Ben Muse

Did the Africa Growth and Opportunity Act work?

The African Growth and Opportunity Act (AGOA) reduced U.S. trade barriers for goods from African countries that met certain conditions.  The objective was to give their economies a boost.

Did it work?  New research by Garth Frazer and Johannes Van Biesebroeck suggests that it did: Trade Growth under the African Growth and Opportunity Act (NBER working paper 13222, July 2007). 

From the abstract:

The downside of Botswana's diamonds

Botswana has been able to build a remarkable growth record on its diamond endowment, without falling victim to the resource curse (How did Botswana avoid the "resource curse"?, Ben Muse Oct 17, 2006).

But yet, as John Holm posts at the Center for Strategic and International Studies (CSIS) Africa Forum, everything's not hunky-dory (Diamonds and Distorted Development in Botswana, Jan 8, 2007):

Yet there is another, more pessimistic side to the story of Botswana’s development.   To put the matter simply, diamonds have produced distorted development.  Most obvious has been the limited economic spin-off in terms of employment. Debswana, the diamond mining corporation owned jointly by the government and DeBeers, employs about 6,500 people, or just 2 percent of the workforce.  To be sure, there is significant secondary employment generated by the company’s contractors and consumption by Debswana employees.  The bottom line, however, is that after decades of rapid GDP growth, about 40 percent of the working age population is unemployed.  Apart from the diamond industry, no other economic sector has experienced much growth.  In the meantime, the educational system, well funded by diamond income, annually churns out large numbers of students who cannot find jobs, even when they have a university education.  Top planners in the education have concluded that government must restructure the system to prepare  youth for export to the global economy, since few jobs will be available inside the country in the foreseeable future!

Another distortion has to do with the size of government.  Diamond sales have fueled rapid expansion of government employment.  The result is that the public sector now employs almost 45 percent of the workforce (295,000), if parastatal corporations are included.  The national government alone employs one-third of the total workforce.  The result is the emergence of a bureaucratic behemoth with a capacity to penetrate and regulate many aspects of society...

Still another distortion is that the government is inclined to use its massive income to subsidize major sectors of economy and society.  Other African states have privatized sizeable sections of their governments over the last several decades.  In contrast, the Botswana government has been moving at a snail’s pace.  Regular money losers like Air Botswana and the copper mines continue to limp along with subsidies from the government.... 

A looming political danger to government is the power of the diamond trade unions.  If the unions should launch a sustained strike (Debswana holds a considerable diamond reserve, so government could survive a short strike), the government could be brought to its knees.  As a result labor laws serve to restrict union activity severely, particularly in the diamond sector....

I learned about Holm's post from a Lars Smith's post at Conservation Finance: Diamonds and the resource curse (Jan 12, 2007)

re "hunky-dory" see also : World Wide Words. Michael Quinion writes on international English from a British viewpoint and Answers.com.

How did Botswana avoid the "resource curse"?

Little, land-locked Botswana has had one of the best growth records in the world (What happened in Botswana?, Ben Muse, Jan 9, 2004).

Finding diamond mines didn't hurt.  But many countries have been unable to leverage rich natural resource endowments into growth.  Many think that under some conditions resource riches can lead to lower growth rates.  This is the resource curse.  Why was Botswana different?

Her President, Festus Gontebanye Mogae, laid out his thoughts recently at the Center for Global Development.  Michael Clemens reports:

New African HIV infection rate estimates

New research is suggesting that UN estimates of HIV infection rates in parts of Africa may have been high. 

The new research also indicates that AIDS remains a very serious public health problem in much of Africa, and Southern Africa remains an HIV/AIDS disaster. 

Craig Timberg reports in the Washington Post: How AIDS in Africa Was Overstated. Reliance on Data From Urban Prenatal Clinics Skewed Early Projections (April 6)

UNAID agency estimates of HIV infection rates in East and West Africa have been very high:

What made Mauritius grow?

It's pretty dark in Alaska right now.  Of course the shortest day came shortly before Christmas. 

In Juneau, the light that day lasted about 6 1/2 hours.  But Juneau's daylight might not be considered real daylight elsewhere. Clouds screened out a lot of the light we might have had.  Moreover, the sun lies low on the horizon, even when it's up, and much of the time we're in the shade of the mountains that crowd close around us.

It's worse further north - in Barrow (on the shore of the Arctic Ocean) they won't see the sun for weeks.  The New York Times just ran a story on Alaska's dark days, highlighting "seasonal affective disorder" - the dark induced depression that many feel at this time: In Alaska, Darkness and Depression Descend (Associated Press, December 18):

Winter is a drag to some extent for one out of five Americans, studies suggest. A smaller fraction - mostly women and young adults - suffer from Seasonal Affective Disorder, a type of depression stemming from decreased daylight.

Nearly 10 percent of Alaskans suffer from the disorder to some degree, according to a 1992 study published in the American Journal of Psychiatry.

Symptoms include lethargy, a heightened desire for sleep, cravings for carbohydrates, feelings of melancholy, fuzzy thinking and loss of libido or sociability, said Suzanne Womack Strisik, an assistant psychology professor at the University of Alaska Anchorage.

Severe cases can be debilitating, even prompting thoughts of suicide. Experts say, however, suicide rates actually peak with increasing spring light.

"You don't have enough energy to make a plan before then," Ms. Strisik said. "It's too much trouble. Once the light starts coming back, there's more energy, but reasoning is still off. "

So, naturally one's thoughts turn to warmer, sunnier, more cheerful places.  Like tropical Mauritius:

Mauritius, an island nation, is located in the Indian Ocean.  This Air Mauritius route map shows where:

There have been a number of impressive growth episodes in Africa: Growing in Africa ...

Growing in Africa

Post-war Africa has been the scene of impressive growth episodes.  Arvind Subramanian and Devesh Roy document sixteen of these at the start of a recent article on one of the most impressive:

("Who Can Explain the Mauritian Miracle? Meade, Romer, Sachs, or Rodrik?," from In Search of Prosperity.  Analytic Narratives on Economic Growth, edited by Dani Rodrik.

Revised: "impressive growth episodes" instead of "a lot of impressive growth episodes."    January 4, 2006

What happened in Botswana?

Sub-Saharan Africa is an economic basketcase. Elsa Artadi and Xavier Sala-i-Martin reviewed sub-Saharan Africa's economic growth performance in the National Bureau of Economic Research working paper, "The Economic Tragedy of the XXth Century: Growth in Africa." As summarized by Les Picker in "The Economic Decline in Africa":

African Economic Tragedy

Elsa Artadi and Xavier Sala-i-Martin think the "worst economic disaster" of the 20th Century was "the dismal economic growth performance of the African continent."  (Artadi, Elsa V. and Xavier Sala-i-Martin, "The Economic Tragedy of the XXth Century: Growth in Africa."  National Bureau of Economic Research.  Working Paper 9865.   July 2003.  Accessed at http://papers.nber.org/papers/W9865 on July 23, 2003).