The long lasting effects of trade

In The Long Process of Development: Building Markets and States in Pre-industrial England, Spain and their Colonies, my co-author and I show that smugglers in New Spain (current Mexico plus much more) conducted virtually all trade with Europe in the 1600s, including much of the exportation of silver.  In fact, it is estimated that in some decades over 50% of the silver sent to Europe was shipped illegally from Mexico.  Because this trade was illegal, it didn’t bring about a growing system of laws, rules, & regulations enforceable in a judicial system.

As Douglass North wrote, it is important to have property rights that are internalized in people’s consciousness and unconsciousness, embodied in multi-volume codes of laws and regulations, and enforced by impartial courts and professional bureaucracies. That Mexico did not have because of its smugglers ’ economy.

In principle, the de facto legalization of trade between Mexican ports and the United States during the war with France should have been highly beneficial to the development of a commercial culture in Mexico. It was, in fact, advantageous, but the benefits were limited by the fact that Mexico had few ships on the East coast to use in trade with either the US or anyone else.

An excellent new working paper shows that perhaps illegal trading wasn’t so bad after all, even if it didn’t give rise to good institutions.  Daphne Alvarez Villa and Jenny Guarded, in “The Long-Run Influence of Institutions Governing Trade: The Case of Colonial and Pirates’ Ports in Mexico,” show that:

“The presence of trade, either in its legal or illegal form, leads to significantly better development outcomes compared to neighboring areas where such activities were absent.”

They note that conventional wisdom would assume that “smuggling may be detrimental for long-run economic growth and development for numerous reasons: first, by fostering a culture of informality and illegality in detriment of revenue collection; second, the weaker presence of the state may make it difficult to enforce contracts and protect property rights thus depressing economic activity; and finally, colonial smuggling was at times accompanied by piracy and these ports were often subject to armed attacks and pillage, particularly during the 16th and 17th century.”

However, “smuggling during colonial times may have created the necessary conditions to benefit from trade liberalization in the late 18th century (comercio libre) and after independence (1821). For instance, merchants with the “know-how” and experience of clandestine networks had an advantage in the business once trade restrictions were lifted. Such an early start in commercial activities (either legal or illegal) may have compensated for the damaging effects of a weak state presence and supports an emphasis on increasing returns to scale mechanisms.”

The paper is quite good and well worth reading in full.


Ethnicity, institutions & governance in Sub-Saharan Africa

Stelios Michalopoulos and Elias Papaioannouby have a great new working paper called “On the Ethnic Origins of African Development Chiefs and Pre-colonial Political Centralization.”  The authors make the excellent point that there is a tension between the focus on the nation-state in Sub-Saharan Africa and the reality that national governments often don’t effectively govern all of their territory and that ethnicity matters.  The authors note:

“Herbst (2000) notes that quite often Western policy makers and academics alike when discussing African countries project their notion of nation-states that is based on strong governments, pervasive national identification, and well-defined political boundaries. Yet, most African states defy the Weberian notion of an entity that enjoys a legitimate monopoly of violence providing order, security, and protection of private contracts. Throughout most of its post-independence history, most African states have not been able to monopolize violence and uniformly enforce the law. Moreover, national identity has only recently started to emerge, as most African states are colonial makings without strong historical antecedents (notable exceptions include Ethiopia and to a certain extent Botswana).

They go on in the paper to show that:

1. “Individuals identify with their ethnic group as often as with the nation pointing to the salience of ethnicity.”

2. “The strong link between pre-colonial political centralization and regional development -as captured by satellite images of light density at night- is particularly strong in areas outside the vicinity of the capitals, where due to population mixing and the salience of national institutions ethnic traits play a lesser role. Overall, our evidence is supportive to theories and narratives on the presence of a “dual” economic and institutional environment in Africa.”

Really interesting work.

Score one for Jeffrey Sachs in the geography versus institutions debate

While hopefully all economists believe that both institutions and geography are important to development, there is a debate in the literature about which factor is more important.  Acemoglu, Johnson, and Robinson, for example, come down on the side of institutions, arguing that geography mattered in the past but is no longer significantly correlated with income.  I understand econometrically why they need to make this claim but it has always seemed to be relatively weak to me.  I give my students an excerpt from Ryszard Kapuscinski’s Shadow of the Sun called “Mountain of Ice.” Kapuscinski, one of my long-time favorite writers on Africa, came down with a virulent form of malaria and the description is so horrifying that it ensured I never missed a dose of my anti-malarial medicine when visiting malarial regions.

I think economists are sometimes too flippant when they downplay the effects of diseases like malaria on income.  I wonder if they would feel the same if they came down with the same strain that Kapuscinski did.

There are many difficulties with getting people in malarial regions to use bed nets effectively.  Before I read Nina Munk’s tremendous book The Idealist, I didn’t realize that people were using them to protect their livestock rather than their kids.

The company Psyop has teamed up with the Against Malaria Foundation (AMF) to try to change people’s perceptions of malaria.  To do so, they have created a 90-second animated film called “Nightmare: Malaria” “that begins as a sweet bedtime story before quickly devolving into a hallucinatory trip that paints a picture of how the disease affects a body. Symptoms such as high fever, violent convulsions, vicious sickness, and attacks on the liver and brain are rendered with psychotic energy befitting a Hunter S. Thompson tale.”  The moral of the story is that people can avoid these symptoms by using bed nets.

They have also created a video game, where “players avoid killer mosquitoes and collect teddy bear tokens amid fever-dream visuals, [which] further impresses how diabolical malaria can be.”

I was curious about who the target audience for these things are.  Surely they aren’t the people in the malarial regions themselves, given that they probably already have a good idea what malaria looks like (and probably don’t have the time or money to be watching these videos and playing the games).  It isn’t totally obvious from the article but it seems like the idea is to educate Western audiences to the horror that is malaria.  It seems to be working in that the “game was downloaded to iOS and Adroid devices over 130,000 times…[and]… has already resulted in 42,000 visits to the AMF donate page, which should translate nicely into a lot of nets.”

I like how innovative this approach is but it still needs to be paired with ways to get people in malarial zones to use the nets effectively.

Always good to dream big

I’m late to this story, but I was recently reading about President Yahya Jammeh of The Gambia.  While many African countries have made great strides in democratization in recent years, Mr. Jammeh is apparently not a fan.

In 2011he claimed that he “will rule for “one billion years”, if God wills.”  Apparently God still wills it as he hasn’t stepped down.   And what about critics who say that he wins elections through intimidation and fraud.  They can “go to hell”!

Other great claims by the big man of Gambia:

1. In 2007, he noted that he could personally cure HIV/AIDS with herbs.

2. He can also cure infertility in women.

3. In 2008, he threatened that any homosexuals in the country would be beheaded.  He later backed off that threat, but in 2013 stated: “Homosexuals are not welcome in the Gambia. If we catch you, you will regret why you are born. I have buffalos from South Africa and Brazil and they never date each other. We are ready to eat grass but we will not compromise on this. Allowing homosexuality means allowing satanic rights.”  Note: what is up with the buffalo and grass references?

The 2011 article about the president that I referenced above ends with this awesome statement: “The tiny West African state is a popular tourist destination.”  Really? As compared to what?  Somalia?

Interesting new papers on African institutions

The Journal of African Economies has a special issue this month on the topic of institutions and African economies.  In my Ph.D. development class I have a section on African economic development, so I am eager to check these out and see if there are any I should add to the syllabus.

All of the articles look promising, but here are the two I find most interesting ex ante:

“The New Institutionalism and Africa” by Robert H. Bates & Anke Hoeffler

After briefly reviewing the new institutionalism, this article uses the history of political reform in Africa to test its key tenet:  that power, if properly organised, is a productive resource. It does so by exploring the relationship between changes in political institutions and changes in economic performance, both at the macro- and the micro level. The evidence indicates that political reform (Granger) causes increases in GDP per capita in the African subset of global data. And, at the micro level, it demonstrates that changes in national political institutions in Africa strongly relate to changes in total factor productivity in agriculture.
“Growth of African Economies: Productivity, Policy Syndromes and the Importance of Institutions” by Augustin Kwasi Fosu

Recent evidence from an exhaustive political-economy study of growth of African economies—the Growth Project of the African Economic Research Consortium—suggests that ‘policy syndromes’ have substantially contributed to the generally poor growth in Sub-Saharan Africa during post-independence. The current article employs the unique data and insights generated by the Growth Project to further explore the importance of a ‘syndrome-free’ (SF) regime for growth in the region by examining: (i) the channels via which SF affects growth: total factor productivity versus factors of production and (ii) the role of institutions in mediating this impact, with special attention accorded to the efficacy of the restraint on the executive branch of government in mitigating the potentially adverse effect of ethnicity.


Disease & Development

Two of the best economists on the topic of agriculture and development, Margaret McMillan and William Masters, have teamed up with a good development economist from Oklahoma State University, Harounan Kazianga, and written an interesting new working paper called Disease Control, Demographic Change and Institutional Development in Africa.  The abstract below gives more details, but they essentially find that selective treatment of river blindness has had a significant long term effect on population growth and institutions in those villages.  I am teaching a Ph.D. class on development this fall and I have a section on institutions, geography, and development.  Looks like I have a new addition to the syllabus:

This paper addresses the role of tropical disease in rural demography and land use rights, using data from Onchocerciasis (river blindness) control in Burkina Faso. We combine a new survey of village elders with historical census data for 1975-2006 and geocoded maps of treatment under the regional Onchocerciasis Control Program (OCP). The OCP ran from 1975 to 2002, first spraying rivers to stop transmission and then distributing medicine to help those already infected. Controlling for time and village fixed effects, we find that villages in treated areas acquired larger populations and also had more cropland transactions, fewer permits required for cropland transactions, and more regulation of common property pasture and forest. These effects are robust to numerous controls and tests for heterogeneity across the sample, including time-varying region fixed effects. Descriptive statistics suggest that treated villages also acquired closer access to electricity and telephone service, markets, wells and primary schools, with no difference in several other variables. These results are consistent with both changes in productivity and effects of population size on public institutions.

h/t @JustinSandefur