In a January 26 article, Lydia Polgreen, the West African bureau chief for the New York Times, wrote about the increase in domestic rice farming in Senegal brought on by the recent price rise for that staple. Entrepreneurial farmers in that country are planting more rice in response the the changed market conditions in the hope of earning more money.
One would think that this would be a good news story. Not according to Lydia Polgreen. Polgreen paints a portrait of impending doom and disaster, repeatedly pointing out the risks involved should the price of rice fall beneath the cost of production. Polgreen presents the story as a human interest piece but misses the bigger picture.
There are two issues that escape Polgreen’s grasp. The first is the triumph of capitalism, and the second is the market distorting effects of US and EU subsidies for agricultural production.
Polgreen spends the majority of the article discussing the potential, and as yet unrealized, downsides to the increased production of this cash crop instead of lauding the entreprenurial spirit of the farmers who are pursuing higher profits. Certainly there are risks involved, as there are in any new venture - regardless of geography. The fact that Senegal has an economic system in which farmers are free to pursue the most efficient and profit maximizing crops should be a cause for celebration. History demonstrates that liberal economic policies are the best method for inducing growth in a country.
Additionally, there are time tested mechanisms for reducing ones exposure to price fluctuations in the commodity markets. Polgreen does not even address the issue of whether or not the Sengalese farmers have the ability to hedge their crops. Hedging is a simple mechanism where one sells their yet unrealized crop now for delivery in the future, effectively locking in the current price and ‘hedging’ the risk. Of course, if the price goes up, this limits the upside, but more importantly, it also limits the downside. Oxfam, the British charity who is quoted in the article as helping the rice farmers achieve their goals, should be organizing this mechanism if they haven’t already done so. We don’t know as Polgreen doesn’t address this most basic issue.
The second point that Polgreen misses is the market distorting effects of US and EU subsidies for agricultural production. The developed world spends over $250 billion a year on subsidies for domestic agricultural production. This artificially lowers the cost of domestic production which in turn lowers the global price for those commodities. This in turn often makes farming unprofitable in the developing world.
If the developed Western world was serious about promoting economic growth in the developing world it would suspend those subsidies and let market forces rule. This would shift production away from high cost production centres such as Europe and the US and towards low cost places such as Africa. In turn the economies of the developing world would see export oriented growth – a prerequisite for economic development.
This concept, however, takes much more effort to comprehend and isn’t nearly as emotionally charged as lamenting the potential downsides of entreprenurial risk.
Thursday, January 29, 2009
Sunday, January 25, 2009
The Economics of Chaos – Who really benefits from the conflict in the Eastern Congo?
The bubble of instability in the eastern Congo burst this week with the arrest of the renegade General Laurent Nkunda by Rwandan authorities and the co-opting of his rebel group by the Congolese government. This would seem to be a cause for celebration by the UN and the various NGO’s who have done so much hand wringing over the issue.
Instead, many of the NGO’s as well as the UN have sought to minimize the significance of the events and instead keep the conflict alive in the media. But why, and at what cost?
Its no secret that the eastern Congo is minerally rich, as is the entirety of the Congo, and much of sub-Saharan Africa. Artisanal mining, codified in the Congolese Mining Code written with the help of the World Bank, provides employment and opportunity for hundreds of thousands of Congolese who would otherwise be living in much worse conditions. True, artisanal mining is dirty, hard work, but it provides employment and supports a large percentage of the population in the Congo. Studies have demonstrated that artisanal mining has provided much greater wealth to the region’s population than industrial mining did under the corrupt and ill-managed state owned mining companies.
Instead of focusing on the benefits of artisanal mining, a recent UN Report, as well as various NGO’s, most prominently Global Witness, have attempted to demonize the trade in its entirety. Certainly there are some fairly small, politically and militarily irrelevant rebel groups who are benefiting from the trade, as they also do from extortion and illegal taxation. But the evidence demonstrates that, by and large, the vast majority of the trade is not only legal, but highly beneficial to the economy of the region.
So who really benefits from the conflict?
The first is the United Nations. The UN mission in the Congo is the largest in the world with an annual budget of over a billion dollars. There are 17,000 peacekeeping troops in the Congo, and thousands more civilian support staff. Should peace, God forbid, actually break out the raison d'être for their mission would suddenly evaporate. Demonizing artisanal mining and the small, militarily insignificant rebel groups provides justification to the UN headquarters to continue its mission, and the fat expatriate salaries of thousands of Westerners.
The second group are the NGO’s themselves – many of which have made a name for themselves publicising the conflict in their media campaigns to raise funds for further research, development programs and refugee work. Should peace suddenly break out their jobs too are at risk. The most recent example of this is Global Witness, whose exaggerated statements on the economics of the mineral trade serve only to further their own cause and consequently, their funding. Carina Tertsakian, a researcher at Global Witness who studies the relationship between conflicts and natural resources stated in the South African Mail and Guardian that “At the moment it’s a free for all in the Congolese mining trade…You have different armed groups controlling mines throughout the region.”
This is not exactly how the UN Security Council report put it – but don’t let the facts get in the way of superficial sound bites.
The last group that benefits from the conflict are the legions of journalists who cover the issue for all of the Western media outlets. While in the larger sense, the conflict is actually quite small and localised, journalists are naturally incentivised to paint a much darker picture than reality would suggest. Journalists, while hiding under the banner of independence, are in fact pursuing their own agenda of self-interest. Reporters don’t get promoted for balanced reporting – they get promoted for selling newspapers.
In the end, these three groups while publicly decrying the conflict, privately benefit from it and in an even more sinister and hypocritical way, actively promote it as a means to further their own agendas. Sadly, the ones who lose out are the very ones they claim to be helping – the Congolese people.
Instead, many of the NGO’s as well as the UN have sought to minimize the significance of the events and instead keep the conflict alive in the media. But why, and at what cost?
Its no secret that the eastern Congo is minerally rich, as is the entirety of the Congo, and much of sub-Saharan Africa. Artisanal mining, codified in the Congolese Mining Code written with the help of the World Bank, provides employment and opportunity for hundreds of thousands of Congolese who would otherwise be living in much worse conditions. True, artisanal mining is dirty, hard work, but it provides employment and supports a large percentage of the population in the Congo. Studies have demonstrated that artisanal mining has provided much greater wealth to the region’s population than industrial mining did under the corrupt and ill-managed state owned mining companies.
Instead of focusing on the benefits of artisanal mining, a recent UN Report, as well as various NGO’s, most prominently Global Witness, have attempted to demonize the trade in its entirety. Certainly there are some fairly small, politically and militarily irrelevant rebel groups who are benefiting from the trade, as they also do from extortion and illegal taxation. But the evidence demonstrates that, by and large, the vast majority of the trade is not only legal, but highly beneficial to the economy of the region.
So who really benefits from the conflict?
The first is the United Nations. The UN mission in the Congo is the largest in the world with an annual budget of over a billion dollars. There are 17,000 peacekeeping troops in the Congo, and thousands more civilian support staff. Should peace, God forbid, actually break out the raison d'être for their mission would suddenly evaporate. Demonizing artisanal mining and the small, militarily insignificant rebel groups provides justification to the UN headquarters to continue its mission, and the fat expatriate salaries of thousands of Westerners.
The second group are the NGO’s themselves – many of which have made a name for themselves publicising the conflict in their media campaigns to raise funds for further research, development programs and refugee work. Should peace suddenly break out their jobs too are at risk. The most recent example of this is Global Witness, whose exaggerated statements on the economics of the mineral trade serve only to further their own cause and consequently, their funding. Carina Tertsakian, a researcher at Global Witness who studies the relationship between conflicts and natural resources stated in the South African Mail and Guardian that “At the moment it’s a free for all in the Congolese mining trade…You have different armed groups controlling mines throughout the region.”
This is not exactly how the UN Security Council report put it – but don’t let the facts get in the way of superficial sound bites.
The last group that benefits from the conflict are the legions of journalists who cover the issue for all of the Western media outlets. While in the larger sense, the conflict is actually quite small and localised, journalists are naturally incentivised to paint a much darker picture than reality would suggest. Journalists, while hiding under the banner of independence, are in fact pursuing their own agenda of self-interest. Reporters don’t get promoted for balanced reporting – they get promoted for selling newspapers.
In the end, these three groups while publicly decrying the conflict, privately benefit from it and in an even more sinister and hypocritical way, actively promote it as a means to further their own agendas. Sadly, the ones who lose out are the very ones they claim to be helping – the Congolese people.
Monday, January 5, 2009
NGO Paternalism and the Politics of Soft Racism
On December 12th the United Nations Group of Experts on the Democratic Republic of Congo published its latest installment in a continuing series of reports on the financing of rebel groups in the eastern part of the country. Much like previous reports, it found that the myriad rebel groups obtain financing from a variety of sources to include taxation, protection rackets, renumeration from abroad and the trade in various minerals.
Three days later Global Witness issued a press release calling on governments to take “strong action” on the findings of the UN report, in particular the trade in minerals. The interesting thing about Global Witness’ statement is that they don’t call on the government of the Congo to do anything, but rather on the international community to do something about the problem.
This typifies not only Global Witness’ attitude towards Africa, but of the international aid community in general. The international aid groups absolve African governments and their leaders of the responsibility for good governance and instead adopt a paternalistic attitude towards them. Africa suffers from the legacy of colonialism, goes the argument. They are too poor to help themselves. The mantra of the NGO Jet Set is it’s the fault of the rich developed Western world.
The last sixty-three years of aid to Africa and the rest of the developing world has resulted in – well, not much. Building dams, roads, schools, clinics and donating clothes may seem like a good idea but in the long term it has had negligible, and possibly negative effects. The net result of all those donated clothes to Africa has resulted in a decimation of the textile industry in sub-saharan Africa, putting countless thousands out of work.
Certainly, the abrupt end of colonial rule caused much havoc in the developing world. But fifty years on one has to ask the question – when exactly will the international community start to hold African governments accountable for their actions? Only through good governance and good economic policy decisions will African countries be able to launch themselves into self-sustaining economic growth. This has been proved time and time again – Chile, Singapore, China, India, Thailand, and Malaysia to name a few. Kenya was the darling of the World Bank during the 1970’s when it achieved continuing and impressive economic growth rates under President Jomo Kenyatta. Only after he was succeeded by Daniel Arap Moi, who proved to be a corrupt and inefficient ruler, did things begin to go downhill. That, perhaps not coincidentally, coincided with a massive increase in aid to Kenya – which continues, despite its failure, to this day.
Global Witness and the rest of the NGO community indirectly support failed African leadership through their social programmes and activism. Their programes alleviate the host government of those responsibilities, and thus, accountability, to the people they are supposed to serve. Patrick Alley of Global Witness calls the mineral wealth of the DRC an “engine of conflict” – as if the mere presence of mineral wealth causes armed groups to greedily rise up. Global Witness ignores the fact that the richest province in Congo, Katanga, is not mired in insurgency, nor are other minerally rich areas of the world. The “engine of conflict” is not the mineral wealth of the region, but rather the failure of the Congolese government to address underlying issues of the long simmering conflict. The various rebel groups all have their own political goals, and use whatever methods they can to raise funds to achieve those goals – be it gold smuggling or (don’t tell anyone) taxation on NGO aid convoys.
Neither Global Witness nor the UN cite the direct failures of the Congolese government to deal with the conflict. The Congolese political maneuvers to deal with the rebel groups have been an unmitigated failure, and its army is ill-trained, ill-equipped, and unpaid; leaving little threat of force to back up any political resolution to the conflict. Why doesn’t Global Witness advocate for a more effective and professional Congolese army as a means to end the conflict?
The UN, and Global Witness ignore the fundamental political aspect of the conflict altogether and call for amorphous action by the international community. Only through political measures by those directly involved can the conflict be resolved. Apparently, governments in Africa cannot be held accountable for their actions, or lack thereof. One has to wonder if the apostles of the international aid community aren’t engaging in the politics of soft racism.
Three days later Global Witness issued a press release calling on governments to take “strong action” on the findings of the UN report, in particular the trade in minerals. The interesting thing about Global Witness’ statement is that they don’t call on the government of the Congo to do anything, but rather on the international community to do something about the problem.
This typifies not only Global Witness’ attitude towards Africa, but of the international aid community in general. The international aid groups absolve African governments and their leaders of the responsibility for good governance and instead adopt a paternalistic attitude towards them. Africa suffers from the legacy of colonialism, goes the argument. They are too poor to help themselves. The mantra of the NGO Jet Set is it’s the fault of the rich developed Western world.
The last sixty-three years of aid to Africa and the rest of the developing world has resulted in – well, not much. Building dams, roads, schools, clinics and donating clothes may seem like a good idea but in the long term it has had negligible, and possibly negative effects. The net result of all those donated clothes to Africa has resulted in a decimation of the textile industry in sub-saharan Africa, putting countless thousands out of work.
Certainly, the abrupt end of colonial rule caused much havoc in the developing world. But fifty years on one has to ask the question – when exactly will the international community start to hold African governments accountable for their actions? Only through good governance and good economic policy decisions will African countries be able to launch themselves into self-sustaining economic growth. This has been proved time and time again – Chile, Singapore, China, India, Thailand, and Malaysia to name a few. Kenya was the darling of the World Bank during the 1970’s when it achieved continuing and impressive economic growth rates under President Jomo Kenyatta. Only after he was succeeded by Daniel Arap Moi, who proved to be a corrupt and inefficient ruler, did things begin to go downhill. That, perhaps not coincidentally, coincided with a massive increase in aid to Kenya – which continues, despite its failure, to this day.
Global Witness and the rest of the NGO community indirectly support failed African leadership through their social programmes and activism. Their programes alleviate the host government of those responsibilities, and thus, accountability, to the people they are supposed to serve. Patrick Alley of Global Witness calls the mineral wealth of the DRC an “engine of conflict” – as if the mere presence of mineral wealth causes armed groups to greedily rise up. Global Witness ignores the fact that the richest province in Congo, Katanga, is not mired in insurgency, nor are other minerally rich areas of the world. The “engine of conflict” is not the mineral wealth of the region, but rather the failure of the Congolese government to address underlying issues of the long simmering conflict. The various rebel groups all have their own political goals, and use whatever methods they can to raise funds to achieve those goals – be it gold smuggling or (don’t tell anyone) taxation on NGO aid convoys.
Neither Global Witness nor the UN cite the direct failures of the Congolese government to deal with the conflict. The Congolese political maneuvers to deal with the rebel groups have been an unmitigated failure, and its army is ill-trained, ill-equipped, and unpaid; leaving little threat of force to back up any political resolution to the conflict. Why doesn’t Global Witness advocate for a more effective and professional Congolese army as a means to end the conflict?
The UN, and Global Witness ignore the fundamental political aspect of the conflict altogether and call for amorphous action by the international community. Only through political measures by those directly involved can the conflict be resolved. Apparently, governments in Africa cannot be held accountable for their actions, or lack thereof. One has to wonder if the apostles of the international aid community aren’t engaging in the politics of soft racism.
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