Saumitra Jha recently gave a fascinating lecture at Berkeley’s comparative colloquium in which he discussed some of his current work on designing financial instruments that can promote political stability. He drew extensively on the case of Japan in the late 1800s, where the government granted bonds to ex-samurai who were opposed to its modernizing reforms, then encouraged the bondholders to invest in the national banking system. This gave a potentially militant group a significant stake in political stability and financial modernization. Jha’s description of this process is worth quoting at length:
The government created an innovative, ethnically-delimited asset – the bonds given to samurai — even while eliminating the privileges and obligations that had made this ethnic group distinct. It then took the ex-samurai, one [group] that was the most likely to engage in violence and enhance political risk, and gave them incentives to become local bankowners – a group with arguably the greatest incentives to avoid engaging in violent actions that would raise the political risk of their investments in local ventures (often rice and silk). By aligning the samurai’s interests against political risk, these financial innovations aligned their interests with not only the merchants who were their fellow merchant share-holders but society at large. Since all could benefit, and in fact the samurai had explicit stakes, as bankers, in the nation’s future, they also meant that the samurai could give up their arms and credibly share the gains that modernisation and reduced political risk provided.
This process also produced a truly phenomenal photo of samurai-turned-banker Eiichi Shibusawa, who’s known as the father of Japanese capitalism for his role in founding the Tokyo Stock Exchange and a number of other publicly held companies.
What I find fascinating here is the ways in which this process is both similar to and different from current debates about post-conflict power-sharing in Africa. The idea behind consociationalism is that placing representatives of all contesting groups in power ought to give them a common interest in maintaining the stability of the state. This appears to have worked out relatively well in Burundi for the last ten years. Lemarchand is explicit about Bujumbura’s focus on maintaining interethnic stability even at the cost of good governance: “[the administration is] a top-heavy political machinery whose sole purpose is to provide as many jobs as are needed to meet the requirements of political stability. The government is not meant to govern; its purpose is to offer an attractive alternative to rebellion” (2009, p. 149). In a sense, then, this is simply a less efficient means of accomplishing what the samurai bonds did in Japan.
However, institutionalized power-sharing has often failed in Africa as well. The prime case here is obviously the DRC, where the 2002 power-sharing accords got most – but not all – of the major rebel groups durably off the battlefield. The Nkunda- and Ntaganda-centric set of groups which continually rebelled in the east were largely spurred on by Rwanda, but also presumably believed that they might get a better deal out of some future peace agreement. Would a different benefit structure for ex-rebels – shares in banks as opposed to positions in the government – have led to a different outcome? The Congolese central bank has been issuing bonds for several years now, and the banking sector is badly underdeveloped, so promoting investment (and of course concomitant regulatory mechanisms) there might indeed benefit everyone. If readers have other examples of the strategic use of financial instruments to promote political stability, I’d love to hear about them.
Mark Anderson recently shared a link to an interesting map of tax rates on the average income for each country in Africa. The original map is from an international relocation site called MoveHub. I’m guessing this is about nominal tax rates and not effective tax collected.
Which countries surprise you? I for one would not have expected that Rwanda’s tax rates are higher than either Burundi’s or Uganda’s.
Lise Rakner, who’s visiting Berkeley from the University of Bergen for the year, recently gave an interesting talk on how competitive elections haven’t done much to improve development outcomes in Malawi. As a rough measure of this, I compared Malawi’s economic growth since the mid-1980s to its neighbors – Mozambique, Tanzania and Zambia.
(Data from the World Bank, via the Google Public Data Explorer. The graph looks different depending on whether you use current dollars or a PPP adjustment, but doesn’t change the fact that Malawi hasn’t grown as fast as the other two since 2000.)
I asked Lise what she attributed these divergent outcomes to, and her hypothesis was natural resources. This clearly accounts for Zambia’s higher GDP, but doesn’t explain why every country except Malawi saw a steady increase in GDP since 2000.
All four of these countries are considered “partially free” by Freedom House, so it’s not clear that the political environment is substantially worse in Malawi than elsewhere. They also looked very similar on the World Governance Indicators’ measures of government effectiveness, regulatory quality and rule of law in 2012. (Look at the error bars on the estimates – they’re all overlapping.)
(Data from WGI. I didn’t include data from 2000 or earlier to keep the graph easy to read, but they looked fairly similar at that point as well.)
So what’s going on? I don’t know Malawi at all, so any explanation would be appreciated!
This article by Guillaume Iyenda on the lives of street vendors in Kinshasa’s informal economy is nearly a decade old now, but it doesn’t seem like things have changed that much:
Our research showed that the highest diversity of sales took place between 10 and 12 in the morning. As many households consume only one meal a day, people prefer to do their shopping at this time and then cook a meal that is eaten between 4 and 5 p.m. In the late afternoon, sales are high in what is locally called the wenze ya bitula, the “market of the unsold”. Here, people generally sell all their perishable goods, which they are unable to keep from one day to the next because they lack freezers. As a result, these goods are sold at half price or less. Shoppers who most frequently use these markets are those who consume their one daily meal between 8 and 10 p.m.; most of them have to wait for the main income earner to return from work, bringing back the daily money for the food shopping.
Interesting throughout. He also has a related paper [PDF] on how street food preparation is a primary source of income for many women in Kinshasa whose husbands are disabled or unemployed.
Just wanted to point out that I’ve been listing links to datasets on conflict and governance on the righthand sidebar of the blog’s home page. If you read the blog in an RSS reader or just click on links to specific posts, you may not have seen this. Right now it’s at 24 links and counting, ranging from large dataverses (Harvard, World Bank) to mid-size databases (AidData, PRIO Armed Conflict Data, Yale ISPS,) replication datasets for individual papers (Mapping Migration in the DRC, Non-State Actor Data).
If you’re a Stata user, you may also be interested in the -wbopendata- module, which allows you to download World Bank data directly from Stata.
Globalization is often portrayed as something that is imposed on people in Africa, not as a process which they can seek to mediate or even actively participate in. Nina Sylvanus has a piece on Togolese imports of Chinese-made wax print fabrics (gated) in the April edition of African Studies Review which challenges this narrative:
[Fabric trader Antoinette] Mensah’s first experiences with the Chinese were in 1995. She had brought a set of samples, mostly non–wax prints, to Bangkok, and she wished to reproduce them as economically as possible. She met a Thai entrepreneur who introduced her to a colleague in Hong Kong who was the head of several textile manufacturing units. She worked with this Chinese manufacturer in Hong Kong for several weeks, and recalls his many misconceptions about African tastes. She had to point out repeatedly, for example, that her concern for her profit margin did not mean that she would accept goods that were shoddy or cheap… [The] fabrics met with immediate success [in Togo]… [However, by] 1996, she was confronted with a … challenge: a group of Togolese traders had her prints reproduced in India and copies of [her] fabrics entered the market.
Over at Living Anthropologically, Jason Antrosio makes a similar point that 21st-century globalization can only amaze us if we forget the past.