Africa is a country tantalizing in potential and seemingly perpetually in despair. So it was ironic that over breakfast today in Dubai, a global beacon of capitalism, I read an interesting commentary by Ellen Johnson-Sirleaf, the president of Liberia and Nicky Oppenheimer, the chairman of DeBeers in the weekend edition of the International Herald Tribune, the global edition of the New York Times.
They point out that “Africa is more democratic today than at any point since the start of decolonialization” and that “the amount of aid flowing to the continent, exceeding $30 billion, has never been greater.” And the global commodities boom has fueled economic growth rates, averaging 6.6% across sub-Saharan Africa. In fact, private capital flows to sub-Saharan Africa in 2007, mostly from investors in China, the Middle East and other parts of Asia, were estimated at $50 billion, far outdistancing direct aid and just getting started. So, they ask, why is Africa still lagging behind the rest of the world on most indicators of development?
Their claim is that, bucking the conventional wisdom that Africa doesn’t use aid properly, the real reason is the cost of doing business in Africa is too high. The authors cite a report from the International Finance Corporation that points out that 24 of the 30 countries with the most costly business environment are in sub-Saharan Africa, costs seldom borne by consumers but shouldered by African businesses and producers. They argue that the experiences of successful small and medium-sized economies elsewhere over the past 30 years have some important lessons for Africa, citing Costa Rica as an example, which has increased its per capita economy 250% over the past two decades, in going from an agricultural to a high-tech and services base:
- Competitiveness requires governments that can establish a framework for investment and step aside to let businesses thrive. Few countries in Africa have managed to establish and sustain a domestic political consensus around private sector growth and the often-painful reforms necessary to stimulate it.
- Countries must be willing to make a change in mind-set from the idea that foreign programs and plans will lift countries out of poverty to a belief in their own vision for their future. African governments need to sell the necessary reforms—to sell capitalism—at home. Foreign aid should only temporarily support countries while they implement difficult reforms and get on their feet.
- International debate on development must be reshaped. The heart of development is the relationship between governments, their citizens, and their own private sector—knocking down the main obstacles that entrepreneurs have in running a business like access to capital, electricity, transportation, telecommunications, taxes, labor, and corruption. Yet international debate on development is by and large still focused on the interaction of donors, nongovernmental organizations, and recipient governments. I like the part where they suggest complementing the United Nation’s Millennium Development Goals with a set of “development goals for competitiveness”.
Admittedly, when I read these kinds of articles, the skeptic in me asks “what’s in it for the authors?” and there are plenty of critics that would argue that Liberia and DeBeers shouldn’t be the poster children for reform in Africa. But, with poverty levels dropping rapidly in market reform countries like India and China, it’s hard to dispute Johnson-Sirleaf and Oppenheimer’s final point:
Effective use of aid can support African reforms, but it must not be the organizing principle for African development. The key to success will be the extent to which African governments to provide the private sector the right incentives to add value to the economy, so both business and government can concentrate on what each does best.
You can’t travel anywhere in Southeast Asia without noticing that motorcycles 
and scooters are everywhere. They remind me of ants at a picnic--frenetically, chaotically, recklessly on the move, yet still maintaining some kind of strange order, heading toward some important, unseen object.
And if your eyes don’t notice all the activity, your ears sure will. Low on power, big on noise, the 2-wheelers, with their little 100-200cc engines often straining under heavy loads, sound like a typical Saturday morning suburb in the U.S. where mowing your lawn is a weekend rite of passage. But maybe, almost imperceptibly, the world is starting to change.
I was recently in a taxi in Malaysia when the driver and I struck up a conversation. After all, we both knew that the crush of rush hour traffic would make our 10km trip from the hotel to my first appointment take, oh, about an eternity (an hour, actuality, but who’s counting?). In the midst of apologizing about all the traffic, he noted that the price of cars is coming down so fast in Malaysia that they’re not that much more expensive than those ubiquitous motorcycles and, given the choice, everyone would rather have a car.
His comment got me thinking about another article that I had read just that morning about Tata’s new Nano, the “People’s Car” designed and manufactured to cost 1 lakh (about $2,500) and slated for sale by year-end. It’s been hailed as the “next Model T Ford or Volkswagen Beetle”, claims to meet European emissions standards with a fuel economy matching the best hybrids, and will be introduced with unique financing arrangements to put it within reach of millions of new consumers. Tata has even proposed that the Nano might be boxed up and sent to budding Indian entrepreneurs to finish assembly and provide ongoing maintenance—Toyota, meet Ikea.
But this particular article was about how its new plant in an impoverished part of India, West Bengal, is under siege by opposition party politicos and farmers who claim that Tata didn’t pay enough for the fertile farmland where the new factory sits. In the midst of its attempt to create 21st century jobs in a region where the clock is stuck in neutral, Tata has unwittingly generated a clash between economic growth and property rights, politics and profits, a known old and an uncertain new.
And this maelstrom won’t stop at the borders of West Bengal. The very idea of a car for the masses (and I’m talking about tens, if not hundreds, of millions of emerging consumers here) has something to tickle or enrage just about everyone.
Environmentalists will complain about more pollution and the acceleration of global warming that comes from having more cars on the road. Other “eco-nistas” will argue that, when these new emissions-friendly cars replace old exhaust belching gas-guzzlers, CO2 levels in the atmosphere might actually drop. Here’s an equation you don’t see everyday: more cars=less global warming?
Consumer advocates will celebrate the fact that traffic fatalities will drop (almost 5x higher per capita in India than in the West, driven primarily by pedestrians getting hit trying to cross busy intersections and motorcycle crashes with 4-wheeled vehicles). Urban planners will tear their hair out trying to figure out how traffic will move at all.
They all better start getting their arguments ready because, whether the Nano itself takes off or not, the world is going to witness a radical drop in the average price of a car. As seems to be the trend for so many radical, cost-trending-to-zero social innovations, the Nano has prompted global car makers like General Motors to announce their own micro-cost car development efforts, a predictable dance in an industry where everyone follows “just in case” and thus creates a trend line (see “SUV”).
The introduction of successful innovations always creates more questions than answers in the short term. But history tells us that we always find a way to adapt. Not that that’s very comforting as I sit in endless Kuala Lumpur traffic, listening to the lawnmower serenade.
I don't get to read for pleasure nearly as much as I'd like. In fact, a bookstore or library with full stacks and a good coffee shop is my idea of heaven (obviously it doesn't take much to make me happy). My best, too infrequent, opportunities are when I'm on the kind of vacation that I just got back from--long enough to relax, busy enough not to get bored, with plenty of in-between time to crack a good book (particularly if, like me, you suffer from jet lag-induced insomnia).
One from this latest stack was particularly good: The Geography of Bliss by a US National Public Radio Correspondent Eric Weiner (see the NY Times book review article here). It chronicles the curmudgeonly author's efforts to find the happiest places in the world (contrasted with a few of the unhappiest) and find out why the people who live there are so, well, happy. His travels take him from the Netherlands (home of the World Database of Happiness, housed in a surprisingly sober, data intensive research organization) to places like Iceland, India, Qatar, and Bhutan. Weiner points out that social scientists have found that personal happiness is highly correlated with the things that money can't buy like close relationships, solid family lives including loving spouses/partners, and engaging in genuine acts of kindness. But researchers have also found that one of the things that contributes to personal happiness is faith in their government: that senior officials and the rest of the public service are capable, caring, and consistent in their efforts to serve constituents.
It made me remember part of a speech that I gave here in Australia on the changing nature of business and the role of 21st Century governments. In that speech, I quoted the 18th Century UK moral philosopher Jeremy Bentham who argued that the purpose of politics should be to bring the greatest happiness to the greatest number of people. I also cited a 2006 survey in the UK that found that 81% of those polled thought that government should focus on happiness, not wealth creation.
Just for fun, before the talk, I had decided to see if there was any correlation between a country’s wealth, measured in per capita Gross National Product and its Happiness Index score which is published by researchers at Britain's University of Leicester. Sure enough, more wealth a country has, the happier its people are--up to a point, around $50,000USD per year, according to researchers. But there were a huge number of outliers--countries where people are very happy yet relatively poor (like Bhutan). When undertaking the analysis from a Purchasing Power Parity perspective (in a crude attempt to "level out" income disparities) there were even more outlier countries.
Reading The Geography of Bliss reminded me that these are the kinds of important public policy questions that we love to propose and tackle at the Heinz School--perhaps a little offbeat and counterintuitive, often data intensive, with broad implications on the management decisions made by government and business leaders affecting potentially millions of people, if not everyone on the planet. And it also reminded me that I need to get to Iceland someday...
