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November 27, 2006

Calderisi on The Trouble with Africa, Why Foreign Aid isn’t Working

The Trouble with Africa is Robert Calderisi’s personal account of the problems and prospects of sub-Saharan Africa. It is has been variously described as hard-hitting and challenging and, on the opposite side, as self-indulgent and even , 'old hat'. What are its major themes? Who is it written for? How valid are its conclusions?

Calderisi’s book is difficult to classify and that will have an impact on the expectations that people bring to reading it. It is not a book for academic experts. It is about aid and the World Bank and about Africa’s poor economic performance (Ghana on independence was much richer than Malaysia). It is packed with a huge range of interesting examples and yet uses very few figures. It is intended for a popular audience both in Europe and the United States as well as in sub-Saharan Africa. It is also autobiographical, essentially one man’s attempt to come to terms with a huge range of experiences, gathered over many years working either in sub-Saharan Africa, or on its problems. It deals with both a personal and a public agenda and with their interrelations. Raising awareness of HIV/AIDS and the development of appropriate policies towards the epidemic, are topics to which Calderisi seems to have made a personal commitment as well as to micro-developmental projects. The book asks people in Africa to take stock of the assets and liabilities that they have and for African politicians to face up to the fact that country after country has squandered resources that should have helped further economic and social development. His aim is to move the popular conversation about African economic development into new territory rather than around the old anti-colonial and neo-colonial circle that he sees as unhelpful in the context of current resource allocation. He acknowledges that aid is demeaning and that it can encourage dependency. He also acknowledges, but perhaps this needs to be stressed more, that the World Bank and development agencies also made mistakes. It is not simply a question, in my view, of corrupt politicians (though he illustrates corrupt practices at some length) and inwardly oriented growth paths than many countries chose to the detriment of the further development of export crops and new agricultural exports.

The whole set of questions around aid, trade and the colonial legacy is fraught and Calderisi is intent on making direct challenges to established views. So too is, in my view, the idea of ‘development’ as a deliberate act of national government. In the modern world we are very impatient about the slow progress of economic growth in some parts of ‘the global south’. We tend to forget that the idea of deliberately seeking out economic development is a relatively recent phenomenon. The notion did not properly exist before the Second World War though there were glimmerings of understanding at that time of the extent of hunger in the world and of the absolute shortage of industrial capacity in much of the world beyond Western Europe and the United States. Development economics as a subject of intellectual discussion, analysis and research grew out of the activities of a small group of academics and planners in London during the Second World War. Development agencies, such as the World Bank, and development Research Institutes, did not exist to the extent that they developed in the later part of the post-war world. Calderisi illustrates a range of bad practices by African governments. Mistakes were inevitable, I feel, whether on the part of inexperienced national governments seeking to do the best they could under pressing problems and constraints or on the part of the World Bank and other agencies. Governments everywhere may not be able to promote economic growth by their own policy efforts—though some like Botswana and Mauritius in Africa and several governments in Asia have become good at doing just that— but they can very easily frustrate it by the rules that they adopt and the behaviors that they encourage. Some of these behaviors arose out of misguided developmental thinking pushed by external agencies of one sort or another, and not simply from policy development and corruption on the African continent.

This book helps humanize the World Bank, an institution easily demonized by those opposed to the sorts of development projects that it tends to get involved with. It portrays heroic African figures— the portrait of Julius Nyerere and of his visit to the World Bank in his retirement is very moving— as well as of a range of fallen heroes and outright dictators. It insists that sub-Saharan Africa is capable of determining its own destiny provided it gets its values right, avoids corruption, shows concern for the poor and embraces democratic standards. It holds that aid should be concentrated on the relatively small range of countries that have adopted just such a position. Uganda, Ghana, Mozambique, Tanzania and Mali are mentioned in Calderisi’s list of preferred countries. The rest of the aid budget should be used only for projects that will benefit groups of countries rather than simply one country, provided that the poor in the other countries are not completely abandoned. Those with a commitment would then move forward and the West would not be engaged in the counter-productive activity of constantly lecturing such other governments that have no intention of changing.

This book and its conclusions are not likely to be to everyone’s taste: some of the generalizations made can feel over-simplified; the structure is not always helpful; examples have a ‘parable like’ quality needing interpretation and some of the very personal material is simply intrusive. There are few ideas that would fundamentally challenge the existence of multilateral aid (though he feels that the World Bank ought to be merged with the IMF and UNDP in a bid to eliminate duplication). The idea of citizen review groups capable of developing independent views on national decisions is both interesting and useful. The case for more supervision (Schools and HIV/AIDS policies and programs) contradicts the notion that sub-Saharan Africa is up to the challenge of change. However if ithe book helps to promote an informed popular debate, rather than emotionalism, in Western countries and in sub-Saharan Africa, then this ought to be for the good. It may however be overtaken by events as China’s interest in raw materials will once again pull the continent into export led growth. This will not change the issues to be faced: mineral growth can lead to an economic dead-end and an increasing gap between rich and poor, if there are no careful polices with respect to investment planning and wind-fall gains management. With such growth, the issue of democracy and good government will not go away, nor will questions of poverty elimination. The issue in practical terms will be whether or not sub-Saharan African economies, politicians and electorates can learn from past mistakes.

November 21, 2006

Review of Mark Leonard on Why Europe Will Run the 21st. Century

This book, published by Fourth Estate in 2005, is focused on the regionalizing aspect of ‘global influence’ and argues for the continued rise of European economic power and political influence and the relative decline of that of the United States. What is its thesis? How ought we to evaluate Leonard’s arguments?

The conventional view, according to Leonard, is that American power will hold good for another fifty years and then Asia will predominate, with India, and more especially China being the engines of world trade and the new superpowers. Leonard’s thesis is that American power has already shown serious signs of slipping. Its arsenal is huge; its willingness to threaten and to bully is based on this ‘hard power’ but its faith in the exercise of such power is over-confident, even misplaced. Branding states as rogue states and threatening them with military action is counter-productive. Such threats merely encourage them, as in the case of North Korea, in the very behavior that the United States is wishing to prevent. The more that the United States in its ‘war on terror’ attempts to exercise its military option, the more its ‘soft power’ (influence; diplomacy) is eroded. Indeed, the limits of American power are perfectly illustrated by the debacle in Iraq and by the fact that authoritative regimes in the Middle East have been reinforced rather than encouraged to change.

The power of the world’s most successful economic union, the EU, is of a different kind, according to Leonard. Whereas American power is ‘shallow and narrow’, that of the EU is ‘broad and deep’: ‘once sucked into its sphere of influence, countries are changed for ever’. Where America sees only ‘potential enemies’, Europe prefers to see ‘potential friends’. Leonard argues that it is the lack of a significant military option that has encouraged Europe to think of new ways of engaging the wider world. European power as experienced by and through the European Union is ‘transformative power’ accomplishing though negotiation and trade, democratic change in historically undemocratic nations. By operating through the existing ‘shell of political structures’ Europe has achieved a relatively silent political revolution within itself. The structures within the initial members remain the same but the key political process is that of a continuous engagement with other states within the European Union, a kind of ‘Network Europe’ (similar in function to the network that supports ‘Visa’). New states wishing to join participate in the process long before admission and are transformed as a result. Poland and Turkey and changes made in these countries are cited as part of the evidence for the existence of this ‘transformative power’. Key ideas are related to the development of European law: stable democratic institutions; the rule of law; human rights and a market economy. These changes are undertaken voluntary as a result of negotiation and diplomacy, whereas the changes in Iraq (such as they are) are imposed by force. At the same time, international companies are also regulated through changes in EU law, giving Europe a role in setting global regulatory standards. The model for further global developments, according to Leonard, is not that of the United States but rather regional groupings associated with Europe and constructed in similar ways.

China is on the rise and is starting to look at its own regional spheres of influence, aware of its need for sources of raw materials to further its industrial development. India is growing rapidly. The world cannot simply be run, Leonard argues, with out-of-date international institutions. The EU provides an effective model for increased regionalization. This has influenced the development of the North American Free Trade Association (NAFTA) between Canada, the United States and Mexico. This is not, however, a politically popular agreement, as far as I can judge, and has little scope for further development. Demands for protectionism are likely to be on the rise in the United States, especially given the recent changes in the composition of the Congress. Newly elected Democrats are not necessarily trade friendly. Leonard sees a ‘post-America world’ to which America can chose to adapt by becoming more interested in international law and institutions, world opinion and the soft power options of negotiations and alliances or to which it can turn its back. Leonard sees the European way as becoming by adoption, and adaptation, the world way, with or without the United States.

This book paints with a large brush and on a very large canvas so it does not give as much attention to China as may be required or to any backsliding in EU members or potential members who were once in the Soviet bloc. It does not pay much attention to the reform process within Europe (agricultural policy; export subsidies; the drive for increased competitiveness though it is true that this process is underway) nor does it give enough attention to the confusion in Russia and the growing leverage Russia has over trade in gas and oil with respect to Western Europe and elsewhere. Nor does it look at cooperation and competition in Central Asia between Russia, China, the United States and Europe. A significant theme is on trade and on the next stages of globalization i.e. on the rise of regionalism leading, in Leonard’s view, to a world of regional units modeled, more or less, on the EU. Such a world looks more and more like a possible world, in my view, especially given the collapse of the Doha Round. These are no doubt weaknesses in the coverage. However, the strength of the book is found in contrasting the steady progress of EU ‘transformative power’ with the problems in the recent policy of the United States, including the erosion of both ‘hard’ and ‘soft power’ by the demands of the ‘war on terror’ as recently constructed. Leonard may overplay his hand but the book is an interesting read even if it is short on detail.

November 14, 2006

Blair changes strategy in Iraq and beyond.

Blair’s Guildhall Speech of the 13 November 2006 outlines a new diplomatic initiative with respect to Iraq. What are the changes? Are they of any significance?

The Guildhall Banquet Speech is traditionally an occasion for a British Prime Minister to make a key statement on the development of foreign policy. This year, as in previous years, the focus was on Iraq and Afghanistan. In the speech, Blair outlined how he sees the situation in Iraq and in the Middle East as a whole and set out the changes in policy that are required. He welcomed the economic development of China. He also re-affirmed his believe in the significance and strength of the alliance between the United States and the United Kingdom.

Blair, whilst mentioning the fact that there were particular ‘national factors at play’, outlined the ways in which the problems in the two countries, Iraq and Afghanistan, were linked. The source of the problems, according to the Prime Minster, is the ‘same ideology, the same methods that have seen thousands die in acts of terrorism across the world’. In Iraq the aim of the ‘terrorists’ is to 'provoke civil war’ (many believe that they have in fact succeeded in this respect). From his point of view it is ‘outside’ and ‘inside’ extremists rather than ‘faulty planning’ that has given rise to the problem. Al Qaida cooperates with the Sunni and Iran backs the Shia. Iraqis as a whole voted for a ‘non-sectarian government’.

He described the situation in Iraq as ‘evolving’. As the Iraqi scene changes so must ‘strategy’. In this respect the Iraqi Government needs to be strengthened through the development of a ‘strong political compact in Iraq’ together with further investment in administrative and economic capacity. In addition gaps in the training of the Army and police need to be filled.

A key strategic change must be to address the external influences that he saw as the major causes of the disruption. He called for a ‘whole Middle East strategy’. In this he saw the core problem as that of the relationship between Israel and the Palestinians though Blair’s speech did not specify what was required or how it would be achieved other than through uniting moderate opinion. Iran needs to be tackled. The country has a ‘genuine’ though mistaken fear that the United States will take military action against it. Iran is assisting ‘extreme elements’ in order to thwart western aims. Iran’s strategy ‘is perfectly straightforward and clear’ and needs to be answered by an equally clear strategy on the part of the west. It must either be drawn into the discussion of the Middle East Peace Process and other aspects of working toward wider peace or face complete isolation. He held to the view that all of the events are related to the global terrorism and call for a global response.

How is such a speech to be evaluated? It is clear that there is much that is familiar. Iraq is surely not heading for civil war but firmly in the grips of one. Stengthening the capacity of the Iraqi Government is an established theme. That particular problems are manifestations of global terrorism, for example, is also very familiar. That particular problems are manifestations of global terrorism, for example, is also very familiar. It is this sort of thinking that makes it difficult to evaluate particular problems in particular places. Iran was declared part of the ‘axis of evil’ and so, with a received threat of military action against it, set about to find ways of defending itself, and thus confirming the very behavior that the west had intended to prevent. Diplomats should know better than to fall into such traps.

But there is always more to such speeches than meets the innocent eye. Placing Israel/Palestinian problems at the centre of the ‘whole’ approach to the Middle East is a suggestion that is long overdue. Blair will talk to these issues when he contacts the Iraq Study Group today. This will call for some tough questions in Washington. Offering the possibility of a ‘new partnership’ to Iran is also significant and suggests a return to normal kinds of diplomacy and engagement. London and Washington would seem to be in agreement: engage or isolate. Isolation is a dangerous option so we must suppose that engagement is, for the British at least, the preferred diplomatic option.

However a bigger set of changes is on its way. The British have in fact been talking directly to Syria. The unstated aim of the talks in Damascus appears to have been attempting to engage the Syrians in sorting out the situation in Iraq. Attempts are being made to draw Iran and Syria into discussions and involvement in sorting out Iraq. Both are frustrated by Israel’s approach to the Palestinians. The ‘whole Middle East’ strategy means that we can expect if the two countries agree to cooperate that any trade-off will put pressure on Israel in some form or another.

November 10, 2006

The Shanghai Cooperation Organisation, a New Military Alliance?

In the Guest Web-log, David Wall (Chatham House, London) outlines what he sees as the role of China’s Shanghai Cooperation Organisation. What is it? How does it work? How will it develop?

The Shanghai Cooperation Organisation (SCO) celebrated its fifth anniversary in the summer of this year. It was built on the foundation of an earlier organisation, The Shanghai Five, which was established by China in 1996 after the collapse of the Soviet Union (USSR). China was concerned about the security of its borders with the three newly independent countries that had emerged after the disintegration of the USSR. The three countries in question were Kazakhstan, Kyrgyzstan and Tajikistan. Russia was the fifth member.

The Shanghai Five, under the leadership of China, did agree on China’s borders with the three Central Asian countries and also agreed to move troops away from them. China made proposals for developing the agenda of the Five in many directions: economics, logistic, cultural and militaristic. After discovering that meeting the objective of containing “terrorism, extremism and separatism? would involve working with another former Russian colony, Uzbekistan, that country was invited to join the institution in 2001 and the Shanghai Five was renamed the Shanghai Cooperation Organisation.

As China’s presence and status in the four Central Asian country members grew, Russia became concerned. Around the time that the USA came into the area (having established bases in Kyrgyzstan and Uzbekistan and supporting facilities in Kazakhstan after 9/11,) Putin began to watch developments there more carefully. He began to consider it as an organisation capable of balancing USA power in the region, and maybe beyond.

In 2005 he persuaded Hu Jintao to join him in getting the members of the organisation to press the USA to give a date for the closure of its bases in Central Asia. He also persuaded China to mount, in August 2005, their first ever large scale joint military exercise with Russia, involving more than a hundred thousands troops and the latest military equipment. This was run as an SCO exercise.

After commentators began to draw attention to the growing range of military activities being held by SCO members Grigory Loginov, Russia's permanent representative at the organization's secretariat, felt he had to say (in April 2006) that "The SCO has no plans to transform into a military bloc.? However, he went on to say: “... the threat of terrorism, extremism and separatism is so serious today that it is impossible to counter it effectively without the full-scale involvement of the armed forces. The SCO can play an independent role in efforts to sustain stability and security in the region. Its member-states are consistently intensifying their cooperation in fighting terrorism, extremism, and separatism; drug trafficking, cross-border crime, human-trafficking, and money laundering?.

Presumably that is why the large scale military exercise Russia and China held under the auspices of the SCO was a war game involving battling with invading forces coming in from the sea: none of the SCO members other than Russia and China have sea coasts.

It is worthwhile noting that Article 19 of the Shanghai Cooperation Organisations constitution says that “When a situation arises in which one of the contracting parties deems that peace is being threatened and undermined or its security interests are involved or when it is confronted with the threat of aggression the contracting parties shall immediately hold contacts and consultations in order to eliminate such threats.? This wording is very close to the wording of Article 3 of the old Warsaw Pact and Article 5 of NATO’s constitution.

The militaristic element in its constitution, the large scale SCO war games (and extensive range of military cooperation and training exercises and extensive trade in equipment) growing Russian and Chinese military presence in Central Asia, suggest that its members do regard the organisation as a military alliance in one form or another.

Oh, by the way, Iran and Pakistan (currently observers – as are India and Mongolia) are pressing to be admitted as full members, so are other western allies such as Belarus and Serbia. The USA did ask to be admitted as a member, but it was turned down. I wonder why?

David Wall

November 4, 2006

China, African and mineral economies.

What are the benefits and potential pitfalls of China’s growing economic involvement with the continent of Africa?

China is on the move, motivated not so much, if we are to believe its leaders, by political concerns as economic ones. If China is to sustain its rapid industrial development, it needs raw materials, oil in particular. The drive is on to secure supplies and the African continent has been and continues to be targeted. This is good news for Africa, a continent that has, despite the emotional fears of ‘colonialism’ and ‘neo-colonialism’, in fact been marginalized in world trade, due to the kinds of domestic economic policies pursued by the majority of governments since independence. With roughly twenty percent of the world’s population, sub-Saharan Africa contributes to only one percent of world trade. Whilst China and India are growing rapidly as the result of opening to international investment and of domestic reform, sub-Saharan Africa has stagnated, even declined. Whilst Asian countries have been pulling people out of absolute poverty at rates not witnessed before in world history, Africa has slipped backwards. China is a major ‘driver-economy’ in Asia and will be increasingly a driver-economy with respect to the rest of the world. If the United States economy slows further as a result of changes in the housing market and the drying up of spending financed by rising house prices, expanding Asian economies such as China and India are likely to maintain international growth. Rising investment in oil exploration and development and increased exports and export-earnings will bring benefits, loosen budget constraints and kick-start other developments. With the attention being given to the continent by China, other international investors may take courage and reconsider African countries as a place to invest. Sub-Saharan Africa is growing again.

There is a price to pay, though this price in economic terms ought not to be laid at China’s door. The phenomenon takes place whatever the source of the commodity boom. Commodity price booms bring good news— high foreign exchange earnings—though the down side is that countries where the export-base is heavily dependent on a few natural resources such booms tend to bring with them a rising external value of the currency. This can lead to the closing off of other traditional exports (especially those from the agricultural sector that are or at least have the potential to be environmentally sustainable) as the higher foreign-exchange rate removes competitiveness. Agricultural exports are labor-intensive and land extensive (in other words they combine resources in the ‘right’ proportions with respect to availability). Mineral economies under modern technological conditions are capital-intensive.

Mineral economies in sovereign entities (such as Nigeria, Norway or Chad) and non-sovereign entities (such at in Northern Minnesota) alike face a similar set of pragmatic problems. In the investment phase large quantities of investment have a big but short-term impact on growth. In the production phase production builds up, peaks and then declines. In time the resource is depleted and economic well-being moves to somewhere else. It was probably Herodotus who first observed that economic activity never stays long in any one place. Demand for the output comes from the world economy and this itself is subject to periods of expansion and contraction. What matters is how these problems are faced and managed. Norway, for example, is well-aware of the limited potential life-span of oil production and has a planned approach to the investment of the oil revenues. Norway has avoided, as a result, the closing off of economic options that mineral booms can bring. Botswana has maintained its traditional export (beef to the European market) and has avoided by careful macro-economic management cutting of its traditional exports whilst benefiting from the new diamond industry. Botswana’s macro-economic policy has led to the development of high levels of reserves (to enable it to outride any slump in foreign exchange earnings should the diamond market decline). Whilst many sub-Saharan African counties had to adjust to deficits, Botswana had to learn how to adjust to surplus. Windfall gains need to be managed with an eye on both diversification of the economic base and on the long-term. Prudence (one of the Classical virtues) demands care for the long-term and care for the long-term ought to be one of the special responsibilities of government (David Hume thought as much in the early part of the 18th century). Botswana is currently seeking to diversify its economic structure through services, particularly financial services, in which it feels it has, as a result of prudent macro-economic policy, often described as the ‘best in Africa’, a competitive advantage. It has avoided one problem of mineral development (potential loss of traditional exports) and is seeking to avoid the other (no diversification away from the mineral economy).

An important consideration therefore is the quality of governance, the capacities of governments to manage mineral economies in ways that are beneficial in the long-term. This means re-investing revenue from mineral resources in health, water and sanitation and in education rather than in financing consumer imports or in the purchase of armaments. It means building up reserves to offset ‘external shocks’ to the economy (unexpected reductions in commodity prices or even drought). It means learning for the errors of the last forty years and from the success of places such as Norway and Botswana. It means, in short, raising the quality of governance. And here is a potentially significant problem. China has been accused of undermining long-term Western attempts to increase good governance by supporting regimes that have gained international disapproval (Sudan, Zimbabwe). The issue with respect to commodity booms is of significance: windfall profits and economic rent need to be reallocated with care and efficiency and transparency if the growth in mineral exports it to bring long-term benefits. Good governance is key. In the end this is really up to governments in Africa and to those who elect them.