Archive for May 2012
In the build-up to Euro 2012, a couple of friends and I recently attended an u/20 international football tournament in Cape Town. We watched two matches – South Africa vs Ghana and Nigeria vs Argentina. On display were some of the best future football talent: look out for future star Snethemba Ngidi, pictured, the diminutive South African central attacking midfielder currently signed at SuperSport United, who won plaudits – even from the Argentinian coach – for his distribution and attacking skills; he also seems to enjoy it. But, as the results over the last week have shown, an all too familiar trend for African countries appear: the African teams struggled to compete against their Latin American, European and Asian rivals, in this case Brazil, Argentina and Japan (there are no European countries participating in the tournament). An African country has never reached the semi-finals of the FIFA World Cup. It has never won the FIFA Confederations Cup. Only once in the eighteen times the event has been staged has an African country – Ghana in 2009, beating Brazil on penalties – won the u/20 FIFA World Cup.
What are the reasons for this poor performance? It’s not that Africa doesn’t produce exceptional football players. Didier Drogba’s exceptional performances for Chelsea, showcased in the final of the Champions League a few weeks ago, is a case in point. Income per capita is certainly important: at the most basic level, it allows for better diets which reduces the stunting of children; at a broader level, it results in higher government revenues which pays for better schools, training facilities, coaches, administrative structures and high-performance centres. Some would argue that genetics is important: Southern Africans are generally shorter than West Africans. But then again, Zambia beat Ivory Coast in the final of the African Cup of Nations earlier this year. Also, Barcelona doesn’t seem to care too much about height. In fact, one could argue that the genetic diversities of African countries should actually act as an advantage in team selection.
I would argue that the small size of most African countries – the effects of low population density and haphazard colonial borders – is another important explanation for Africa’s inability to compete. We have exceptional footballers, but they are dispersed over the continent, and only once in a generation does one African country have a large pool of exceptional players at their disposal – perhaps Ivory Coast over the last few years. So here’s my suggestion: instead of having eight countries compete in the Confederations Cup, why not have six continental regions compete: Africa, South America, North and Central America, Northern Europe (including Russia), Southern Europe, and a combined team for Asia (South and East) and Oceania. An African team of Drogba, Gervinho, Yaya and Kolo Touré (Ivory Coast), Adebayor (Togo), Demba Ba (Senegal), André Ayew, Kevin-Prince Boatong and Michael Essien (Ghana), Steven Pienaar (South Africa), Seydou Keita (Mali), Samuel Eto’o and Alex Song (Cameroon), Adel Taarabt (Morocco) and Stéphane Sessègnon (Benin) sounds devastating. (And just imagine Messi, Tevez, and Higuain (all Argentina), and Kaka, Hulk and Neymar (all Brazil) and perhaps Luiz Suarez (Uruguay) in the same line-up.) This will also give exposure to those brilliant players that originate from small countries that are unlikely to ever compete at the highest international stage (this is also true for players of small, European countries; imagine Christiano Ronaldo had been born in Bosnia and Herzegovina).
I’m pretty sure such a tournament will create immense excitement – and severe headaches for whomever has to coach the respective teams. It will also draw spectators from a broader pool of just the current participating countries. And who would not want to travel to see the best African players take on the best of Europe, Asia and America?
The Confederations Cup in its current format is dead. Bring on the Continents Cup!
The debate about the impact of aid on African countries has divided scholarly opinion, with proponents, such as Jeffrey Sachs, saying that more is needed if we are to see an impact, and opponents – such as William Easterly and Dembisa Moyo – proclaiming that aid can do very little, and that in many cases it can actually do more harm than good. Sachs’s The End of Poverty, for example, argued that development aid can help countries exit the poverty trap of low savings, low investment (in physical and human capital), low productivity growth, low income growth and, consequently, low savings. Aid can – exogenously – increase a country’s investment in education, for example, which will increase productivity and propel it on a higher growth path, according to Sachs. In contrast, Easterly argued in his book The White Man’s Burden that development aid do more harm than good by fostering dependency in recipient country governments (they aim to please the donor instead of their electorate), by focusing on the wrong projects (project impacts are often not measured scientifically), and by crowding out private sector activities – like farmers, when food aid is distributed – in the recipient countries. The vehement debate between Sachs and Easterly has often found an uneasy compromise in the absence of clear causal evidence on the impact of aid. Macroeconomic empirical studies find, as expected, a negative relationship between aid and growth, but that is because aid is directed at the poorest of countries. And while randomised field experiments can help, their results are often true only at the local level: de-worming programmes in Kenya work, yes, but does that mean development aid is good or bad everywhere else?
Nathan Nunn and Nancy Qian now offer convincing evidence that a specific form of aid – food aid – is bad for African countries. They use the highly exogenous impact of weather patterns in the United States to see whether fluctuations in US food aid causes the incidence, onset and duration of civil conflicts in recipient countries. It works like this: The price of wheat does not vary considerably in the US because of the high agricultural subisidies paid to farmers. In high production years, when a large surplus of wheat is produced, one would expect the US price of wheat to fall, but this does not happen. Instead, the he US government accumulates these surpluses and the next year sends them to African countries as food aid. Yes, regardless of whether African countries actually need the food.
These (exogenous) fluctuations in food aid is what Nunn and Qian use to measure the impact of aid on wars in Africa. They find that an increase in US food aid by 1000 metric tons increases the incidence of civil conflict by 0.38 percentage points. “For a hypothetical country that receives the sample mean of US food aid – approximately 27,600 MT – and experiences the mean incidence of conﬂict – 17.6 percent, the estimates imply that increasing food aid by ten percent increases the incidence of conﬂict by approximately 1.14 percentage-points.” Consistent with descriptive accounts of humanitarian aid being appropriated by small-scale rebel groups or refugee warriors to fund their military activities, they also find that there is a greater likelihood that US food aid causes small military conflicts (more than 25 deaths) rather than larger ones (more than 1000 deaths).
While Nunn and Qian note the contribution of their study to several important literatures – the general impact of aid, aid and conflict, and the determinants of conflict – I would argue that their major contribution is to highlight another channel through which agricultural subsidies in the US and Europe continue to adversely affect African countries. Over and above the inability of African farmers to compete with the artificially low food prices of Europe and the US, Nunn and Qian demonstrate that surplus wheat production in the rich countries and the “dumping” of said surplus production in the guise of aid, further injures African farmers through increasing the likelihood of civil conflict and war. If we believe that improvements in agricultural productivity plays a significant role in a country’s early stages of development – and we do! – then scholars on both sides of the aid divide should note that abolishing agricultural subsidies is the most important “aid” African countries need.
Andile Khumalo, a Johannesburg venture capitalist, recently raised the following vexing questions in a blog post (and Sunday Times column): “Is Stellenbosch going to continue to be the economic capital of South Africa, whilst Africans, in their townships and villages, remain the systematic consumers of its myriad of goods and services? Think about where you do groceries? Afrikaans capital. Think about where you bank? Afrikaans capital. Who grows your food? Afrikaans capital?”
Then the conundrum: “Why can’t Black people think-up, develop and roll out these ideas for themselves by themselves… to themselves?”
Stellenbosch is widely seen as the bedrock of white, mostly Afrikaans-speaking capital, and for good reason. According to the most recent Forbes list, five of the wealthiest forty Africans live in or close to Stellenbosch, and a sixth teaches at the University. Johann Rupert, fourth on the list, is chairman of Richemont, which owns brand names such as Cartier, Alfred Dunhill and Montblanc. Christo Wiese, eight, is the chairman and largest single shareholder of the continent’s biggest retailer, Shoprite. Twenty-seventh is GT Ferreira, chairman of the financial services company RMB Holdings. Jannie Mouton, executive chairman of PSG financial services (which he founded in 1995), is thirty-first on the list, while Michiel le Roux, thirty-third, founded Capitec in 2001.
The perceived wisdom is that Stellenbosch is a legacy of Apartheid, that most of this is “old money” from the days when whites were fortunate to have access to protected markets and state resources. Certainly some of this money is “old”, but there is little evidence that a large share of it was acquired with considerable government support; in fact, as an excellent history of Apartheid economics in the latest Cambridge history of South Africa (and, more anecdotally, Johan Rupert’s biography) clearly suggests, in many cases the needs of white entrepreneurs (for example, the need to appoint blacks in skilled or semi-skilled positions, the need for a high-educated, black labour force) were subordinate to the interests of a government committed to the vision of a racially segregated country. In truth, most of Stellenbosch’s “white capital” is “new capital”, acquired after the fall of Apartheid when white business was forced to enter a more equal playing field.
But how is that the former oppressor, now with less political freedom, gained in economic wealth? Clem Sunter, in a 2010 News24 column, eloquently answered this when he wrote:
“During the years of apartheid, there was a culture of entitlement among the volk (white, Afrikaans-speakers). With a good education you could end up as a Cabinet minister, a top civil servant, head of a parastasal or a senior executive in an Afrikaans-owned business like the Trust Bank or Sanlam. If you weren’t so privileged, you could get a job on the railways as an artisan, join the ranks of the army or police or work for a municipality.
After 1994, all these expectations came to an end. Suddenly Afrikaners were out of power. They had to take a leaf out of Steve Biko’s book: you are on your own and you will have to fend for yourself. And they have done so – fantastically well. I was told the other day that the fastest growing element of the Johannesburg Stock Exchange are companies owned and run by Afrikaners. The whole coast north of Maputo in Mozambique is now a string of safari lodges and dive shops established by entrepreneurs from Pretoria. The list goes on and on all around South Africa, and increasingly north of the border and elsewhere in the world.”
1994 liberated not only black South Africans. Instead, I would argue, white South Africans were liberated from an incentive structure that guaranteed a ‘safe’ job in the public sector, or in white-owned, state-supported business. Whites were forced to create jobs for themselves, not simply fill jobs; entrepreneurship, not political (or Broederbond) contacts, became a way to gain power. This is true of many cultural minorities across the world that has little political power: why is it that Somalians thrive in South Africa while their own country falls apart? It is because they know that here they are on their own. There’s an attitude of “if we fail, there is no one to blame but themselves”.
Ironically, the 1994 transition may have had exactly the opposite effect for black South Africans. While a democratically elected government brought political freedom, it also created an incentive structure of entitlement. The attitude was that “we had suffered enough during those dark days and should now share in the economic spoils”. Government policy made this easier: black economic empowerment, for all its good intentions, did not create entrepreneurs, it created a class of connectors, networkers, tenderpreneurs or whatever you would like to label those with the skills not in creating something new, but in redistributing. A few years ago I gave a lecture in parliament on trade policy. During tea, a PAC MP came over to ask one of the most important questions we’ve not answered as a collective. In his village, he told me, the farmer, the baker and the shopkeeper (read: the entrepreneurs) are still there, two decades after Apartheid, doing what they did back then. Only those with political connections have moved up, out, working in government departments. (I guess he included himself in this list.) Of course the next generation realises this. All the kids want to become politicians, not engineers, because that’s how you make money. In contrast, I told him, Afrikaans kids don’t dream about becoming president of South Africa; in Stellenbosch, at least, they dream about becoming Mark Zuckerberg. How to change this?
Andile Khumalo writes: “Black man, wake up! Your ‘real’ freedom is being outsourced to the minority, whilst you occupy yourself with meaningless politics and tenders. You are busy drinking skinny cappuccinos in Melrose Arch, whilst your markets are being penetrated by those who dare to dream, and do.”
Khumalo is correct in saying that Afrikaans capital has prospered. But it’s not because white South Africans are inherently more entrepreneurial (or, worse, that they have mafia-like tendencies that aim to control the lives of the masses), or that black South Africans tend to enjoy the luxuries of Melrose Arch more. Stellenbosch is thriving because it has accumulated a group of highly skilled individuals – black and white – that realise that prosperity is not tied to political contacts, but to innovative ideas and to the people that help turn those ideas into reality. Their attitude is: You are not on your own – Khumalo knows this when he says that great ideas always secure funding, and Stellenbosch is not the worst place to start looking – but that creating wealth is your responsibility. These are the virtues – creativity, diligence, responsibility – our society must reward. The only way South Africa – and especially black South Africans – can prosper, is if we start spreading these ideas (Khumalo calls them dreams) to the Sandtons and Sowetos of our country.
Sunday’s Premier League final day could not have been scripted more dramatic. It was a good day to be an Arsenal supporter, but a once-in-a-lifetime experience to be a Man City fan. It was a match that awakened bipolar emotions: the joy of a first goal and a hand on the trophy, the horror of a QPR goal and another, followed by the slow, awful realisation that you’ve handed the cup to the arch-rivals (oh how we Protea fans know this all too well). Only to – miraculously – score two goals in three minutes to win it all. For the non-believers, that’s why we follow sport.
The scenes at Etihad Stadium reminded me of South Africa’s own recent sporting success stories. Although we won only one match, our hosting of the 2010 FIFA World Cup will probably remain one of my most vivid memories. It was an awesome event: two friends and I traveled around South Africa to watch eight live matches, including Bafana Bafana’s spectacular win at a jam-packed Bloemfontein stadium. It was a month of passion, of joy, of little productivity and lot’s of partying; in short, a month to be proudly South African. Or so it seemed to those of us attending.
But our views are often shaped disproportionately by our immediate surroundings, which is why social scientists use surveys to assess the overall impact of a government policy, or to test the general perspective of South Africans. The National Income Dynamics Study is a national panel data set for South Africa, and recently released its second round of survey data. Although it is principally aimed at investigating poverty, income , unemployment and education trends, it also asks some rather random questions that allow researchers to explore all sorts of interesting hypotheses. One of the questions asked in the survey, for example, was how satisfied the respondents are with their lives in general. (You may think this is pretty arbitrary, but there’s actually a growing literature about “happiness economics”. Bhutan famously measures their Gross National Happiness.) The inclusion of this question in the survey, and the fact that respondents were surveyed between May 2010 and April 2011 (the World Cup kicked-off in June 2010), allow us to see whether the World Cup had any effect on South Africans happiness. (A big thank you to Marisa Coetzee who helped with the analysis.)
But why would the World Cup affect life satisfaction? There is a rather large literature that suggests that mega-events are rather unprofitable ventures for countries: the returns, except in exceptional cases like the Sydney Olympics, rarely outweigh the costs. But countries continue to bid for these events, which must suggest that there are other, perhaps unquantifiable, benefits. Some scholars have suggested that these benefits include the “happiness”, “good image”, or “national pride” that these type of events create. Think of the “nation-building” following South Africa’s 1995 Rugby World Cup win, or the 2006 FIFA World Cup that portrayed Germany as a friendly, welcoming country.
So do the NIDS survey show that mega-events (in this case, the 2010 FIFA World Cup) create large gains in terms of happiness? No.
The first graph shows the average life satisfaction across all respondents by month (the first month is May 2010, the 2010 FIFA World Cup started in June, i.e. dot number two). There is no evidence that South Africans were, on average, more satisfied with life in June and July than before or after the tournament. If anything, they were the least satisfied with life during those two months.
This picture changes remarkably if one considers only the white South African population. The second graph shows the marked improvement in white South Africans’ life satisfaction ratings during the months of June and July. Thereafter it stays relatively constant until December, when it plummets. (I don’t know why.) The basic problem here, though, is sample size. There are very few observations in the sample of white South Africans (not more than 20 for May), and so statistical significant deviations will be difficult to prove.
While there seems to have been at least some positive “happiness” effect of hosting the World Cup for white South Africans, there was no discernible impact for South Africans as a whole. Sport – and the passions it inspire – is seemingly a luxury good.
PS: Dieter von Fintel raised some issues with the graphs in the comments section. He requests to see 95% confidence intervals around the dots. Marisa again kindly helped to plot these, now with a continuous variable and a confidence band. The observations again begin in May 2010. Across all population groups, there is no evidence to suggest that during June or July life satisfaction increased.
Stefan Schirmer and I recently co-authored a note that will be published in the next issue of Economic History of Developing Regions. We argue that, while significant South African economic history research has been undertaken since the 1990s, South African historians and economists are still fighting a methodological Cold War. This is, of course, in no way unique to South Africa, but since the beginning of the twenty-first century much progress has been made internationally (on both sides of the divide) to overcome this stalemate. We propose that South African historians need to familiarize themselves with quantitative techniques and that South African economists need to gain a deeper insight into the way historians conduct research. Ultimately, methodological tolerance is also needed if historians and economists with different strengths and orientations are to work together and to learn from one another. All methodologies ultimately have strengths and weaknesses; no methodology is better suited to reveal ‘the truth’ than another. As Andrew Rutten (1980) put it many years ago, ‘Science does not have any single goal or method. Science demands that economic historians develop whatever tools are needed to solve the problems they face’.
Perhaps we’ve already reached a turning-point. I recently teamed up with Robert Ross and Russel Viljoen, two of South Africa’s most prominent historians, to investigate the determinants of literacy on Cape missionary stations in the mid-eighteenth century. It was an excellent experience, more so because I got to visit Robert twice in lovely Leiden. The paper will soon be available for comments. More persuasive evidence, though, is found in the number of South African economists and historians that have signed up for the World Economic History Congress to be held in Stellenbosch during July 2012. This event, which is to be held in Africa for the first time, has already attracted more than 700 entrants globally, of which more than 80 are from South Africa. Bringing the world’s best economic historians to South Africa will hopefully encourage economists and historians to co-explore the rich sources of the South African (and African!) past.
It is not only the integration of theory and techniques that needs consideration, but also the integration of South African economic history into the economic history of Africa. African economic history is making a comeback; the formation of a new African Economic History Network is just one example. Debates published in EHDR suggest that economists and historians are grappling with issues of low data availability and mis‐measurement especially applicable to African economic history. South African economic historians should not stand isolated from these debates. Shedding new light on the economic history of South Africa, and Africa more broadly, matters not only for understanding history, but should influence broader debates about economic change as well. In South Africa, rich colonial archives can inform early trajectories of comparative development, while the unique Apartheid institutions, and the attempts by the democratically‐elected government to redress past inequalities, provide fertile ground for empirically testing hypotheses. In a paper published in the American Economic Review, Dinkelman (2011), for example, uses South Africa’s mass roll‐out of electricity to rural households in the 1990s to show how household electrification raises employment by releasing women from home production and enabling micro‐enterprises.
South African economic history can only profit from multiple methodological approaches, and so, too, can its scholars. Ike e: ǀxarra ǁke. It’s time to start talking.
PS: The 16th World Economic History Congress will be held from 9-13 July in Stellenbosch. More than 800 papers will be presented in 15 parallel sessions over five days. NewsNow magazine is the official media partner. Register for the congress here.
I’m not one of those people who actually finish a book. In fact, I can’t really remember when last I did. It’s not that they’re boring; it’s just that there’s always something more interesting, more appealing, with new ideas and hypotheses and font types. Actually, that’s only a part of the reason I don’t finish books. It’s really because I want to avoid that split-second of silent sorrow when you’ve just finished the last sentence: that realisation that you’ve come to the end, that there’s no more, that, no matter how much you’ve enjoyed the book, there’s no more to explore, to find, to discover. That, aside from a place and my bookshelf, it’s job is done.
It’s also is a great way to keep bookmark makers in business. So here is the list of books that I’m currently “reading”:
“Why Nations Fail” by Daren Acemoglu and James Robinson is a really easy-to-read introduction to the primacy of institutions in explaining the divergent growth trajectories of countries. Extending the franchise is key, the authors argue, to explaining why some countries prosper and others fail to. The book is not without criticism, especially from those in political science, but it should be compulsory reading for any student of economic development.
“1494” reveals the untold story of how a personal struggle between queens and kings, churchmen and explorers split the globe between Spain and Portugal and made the world’s oceans a battleground. Stephen Bown (author of “Merchant Kings” which I’m also “reading”) shows why history is sometimes stranger than fiction.
I am an optimist and so are the authors of “Abudance”, Peter Diamandis and Steven Kotler. They argue that through technologies improving exponentially fast, we will soon be able to meet and exceed the basic needs of every man, woman and child on the planet.
“Thinking, Fast and Slow” by Daniel Kahneman has already won several awards and is an intriguing read for anyone interested in how humans behave (thus, all the social sciences). Kahneman posits two “systems” of thinking: System 1 is fast, intuitive, and emotional; System 2 is slower, more deliberative, and more logical. Kahneman exposes the extraordinary capabilities–and also the faults and biases–of fast thinking, and reveals the pervasive influence of intuitive impressions on our thoughts and behaviour.
“Economic Development in the Americas since 1500” is another story about the importance of institutions in economic development. A compilation of Stan Engerman and Ken Sokoloff’s research over the last two decades, this book will become a compulsory reference for anyone interested in the economic histories of the Americas and their lessons for other developing regions.
“Africa’s Future” by Duncan Clarke is dense but fascinating account of Africa’s past challenges. Although Clarke is clear that the book is “not an economic history”, he writes a mega-economic history that explains why from Roman times to 1500 CE Africa went backwards, evolving slowly, growing later, improving recently, and how its modern and archaic economies coexist uneasily today.
“The Clash of Economic Ideas” by Laurence White brilliantly integrates the rise of new economic ideas and their implications for economic policy during the twentieth century. This book will become a standard reference for scholars in the History of Economic Thought, but also for politicians and policymakers hoping to understand the successes and failures of past economic policies.
Finally, “End The Depression Now” is Paul Krugman‘s latest book about the failure of austerity measures to boost business confidence, production and employment. Growth is the only way to pay for the rising debt, and the only way to achieve growth is through Keynesian government investment. Good news, I guess, for President Hollande.
And if all this economics (and history) is too much, consider the following two books:
Les Padfield is a scout for Bolton Wanderers. “Scouting for Moyes” is a compilation of short, hilarious anecdotes about his experiences scouting new players. (This is the only book I actually did finish reading.) The book ends with him visiting South Africa during the 2010 FIFA World Cup.
This is the book I most look forward to reading. (It’s still in the mail.) If you enjoy Joel Stein’s column in Time magazine, then this should be compulsory reading. Here’s the blurb: “The smudge looked suspicious. The doctor confirmed: “That’s the baby’s penis!” Joel’s reaction? Pure panic. “I pictured having to go camping and fix a car and use a hammer and throw a football and watch professionals throw footballs and figure out whether to be sad or happy about the results of said football throwing.” And so begins Joel’s quest to confront his effete nature whether he likes it or not (he doesn’t), by doing a 24-hour shift with LA firefighters, going hunting, rebuilding a house, enduring three days of basic training with the Marine Corps, and going into the ring with UFC Hall of Famer Randy Couture. Seeking help from a panel of experts, including his manly father-in-law, a racecar driver, Boy Scouts, former NFL star Warren Sapp and some celebrities, he expects to learn that masculinity is not defined by the size of his muscles but by the size of his heart. This is not at all what he learns. ”
I purchased all these books through Book Depository, a UK bookstore, which ship them free to South Africa.