his home, his $1,700 had reduced to $200 by whom he referred to as “his own people.” Mexican citizens had bribed him $1,500 to return home. He then made the decision to enter back into America, in which he was beat and forced into indentured servitude before miraculously returning to Maryland. When asked about immigration reform, Steve gave a surprising response: he did not explicitly advocate for it. He takes the practical approach that immigrant reform is unlikely in the next 4 years regardless of the party elected, and he also advises that the visitor’s proposition creates a second-class citizen and is somewhat counterproductive.

He instead proposes international action in the places these immigrants are coming from, something I’m specifically interested in. He engages with specific communities in Latin America to build life skills through interests, such as soccer. Instead of placing people back in dysfunctional schools and job opportunities, he emphasizes building up soft skills and creating capability. By focusing on this type of international action, we do not solve the issue of immigration, but we lessen the need for family members (particularly husbands) to move to the United States in order to simply provide food for their families.

            On a slightly different note, when I met with him individually, he emphasized the importance of international development in Latin America specifically. This is undoubtedly his region of expertise, and he is passionate about this life skills approach that we should take to Latin America. However, in addition, he told me that I do not only need to learn Spanish, but Chinese as well. Yet again, the archrival of the US has entered into discussions of international development. He emphasized the importance of China in current development strategies, something Collier speaks of, and as do authors we have read for IPE. Asia (well parts of it) took advantage of globalization in the 1980’s and is now vitally important in development ventures. As we continue to invest in Latin America, Africa, and other underdeveloped areas, mediators are needed that can communicate in Chinese. China’s presence cannot be underestimated, and when talking of different languages critical to know in our current global undertakings, Chinese has become prominent. 

The Bottom Billion

            Paul Collier, the director of the Center for the Study of African Economics at Oxford, takes an unprecedented twist on the ‘white man’s burden’ in his book The Bottom Billion. He does not target the sentiments by rendering Africa hopeless and victimized, nor does he claim that their setbacks are simply their mistakes. He takes a nuanced approach: “change in the societies at the very bottom must come predominantly from within,” (xi) and industrial nations must strengthen their efforts. Collier holds the opinion of many other development specialists: aid agencies aren’t exactly doing their job. They are focusing on middle-income countries. For example, The World Bank doesn’t even have a single staff member in the Central African Republic, so they are neglecting those who actually need their help. The world has fallen into mayhem over the Chinese stealing intellectual property, but no one has heard of anyone entering crisis mode over Chad. The conception of the developing world is backdated a few decades, and, as Collier claims, the bottom five billion do not need our help. They are doing just fine; it is the bottom billion that are falling apart.

            Collier points to four traps that make the bottom billion the bottom billion. The first is the conflict trap; if a country has low per capita income, they are more likely to fall into civil war and “the lower a country’s income at the onset of conflict, the longer the conflict lasts” (26). Collier emphasizes a vicious cycle: if countries anticipate civil war, economic decline occurs, and once one civil war occurs, countries are much more vulnerable to future wars. The second trap Collier presents is the natural resource trap. Dependence on natural resources prevents a normal economy from forming and results in what Collier deems “survival of the fattest.” The natural resource trap is accentuated by being landlocked (trap number three), as many Sub-Saharan African countries are. Here we have another cycle. There is less inherent capability by living in the middle of a desert, so countries are doomed to rely on natural resources. The final trap is surprisingly given the same substance as the previous one: the trap of bad governance. When a country is not developed and receives aid, “government must transform its money into public services” (66); welcome to yet another vicious cycle.

            Well how do these cycles end? Many development specialists think Western countries determine the fate of the bottom billion, but Collier targets a different geographical area: Asia. While China is a hot debate topic in the 2012 election, Collier suggests it is those receiving austerity and toughness that are important to development. Asia benefited from an earlier boost of globalization. Now the rest have to wait “until development in Asia creates a wage gap…similar to the gap…between Asia and the rich world around 1980” (86).

            Don’t worry, Collier doesn’t say Asian price gaps are the answer. He goes on to explain how industrialized nations can change their current help mechanisms to actually work. Intuitive changes need to occur to fit countries in traps; conditionality must happen. He presents the time consistency problem, specifying an inherently broad concept. To prevent problems we must invest in projects. To turn around states, we must ensure political opportunity, and to sustain growth in post-conflict situations, we must provide long-term financial aid. Aid cannot be solitarily determined by quality of the government or reputation of the state. It must be time consistent.

            Collier presents the conception of laws and charters next, but they seem to go hand-in-hand with aid. Aid must ensure it will increase investment to indicate growth, so international charters need to be made for this reassurance. Collier specifies charters for different circumstances, but it can be put pretty simply: transparency. Transparent auction, payments, spending, and budgeting are necessary for charters to work. Investment charters must be a long-term commitment and apply to both domestic and foreign governments. The Westerners aren’t coming to the rescue any more; domestic governments must take responsibility. Collier emphasizes that “the whole point of an investment charter is for newly reforming governments” (155), so support must be given to rebels while still holding them accountable.

            Collier presents another cycle: trade policy. Rich countries have subsidies and escalated tariffs while undeveloped countries are protected. With liberalized trade, countries need to diversify their exports, which is made possible when using aid on import supply. To make this feasible, the bottom billion “need temporary protection from Asia” (167) to pay lower tariffs and generous rules of origin.

            All trapped countries will continue their struggle and each need to be catered to specifically by Collier’s varied solutions. Instead of the aid argument that is hyped up by many economists, Collier presents the concept of laws and charters to be more crucial. Nigeria or Angola cannot be forced to take aid and invest it well, but by presenting them with laws and charters, they will be given the groundwork for reform that is not subject entirely to neopatrimonial states.

            Collier’s emphasis on precedents set internationally, protection by Asia, and poignant references to individual country’s success and failures-“less than 1 percent of [money intended for rural health clinics in Chad] reached the clinics” (66)-creates an enticing and convicting read. He is informative yet unique in his approach, but his solutions raise a couple of hesitations. First, his solutions harp on how the G8 must reconsider aid strategies to help reformers, but then he switches to focus on Asia as the most important actor. The majority of his book focuses on the traps countries are in and the measures that need to be taken by Western, industrialized countries and the bottom billion themselves. However, towards the end he throws in that Asia is the place these countries need to turn to. If both are needed, Collier then becomes hypocritical. If the bottom billion need support from Eastern and Western hemispheres and they need international laws and charters, shouldn’t there be some between the US and Asia in the first place? Collier claims the bottom billion must be held accountable in their domestic and international spheres, but how can they be expected to do that if both domestic political parties are debating which one can be tougher on China? This has to do mostly with US-China relations, but if we don’t enter into cohesive charters with Asia, we cannot expect underdeveloped countries to do so. This being said, if Collier redefines the notion of rich countries from Europe and the US to include Asian markets (specifically the ones benefiting from globalization), his argument becomes much stronger. At the end of every section he states what his argument implies for the G8, but China isn’t in the G8 (Japan is the only Asian country). Once more of Asia is considered, the coordination of rich countries and aid agencies within themselves and between each other will have much larger implications. Collier is correct that reform must come from within, but unless reform is properly facilitated, and “we” is redefined to mean the West and Asia, their struggle will prove indefinite.

           

Collier, Paul. The Bottom Billion. New York: Oxford University Press, 2007. Print.