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Counterfactual Africa

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Africa before European arrival: Swedish artist Nikolaj Cyon used historical sources to draw a map of Africa without European settlement or colonialism

Terra intactum: Nikolaj Cyon used historical sources to draw a counterfactual map of Africa  (Source: http://developmentdaily.files.wordpress.com/2013/07/alkebu-lan-1260.jpg)

What if Europeans never colonized Africa? What would modern-day boundaries of African countries look like had the Scramble for Africa never occurred? The short answer is that we will never know, but the thought-experiment is appealing. So appealing, in fact, that Swedish artist Nikolaj Cyon decided to create a map of what Africa would look like today if borders of ethnic groups remained fixed from around 1600. The above map, showing the South on top (to subvert the traditional Europe-on-top orientation), draws on historical sources to show the territories of the major ethnic groups that existed in Africa prior to European arrival.

So what would a tourist, visiting this counterfactual southern (northern?) Africa, have seen? (If you really want the full experience of this post, listen to this song while reading.) If the Khoe groups of the Cape decided to unify politically, a country roughly the shape of today’s Western Cape including half of the Eastern Cape (up onto the Fish River) would have existed. Let’s call it Khoe-country. If I had to venture a guess, the landscape would have been dotted with villages – around Paarl, Swellendam, George, Graaff Reinet – with the capital of Khoe-country around modern-day Grahamstown: Gona. Traveling east, our tourist would have entered the land of the Xhosas and visited the capital Mthatha. Further up the coast, the kingdom of the Zulus, Zululand, the largest country in southern Africa, would have welcomed our visitor. Here the visitor would have seen the beautiful hills around the capital Ulundi and perhaps paid a short visit to the forgotten kingdom of the Basotho people across the stunning Drakensberg mountains. Traveling North, the visitor would have visited the lands of the BaPedi, and their capital, Phsiring, and from here back west into the BaTswana kingdom, the country of mines. Returning to the Cape, the traveller would have met the San-peoples of Komani and Xam, living in the arid regions of the Kalahari around the Gariep river.

What is most interesting about this map, perhaps, is the extent to how colonial boundaries cut ethnic boundaries. Consider the BaTswana, with their capital in Gaborone. Today’s Botswana only includes a fraction of the territory of the then BaTswana people. Had BaTswana been a country, it would have included large parts of South Africa’s Northwest province (platinum mines) and the Northern Cape. Even Kimberley (diamonds) would have been part of Botswana. But the haphazard colonial borders also benefited the BaTswana. Today, Botswana encompasses almost all of the Khwe en parts of the !Xoo and Khomane San territories, peoples that have lost their independence.

A number of recent papers in Economics attempt to assess the costs of these artificial borders on African development. In a recently published paper in the Quarterly Journal of Economics, Stelios Michalopoulos and Elias Papaioannou use light density as measured by satellite images to investigate whether ethnic groups split by colonial borders exhibit different rates of development, and why. They do find significant differences between two ethnic groups divided between two countries like, for example, between the Tswana of Botswana and Tshwana of South Africa, but attribute this not to differences in national institutions (country-wide policies) but instead to ethnic-specific traits (like the role of chiefs, culture and pre-colonial institutions). Their paper is open to critique: their use of Murdoch’s ethnolinguistic map of Africa, a popular but controversial map of Africa’s many ethnic groups, is problematic. (The above map was presumably not drawn with Murdoch’s data, as the boundaries of the two maps do not overlap.) Nevertheless, their and other results provide quantitative proof that the artificial partitioning of African countries had a detrimental effect, causing conflict and lower levels of development.

Naturally, in our counterfactual world, it is extremely unlikely that borders would have remained fixed for 400 years. Ethnic borders in the pre-colonial were in continuous flux, and there is no reason that conflict over territories would have stopped suddenly. Take Johannesburg, for example, the location of the world’s wealthiest gold mines. On Cyon’s map, Johannesburg sits at the junction of the kingdoms of the BaSotho, Zulu, BaPedi and BaTswana. Is it not possible that the discovery of gold would have caused severe conflict over resources between these groups?

Two countries, of course, do fit the current map of Africa quite well: Lesotho and Swaziland. Both countries experienced little European settlement, and while the Basotho did lose territory to the Voortrekker settlers, the position of Swaziland on Cyon’s map is exactly the same size and in the same location as modern-day Swaziland. So how did these countries perform in the absence of colonisation? Not great. Swaziland has a GDP per capita of around $6000, ranked 116 out of 187 countries by the IMF. More than 50% of the country’s annual budget is paid by South Africa. Life expectancy is at 50 years. Much of the reason for this low level of development can be attributed to geographic and institutional reasons: both countries are land-locked and have tiny markets, and communal ownership remains widespread. In the counterfactual world as drawn by Cyon, it is highly likely that more of these small, land-locked and poor countries would have existed.

Counterfactual history is art not science, fiction not fact. (Or, if you trust Sheldon and Amy’s judgement, a board game.) And more importantly, asking what the map would have looked like, and what it should look like, are two very different questions. But counterfactual history does challenge the imagination and, more importantly, propagate the promise that the future is malleable.

Written by Johan Fourie

April 17, 2014 at 13:35

Is a wealth tax the pragmatic solution to South Africa’s inequality?

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Clifton

Luxury living: a wealth tax on Clifton houses such as this one could pay for larger social transfers

On Monday night, in a speech delivered at Stellenbosch University’s Department of Economics, Andrew Donaldson, Deputy Director General responsible for Public Finance in South Africa’s National Treasury, suggested the following: that to address the severe and persistent inequality of South African society, a much larger share of the government budget should be devoted to redistribution. Not only is this morally good, he argued, but recent research by the IMF suggests that it is also better for the economy (or, at the minimum, that it does not affect economic growth negatively). Whereas South Africa now redirects about 3% of GDP from the rich to the poor, this could increase substantially. Iran, for example, redistributes 11%.Yes, this is another post on inequality. I’ve written recently about the good and bad of inequality, and about its relationship with capitalism. But Donaldson’s paper, coming from the centre of policy-making in South Africa, suggests that it is a topic that we need to give our full attention. The study of inequality was, for a long time, the preserve of development economists, debating the many ways it could be measured, lamenting its slow change, while the rest of us focused on improving economic growth. Not any more. The rising popularity of more left-leaning policies, both outside and within the ANC, suggests that there is pressure within government to act on the perceived slow economic transformation since 1994; while poverty has declined significantly (thanks to growth and redistribution), inequality has remained stubbornly high.

Donaldson noted that there are several ways the state can help improve the income distribution. The most obvious – and for many economists, the only way – is to improve education. South Africa spends a considerable amount on education, yet education outcomes for a large segment of our population are appalling, to the extent that South Africa is ranked embarrassingly low on international rankings. But it is one thing to say that we ‘need to get the education system right’, and another to actually do it. It is clear our education is failing, and there is no indication that it will improve in the short run. In the meantime, these kids are exiting school and entering the labour market armed with very few skills. And so, because they are unable to partake in the fruits of the market economy, the dreams and aspirations of millions of young South Africans depend on what they can receive from government. Donaldson’s argument is that this growing gap between the educated and uneducated is unsustainable politically and economically. Something’s gotta give, and so one suggestion is to expand the social welfare system, to increase the amount these individuals receive directly from government, which will, hopefully, give them a better chance of participating in the formal economy.

The response from economists would naturally be that greater redistribution will have an adverse effect on economic growth; that increasing the marginal tax rates on the rich will disincentive them to work (or force them to move to other countries), reducing the productive and entrepreneurial capacity of the country, and cause economic stagnation, or decline. But this is not the case, Donaldson argues, citing a recent IMF report. The report, surveying a large number of countries over many years, finds little evidence for a trade-off between redistribution and growth. In fact, the IMF authors suggest redistribution has a benign effect on growth. That implies that governments can increase redistribution considerably without any adverse effects:

We nonetheless see an important positive conclusion from our look at the big picture. Extreme caution about redistribution—and thus inaction—is unlikely to be appropriate in many cases. On average, across countries and over time, the things that governments have typically done to redistribute do not seem to have led to bad growth outcomes, unless they were extreme. And the resulting narrowing of inequality helped support faster and more durable growth, apart from ethical, political, or broader social considerations.

Which is the reason for Donaldson’s question: Is there greater scope for fiscal redistribution? He proposes several ways that Treasury can redirect tax income to the poor: most notably he suggests that a labour subsidy, not only for young people, but across the economy for the lowest income earners, could incentivise businesses to increase employment of unskilled jobs. In reality, this is something like a negative income tax; individuals that earn below R5000 per month, would get an additional state subsidy of R1000, for example. Other tools to redistribute include the more blunt instruments of higher pensions and child support grants.

Of course, someone will have to pay. He suggests increasing marginal rates on income taxes. In a question I posed to him afterwards, I asked whether higher income taxes are not inherently unfair. The reason for South Africa’s skewed income distribution is its centuries of inequality, and of the repressive and discriminatory labour policies of the twentieth century. Surely, then, a wealth tax is more appropriate. Why should a twentysomething (black and white) of the coming decade pay for the mistakes of the past? A wealth tax, in theory, taxes past incomes. He was unimpressed: few wealth taxes have been successfully implemented, he suggested, and they are often administratively expensive. This is true, but I feel slightly justified in my question given that I share this with the author of a book (to be published in about a month) that will have a profound impact on the field of Economics.

At least, that is the claim of Paul Krugman, who recently reviewed Thomas Piketty’s Capital in the Twenty-First Century. South Africa is not the only country to struggle with solving rising inequality. In short, Piketty argues that globally “we haven’t just gone back to nineteenth-century levels of income inequality, we’re also on a path back to ‘patrimonial capitalism’, in which the commanding heights of the economy are controlled not by talented individuals but by family dynasties”. His suggestion to fix this? Wealth taxes! Here’s Krugman’s summary:

Piketty ends Capital in the Twenty-First Century with a call to arms—a call, in particular, for wealth taxes, global if possible, to restrain the growing power of inherited wealth. It’s easy to be cynical about the prospects for anything of the kind. But surely Piketty’s masterly diagnosis of where we are and where we’re heading makes such a thing considerably more likely. So Capital in the Twenty-First Century is an extremely important book on all fronts. Piketty has transformed our economic discourse; we’ll never talk about wealth and inequality the same way we used to.

Maybe Desmond Tutu, in his call for a white wealth tax in 2011 (in a speech at Stellenbosch University) was on to something, even though his emphasis on ‘white’ was perhaps misplaced. More realistically, while a wealth tax may have negative consequences, these may be less severe than the alternative policies. Consider the Promotion & Protection of Investment Bill (which allows the state to claim land and other property without compensation as a ‘custodian’), the Private Security Regulation Amendment Bill (which forces foreign-owned companies to sell 51% to South Africans), and the Employment Equity Amendment Act (which forces firms with more than 150 staff to use national demographics as ‘guide’ for racial targets in employment), to name a few recently proposed bills that aim to transform the South African economy (see more here). It is likely that these will have far greater, perverse and unintended consequences.

A wealth tax, especially if implemented at the global level, may allow government to strengthen the bottom of the income distribution through social transfers without jeopardizing the economy’s ability to produce.

Written by Johan Fourie

April 10, 2014 at 07:48

The past is the future we fear: notes from 1827

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One of the benefits of studying economics (and economic history) is that you’re a bit more resilient to the populist sentiments of politicians and policy-makers. Especially during election time, facts and fiction are often mixed together in one of those big, black pots, with a touch of fantasy added as special ingredient, and served to expectant ears. We all like to have our ideas about the world affirmed and politicians are good at exploiting this weakness. They tell us exactly what we want to hear. Never let the facts get in the way of a good story.

SomersetLord

Lord Charles Somerset

Much has been said in the build-up to this South African elections, for example, about growing inequalities in South Africa. Whether you think severe and persistent inequality is only slightly bad or extremely bad, there is no denying that a highly unequal society, like South Africa’s population, is not only morally unjustifiable but also a barrier to higher rapid growth. And this is not peculiar to South Africa, of course. Mechanisation, globalisation, and various other trends seems to be driving a gap between those with wealth and those without. Even the IMF has acknowledged that this is an issue.

Many ascribe this growing inequality as an inevitable consequence of the capitalism machine. Like Marx predicted, it seems as though the social structures of our societies are crumbling under the corruption of commerce. And it’s not only the lefties that are having a field day: prominent economists, like Brad Delong, are struggling to come to grips with robots hijacking our jobs. But, as Delong notes, this is not the first time that we’ve encountered the problem of inequality. Sometimes the past is the future we fear. During the Great Depression, many in Europe thought that communism was the only way to escape the deprivation that permeated Western societies. The iron curtain, and its collapse, would later show communist claims to a utopian future to be false.

But even in our own history, we have telling reminders that the egalitarian past we so happily paint is all but true. I recently discovered a table in the Records of the Cape Colony (Theal, 1905) that listed wages paid to all government employees of the Cape Colony in 1827. Remember, this is a time before the discovery of minerals, before the abolishment of slavery, yes, even before the Great Trek. This was a society, presumably, without the upheavals and inequalities of modern capitalism, without the corruption and nihilism of the ‘neoliberal’, materialistic world we inhabit today. And yet, Lord Charles Somerset, then governor of the Cape (let’s call him the premier, or the president), earned £10 000 annually (p. 28). In contrast, a bookkeeper in the Office of Collector of Tithes and Transfer Duties (equivalent to someone working for SARS today), earned, on average, £45 (p. 43). That’s right, he (his names was TF Dreyer) earned 222 times less than the president. What does an auditor at SARS earn annually these days? Let’s say a conservative R300 000. Apply the same ratio, and Lord Charles Somerset earned the equivalent of R66 million. Jacob Zuma, officially at least, earns only R2,6  million. Or take Patrick Kelly, a messenger in the Office of Civil Engineering, who earned £9, less than 1000 times that of Lord Somerset. And, of course, these were all white government workers. Had you been black, you could at best wish for a job in the police, at £4 per annum, that is, 2500 times less than the president. (If a policeman today earns R100 000 annually, that would take the president’s salary to R250 million. Zuma could buy a Nkandla every year with that money.)

MilanovicCapitalism does not necessarily lead to higher inequality, especially not in the very long run. (In more thorough research, Dieter von Fintel and I showed that the eighteenth century Cape Colony was also severely unequal.) But even in the short run, capitalism isn’t always bad. An excellent example is South Africa’s own recent history: Branko Milanovic of the World Bank recently tweeted South Africa’s Gini coefficient for the last decade. While income inequality is slightly higher in 2010 than in 2000, the pattern is decidedly mixed over the decade. Our spending is less unequal in 2010 than in 2000. These changes in inequality also masks the rapid declines in poverty that the country has seen since 1994. A SALDRU report by Arden Finn, Murray Leibbrandt and Ingrid Woolard of UCT shows the incredible gains that a free market (with help from the state) has allowed: From 1993 to 2010, a multidimensional index of poverty has fallen by 29 percentage points from 37% to 8%. These are dramatic improvements, often unappreciated.

The past is a scary place. The future is brighter than we think. We still have problems to solve, but the we are in far better shape to do so. Let’s remind politicians of that this elections.

Written by Johan Fourie

April 3, 2014 at 15:00

Michael Jordaan: Freeconomics is the future

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elysium

Do you contribute to South Africa’s GDP by reading this post? Traditionally, had I written a letter, I would have required 220 envelopes and 220 stamps to send this note to those subscribed to this blog. It would have clearly registered as a tiny contribution to the country’s GDP? And I would have probably charged you to receive this letter, say R20 per individual, which would also have been recorded in the C or the X of GDP. But when you read this for free on your PC or iPad or phone, is it registered as part of our GDP? No. Similarly, if we search for the telephone number of the local restaurant on Google, or the weather prediction for tomorrow on yr.no, has anything been added to GDP? No. How do we measure the ‘free’ goods and services all of us consume everyday? We don’t. But because our utility (or happiness or satisfaction) has increased significantly through these services (I assume it has if you’ve read this far), it could only mean that we are underestimating GDP or, put differently, that GDP is incapable of measuring the vast gains from technological progress we’ve made over the last three decades.

And this process is unlikely to stop. Moore’s law – where computing power doubles every two years – is likely to be true in a much broader sense: the cost of information – books, music and all the other things that we spend an increasingly larger amount of our time on – will continue to fall, halving every two years. Many of these things are already free: road maps, weather predictions, news about cricket scores and elections and Oscar’s murder trial, connecting with that long-lost friend from school, searching for the origin of the word ‘geometric’, listening to music, translating English to French. You get the point. Only a decade ago we were still forced to pay for all these things. Now its free. And that requires new economic models and measurements, because consumers behave differently when, instead of having to pay for a service, they receive it for free.

Call it ‘freeconomics’ says Michael Jordaan, former CEO of FNB and now head of Montegray Capital in Stellenbosch. Jordaan presented his first lecture as new honorary professor in Stellenbosch University’s Department of Economics last night, and captivated the audience with a crash course of the most revolutionary technological changes today (his slides are available here). Much like Malthus had compared the arithmetic increase in food production with the geometric increase in population, Jordaan claimed that the exponential growth in information and, conversely, the exponential decline in the cost of information, necessitates economists to adjust – or perhaps toss and completely rethink - their classic microeconomic models. This new model, he conjectured, is driven by technologies of the digital age, where the marginal costs of services are close to zero, where demand is unconstrained by price and where scarcity has been replaced by the abundance of products and services that are available for free online.

Clearly, the standard supply-and-demand graph needs revision. Quantity does not necessarily increase linearly as price approach zero (or actually reach zero). Free stuff with no marginal cost and nearly frictionless transaction costs can be consumed by billions of people across the globe; one more person watching a YouTube video adds zero cost. According to Jordaan, in the freeconomy, scarcity is replaced by abundance (echoing the sentiments of Diamandis and Kotler in their book by the same name). Yet there are limits, of course, to what we can consume. Jordaan recognises this by acknowledging that the scarcity of time will become our biggest constraint, although that is changing too as improvements in DNA reconstruction and artificial intelligence may result in rapidly increasing life durations. For the immediate future, how we filter the abundance of free information will likely be our greatest challenge – and the ability of consumer goods to ‘save time’ will be extremely lucrative. Hello Google’s self-driving car.

There are many insights to highlight from Jordaan’s lecture, but some of the most interesting discussions came in the question section. Responding to a question about the social inequalities that this rapid technological change will create, Jordaan predicted that we may need to think differently about unemployment in the future. As robotics and AI will replace much of the unskilled and semi-skilled jobs, perhaps, he suggested, a large cohort of people will depend on state subsidies and the free economy for their daily needs, with no need to earn an additional income. The rich will be happy with this social consensus of large redistribution through the fiscal system as long as they can continue to invest in improving technologies for the betterment of all. With more social grant recipients than tax payers, Jordaan suggested that South Africa is already a template of such a society.

Is the future a benevolent Elysium? Perhaps it is, but if the past is anything to go by, radical change will not be as simple as one, two, free.

Written by Johan Fourie

March 28, 2014 at 16:18

Books I want to read (before the end of the year)

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BooksNo time for long posts this week, so I’ve decided to just list the many books that are currently on my have-to-read list. I’ve started with some of them already, but its too early to pass judgement. Some have not even been published yet. So don’t take this as approval – it is little more than a wishlist.

Genes seem to be making a comeback as explanation for our persistent inequalities. The Son Also Rises by Gregory Clark will certainly be controversial. I happened to be in Clark’s office last year on the day he submitted the final manuscript, and he was excited about the book’s prospects. His thesis: class differences are the result of genetic inheritance. Conclusions: 1) The Swedes are far less socially mobile than they like to think. 2) We can do very little to accelerate social mobility; all government attempts to redress the income distribution are useless. 3) If you believe this thesis, then it has serious implications for whom you decide to marry. Perhaps less controversial but still in uncomfortable territory will be Nicholas Wade’s A Troublesome Inheritance. Wade will draw on scientific research to discuss evolutionary differences in human traits. These books, if read insensitively, will give ammunition to racists everywhere. That is not their purpose. Caution is advised.

I often like reading about the history of objects, and there are four new books about everyday things that look quite interesting: On Paper by Nicholas A. Basbanes documents paper’s two-thousand-year history. (Get the hard cover, it is done beautifully.) Milk by Deborah Valenze is a local and global history of how humans have used and abused milk. The People’s Car by Bernhard Rieger tells the story of the Volkswagen Beetle, probably the most loved car in history. And Tom Standage has written a new book on the history of social media, Writing on the Wall.

For the more hard core economics gurus out there, Thomas Piketty has written a seminal book – Capital – which is scheduled for publication today and should be on every economists wish list. Here’s the blurb:

What are the grand dynamics that drive the accumulation and distribution of capital? Questions about the long-term evolution of inequality, the concentration of wealth, and the prospects for economic growth lie at the heart of political economy. But satisfactory answers have been hard to find for lack of adequate data and clear guiding theories. In Capital in the Twenty-First Century, “Thomas Piketty analyzes a unique collection of data from twenty countries, ranging as far back as the eighteenth century, to uncover key economic and social patterns. His findings will transform debate and set the agenda for the next generation of thought about wealth and inequality.

If you want more on wealth and inequality (and economic history), certainly read Angus Deaton’s The Great Escape: Health, Wealth and the Origins of Inequality. It is an excellent overview of what we know about the process of economic development. For a more local flavour, I’ve ordered Jade Davenport’s Digging Deep: A History of Mining in South Africa. This is the first South African economic history text in nine years, and should make for fascinating reading. (Although, if I have to be critical without reading the book, the blurb suggests that Davenport has not read much of what has been published recently in South African economic history. She writes: “Before the advent of its great mineral revolution in the latter half of the 19th century, South Africa was a sleepy colonial backwater whose unpromising landscape was seemingly devoid of any economic potential.” Uhm, no, no and no. For a summary, read this.) On South African history, I’m also reading Bill Nasson’s The War for South Africa, an excellent account of the Anglo-Boer War, I’ve just finished Tim Couzen’s South African Battles and I’ve just received Lindie Koorts’ biography of DF Malan (available in Afrikaans and English) in the mail. Hopefully I’ll write a post or two about these books in the future.

For now, though, it’s back to marking essays, setting tests and preparing for class. And maybe sneak a few minutes to watch the cricket.

Written by Johan Fourie

March 26, 2014 at 07:46

The vanquished people

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WE ARE THE EVIDENCE: Names of groups that have disappeared in the US (National Museum of the American Indian; photo by Johan Fourie)

WE ARE THE EVIDENCE: Names of groups that have disappeared in the US (National Museum of the American Indian; photo by Johan Fourie)

It is often said that history is written by the victors. (The quote is attributed to Churchill but its origin is unknown.) But perhaps it is better to think of it another way: History is written by the survivors. Or, more accurately, the descendants of survivors.

This is because even our recent past includes frightening numbers of vanished peoples; groups of indigenous people that have disappeared and are now retired to the footnotes of history. In September last year, Helanya, Dieter, Wimpie and I visited the National Museum of the American Indian in Washington DC, a museum dedicated to the indigenous peoples that lived across the North American continent when Europeans arrived in the fifteenth century. Over the following four centuries, European guns and especially European diseases killed millions of these peoples; I found the image of the names of the vanished tribes, shown above, bone-chilling.

Of course, the American experience is not dissimilar to our own. The Khoesan, consisting of the nomadic, pastoral Khoe and hunter-gatherer San, inhabited most of the Western Cape, Northern Cape and parts of the Eastern Cape when Europeans arrived in the mid-seventeenth century. (Read this for more on the origin of the Khoesan.) Two centuries later, the descendants of the Khoesan and imported slaves were an underclass, living mostly on farms as labourers and subjected to harsh work and living conditions. Several smallpox episodes, notably in 1713 and 1755, had killed a large proportion of the population and those that would not work on settler farms were forced to move deeper into the drier interior, settling in areas with little economic potential. Their economic and social way of life soon disappeared; names such as the Attaqua, Chainouqua, Cochoqua, Damaqua, Gonaqua, Gorachouqua, Namaqua, Hessequa, Hoengeiqua, Outenique and Sonqua all but vanished.

What we know about these groups we must learn from the records of the victors; the journals of European travellers, letters by settler farmers, reports by Company officials. Even here, there are large gaps. We don’t know, for example, how many Khoesan worked on settler farms, and exactly what they did. Because the Khoesan could not be enslaved, mention of them is also missing from tax censuses or probate inventories, records that kept meticulous account of the number of slaves (imported from south-east Asia) working on farms. So when calculating things like Cape per capita production, or levels of inequality, or slave productivity, what historians (myself included) simply did was to ignore the Khoesan: somewhere in a footnote we would note the existence of a group of people we cannot count because we have no quantitative information about their size and whereabouts. All our earlier estimates of the Cape economy had the caveat of the missing people.

So Erik Green of Lund University and I decided to do something about this. We use the qualitative information available from traveller accounts, settler journals and letter, and Company reports to reconstruct the size of the Khoesan population. Making several assumptions based on anecdotal evidence (anecdata?) and using the eighteenth century tax censuses, we calculate an annual estimate of the Khoesan population. We then use these new estimates to adjust earlier estimates of slave productivity, societal inequality, and GDP growth. It turns out that earlier estimates for slave productivity was much too large, between-group inequality much too low, and GDP per capita too high. The paper is now available as an ERSA working paper.

South Africans have mostly surrendered the history of these peoples to the dominant narrative of colonisation and liberation history (first, white, now black). There are attempts under way to address this: the Department of Traditional Affairs has, for example, decided to include the descendants of Khoesan in the National Traditional Affairs Bill. Yet, given that the Coloured population in the Western Cape are now genetically between 32 and 43% Khoesan (see a recent study by De Wit et al. in Human Genetics), it is not obvious who would qualify as ‘descendants’, and what their interests are. With land claims before 1913 now a possibility, expect more enthusiasm for any evidence that ties current descendants to ancestral lands.

To be able to claim land, I suspect, the location of the ‘original’ Khoesan inhabitants must first be established and, secondly, the modern-day descendants (and claimants) must be linked to those original inhabitants. This is, in truth, an almost impossible exercise in the absence of detailed records for the early Cape Khoesan. And, to be sure, given the high levels of mortality, it is highly likely that most of the Khoesan in the south-west Cape would have left few, if any, descendants.

Again, it seems, history will be written, if not by the victors, then certainly by the survivors.

Written by Johan Fourie

March 19, 2014 at 09:34

Smart people should build things

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Because CNN says so: Kobus Ehlers and his team at FireID are building something:.

Because CNN says so: Kobus Ehlers and his team at FireID are building something.

Smart People Should Build Things is the title of a new book by Andrew Yang, a serial entrepreneur and founder of Venture for America. Yang shows that most graduates from top US universities become bankers, lawyers, consultants, or doctors in one of the five main metropolitan areas of America: New York, Boston, San Francisco, Los Angeles or Washington D.C. Why is this? Because smart people want to achieve, ‘and that’s what achievement looks like’ in America today.

In short, Yang’s story goes like this: The smartest kids go to the top universities, are recruited by the largest corporates and funnelled into fancy offices with high paying salaries where they perform routine, uninventive tasks. The reason they choose this path is because it is the road of least resistance: while it is arduous and challenging to study to be a doctor, or lawyer, or economist, the risk is low if you have a certain academic ability. Jump through the necessary academic hoops, and a high-paying job is assured.

To Andrew, this is a bad thing for America. Imagine if Mark Zuckerberg, known to be one of the top students of his generation, had decided to accept a job at a prominent New York consulting firm. Instead he founded Facebook, to the benefit of the American economy (including the consulting firm, who now advises clients to invest in Facebook) and billions of people around the world. And it’s not only the economy that benefits, Yang argues, but also the entrepreneurs themselves; Zuckerberg is not only fabulously wealthy, but he actually enjoys what he’s doing.

So is this also true for South Africa? What do South Africa’s top talent choose to study, and what do they end up doing with their lives? Are they building future Facebooks, or accepting cosy jobs in Sandton or Canary Warf? To answer this question, I tracked down the top 20 matric students on the Merit Lists for 2001 to 2010, published by the Western Cape Department of Education. A friend and I could find degrees and current job descriptions on 77% of these students (174 of the 226 students on the list; for several years, the List included the names of more than 20 students).

(Incidentally, 115 of these 174 matrics (66%) decided to study at Stellenbosch. The second most popular university is UCT, which attracted 20%. Only one student studied at the other Western Cape university, UWC. 61% of these students are female.)

At Harvard in 2011, 29% of graduates went into finance and consulting, 19% into Law School and 18% to medical school. Table 1 shows the choice of the Western Cape’s top talent: similar to Harvard, 18% of students studied to become medical doctors. Far fewer of our top students study Law (5%), while a significantly higher number went into finance and consulting – 36% when we add the two categories of Accounting, and Maths, stats and finance (which is dominated by Actuarial Science).

Field Freq. Percentage Upstarts Abroad
Accounting

28

16%

6%

29%

Arts

14

8%

100%

30%

Engineering

34

20%

57%

14%

Law

8

5%

33%

20%

Maths, stats and finance

37

22%

12%

27%

Medicine

30

18%

0%

15%

Natural and Earth Sciences

20

12%

71%

47%

Total

171

100%

31%

26%

 

We should ask the same question of South Africa that Yang asks for America: how many of our best students choose the paths of least resistance? To test this, I also include another variable in Table 1: ‘Upstarts’ show the percentage of students from the various fields that now work in small to medium-sized firms (I only included students that finished school up until 2007). The story is quite clear: those in Math, stats and finance, and in Accounting end up working for big, established corporates: for example, nine former students now work for PwC. It is the engineers (57%) and especially the scientists (71%) that end up working for small, South African start-ups. (Students from the Arts also end up in small firms, although the sample size here is tiny; we could only find information on four individuals.)

Students in Engineering and the Natural and Earth Sciences are more likely to start their own thing, or join another small start-up. Unfortunately, many of them do so in foreign countries. ‘Abroad’ denotes the share of students that are situated outside South Africa. Close to half of all the students with a Natural and Earth Sciences degree end up abroad. While some are continuing their studies at top US and British universities and will hopefully return to South Africa, many seem to have relocated permanently. How many of them might be a future Elon Musk?

South Africa needs more start-ups if it is to grow the economy. Most innovation (especially transformative innovation, like Facebook or, to use a South African example, Mark Shuttleworth’s Thawte) occurs in small firms, and this is also where most employment is created. And to lead such innovation and job creation we need the sharpest tools in the shed to start or join these young companies.

Because it is better for South Africa if our smartest students build their own companies or join young ones, perhaps we should offer them incentives to do so. Stellenbosch University already has excellent facilities for start-ups – the MIH Media Lab, for example, and InnovUS. Many Stellenbosch start-ups are already making their mark on the national and international stage, like digital payments app SnapScan, developed by FireID (a company founded by a top 20 Merit List alumni). But maybe we should do more, and Yang offers a number of suggestions like tax incentives, risk sharing or greater emphasis on graduate recruitment, like his own Venture for America.

Of course, we can’t all be innovators, scientists, and entrepreneurs. And not all start-ups will be successful. But what we should do is to create incentives that will reduce the risks for aspiring young innovators to try something new, incentives that will encourage smart kids to join an upstart rather than a corporate conglomerate. South Africa’s GDP – and their happiness – would be much better for it.

*A shortened version of this essay appeared in Die Matie, the student newspaper of Stellenbosch University (12 March 2014)

Written by Johan Fourie

March 12, 2014 at 09:49

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