Explanations of development that make me uneasy

Enrico Spolaore & Romain Wacziarg have a new NBER Working Paper called “Long-Term Barriers to Economic Development.”  In it they explore the barriers to technology adoption.  As they write in the abstract, “What obstacles prevent the most productive technologies from spreading to less developed economies from the world’s technological frontier?”

The answer, they argue, has to do with culturally transmitted traits. Empirically, they look at neutral genes (ones that don’t confer any competitive advantage) across populations, which indicate how long certain populations diverged from one another.  This genetic distance is a proxy for “all divergence in traits that are transmitted with variation from one generation to the next over the long run, including divergence in cultural traits.”

So what’s the argument?  Namely that populations that are genetically distinct also have quite different cultural traits.  These traits, in turn, determine how easily societies can adopt innovations on the technological frontier.

This is an interesting argument and I need to read their paper carefully, but I have to admit that explaining differential development with culture makes me uncomfortable and doing so with genetic differences (even if they are “neutral”) makes me even more so.

A new free trade agreement in Latin America

It’s called the Pacific Alliance and its members include Mexico, Colombia, Peru and Chile. Apparently Costa Rica is set to join soon and Panama not that long afterward.  The group has agreed to remove all tariffs on member trade.  An article on the new agreement argues that this  will “encourage free trade between Latin America and the rest of the world.”  

I am all in favor of more free trade, but regional trade alliances are unlikely to foster free trade in the rest of the world.  As Paul Blustein explains wonderfully in Misadventures of the Most Favored Nations, bilateral and regional agreements give member countries less of a stake in the multilateral trading system of the WTO.  Given the trade diversion they may benefit from in the regional groupings, it’s possible they will be less likely, ceteris paribus, to want to move forward with the Doha Round.

I’m not saying that’s a bad thing, only that the idea that this trade agreement will foster free trade in the rest of the world seems doubtful.  Maybe they meant that it will inspire other countries to create their own free trade agreements?

The new pact explains that duties will drop to zero on 92% of the goods and services traded within the group. The remaining tariffs, mostly on agricultural goods, will be slowly phased out until 2030.  Interestingly, the members have “also declared their commitment to implement automatic tax and financial information exchange within the next six months, and it has been agreed that Mexico is to be accepted, probably by the end of this year, as a member of the Latin American Integrated Market, which currently consists of the stock markets of Colombia, Peru and Chile.”

Not everyone is thrilled with the news though.  Evo Morales has claimed that the FTA is “a geopolitical scheme by the United States to oppose the progressive, left-wing governments of Brazil, Argentina, Uruguay, Bolivia, Venezuela and Ecuador.”

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Welcome to Mugabeland

Zimbabwe is daydreaming about a Disneyland-Africa at Victoria Falls. It actually seems reasonable when you consider that the UN made Zimbabwe the host country for their World Tourism Organization general assembly. Why wouldn’t the Mouse want a piece?

Apparently one of Mugabeland’s major attractions will be a log-ride that washes your money!

Here’s the pithy essence from the BBC:

“We think it should be modelled along the size and the kind of vision that is on Disneyland, including hotels, entertainment parks, restaurants, conferencing facilities. This is the vision and we need people who can run with it.”

Mr Mzembi earlier told Zimbabwe’s official news agency New Ziana that the government wanted to create a free zone with a banking centre “where even people who do not necessarily live in Zimbabwe can open bank accounts” .

He announced the plans at the UN World Tourism Organisation general assembly, which Zimbabwe is co-hosting with Zambia.

C’mon people, sing along with me, “It’s a shitty world after all, it’s a shitty world after all, it’s a shitty, shitty world”

 

 

And I thought I was the hammer

I’m all for high education standards (I have been nicknamed “the hammer” by two separate colleagues over the years), but either the University of Liberia needs to rethink their entrance exam or Liberian high schools need to step up to the challenge.

The BBC reports that the university has lessened its overcrowding problem by not admitting a single student for next year’s class.  According to school authorities, all 25,000 students who took the admission exam failed.  The education minister had this to say about the situation:

“I know there are a lot of weaknesses in the schools but for a whole group of people to take exams and every single one of them to fail, I have my doubts about that,” Ms David-Tarpeh said. “It’s like mass murder.”

I agree that something seems fishy. For example, the university said that the applicants “lacked enthusiasm” and good English skills.  How do you test for enthusiasm and why is that part of the exam?  The fact that they paid $25 to take the test seems to indicate that they have enthusiasm for learning and for investing in their future.

On the other hand, I would question the Education Minister’s equating the situation to a “mass murder.”  That seems like a curious (and terrible) analogy anywhere, but especially the political hell that Liberia has undergone in the last couple of decades.

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Life among the liquidity constrained

BBC Africa has a great piece on what it means to be middle class in the Ivory Coast.  The article profiles two Ivorians, Konan Kouassi Vercruysses (age 26) and Kouadio Koffi (age 29), who make between $2 and $20/day, thus falling in the middle class range as defined by the African Development Bank.

Konan “runs a phone booth with his cousin. He works five-hour shifts, six days a week and attends university.”  Kouadio “is a security guard who shares a one-room house with his cousin. He works 12-hour night shifts, six days a week.” Here are their monthly budgets (first column is for Konan and the second for Kouadio).

Earnings $240-$530 $100
Rent (inc water) $80 (for his room and one for his cousin) $33
Transport $20 $2
Electricity $8 $4
Gas (for cooking) $2 $4.40
Internet $3.20
Phone $12 $2
Food $140 (including for his cousin) $50
Clothes $10-$30 $10 (if money available)
Other circa $40 (to his cousin for phone booth work)
Savings Yes (undisclosed – been saving for five months) No

The profiles are often heartbreaking, showing how hard it is to smooth consumption at low levels of income (and with no access to credit markets) and how precarious life can be when sickness or unemployment can spell ruin.

Here are some quotes by Mr. Koffi:

When I wake up in the morning my problems begin, truly, because I have to first find food and then I have to help my cousin. If I had more money I could help more.

I don’t have any savings or any emergency fund. There is nothing in my bank account. Everything I earn goes on rent, bills and food. There’s nothing left for savings.

When you’re sick it is serious because there is no money for the hospital. I find small treatments or drugs from people who sell them on the street.

There are many challenges. I want to see a better life, a better life for me. I want to have a wife and children but what food can I give them? I need money to give them a life and send them to school. I don’t want them to suffer.

h/t to Souleymane Soumahoro

Ms. 25%

The original Mr. 10% is/was Asif Ali Zardari, who earned the title when he was Benazir Bhutto’s husband. He’s now President of Pakistan. I am still not sure how he beat Tommy Suharto or Raul Salinas to win this coveted title.

Anyway, we can now break a glass ceiling and crown a Ms. 10% 25%, in the person of Isabel dos Santos, the daughter of Angola’s President for life, Jose Eduardo dos Santos.

Isabel started in 1999 with a 24.5% stake in a newly formed diamond firm, and soon added a 25% position in the country’s first “private” mobile phone company. Toss in a bank, an oil company and the country’s only cement company, invest the dividends in European firms and viola:

Africa’s only female billionaire.

Yikes!

Perhaps the most striking line in the linked piece is this:  “Angola’s 2010 constitution bars the president from stealing public money”.

It’s remarkable both that a constitution would actually have a specific prohibition of executive thievery and for the implication that before 2010 stealing public money was permissible.