Friday, March 9, 2012

African poverty and colonisation

Last year I argued that historical colonisation does not explain modern poverty very well:
Liberia was not a colony in the usual sense. Its population came from the US, but came to found a new state, not to serve the economic interests of the Americans. Its ruling elite were mixed race, Euro-Africans from the US, and they occasionally fought native African tribes to establish domination. Nonetheless Liberia ruled itself and none of the 19th century great powers controlled it.

Ethiopian history is simpler: it was conquered by Italy in 1935 and liberated in 1941. Of course Ethiopian leaders fought neighbouring African civilisations and internal rebels, but outside those brief years of Italian imperialism Ethiopia was never colonised.

If colonisation is the cause of modern poverty in developing countries, these two should be wealthy and content.

Today Liberia is the fourth poorest country in the world. Ethiopia is the 15th poorest. Liberia’s next door neighbour Cote d’Ivoire has a GDP per capita over three times higher, despite a century of French colonisation. Liberia also has the third highest infant mortality rate in the world, Ethiopia the 18th highest.
Since then I have had some criticism for this argument, with some complaining that colonisation was not a blanket experience that was the same in every location, so it was unfair to compare the success of countries like Ireland and Singapore since independence with the failures of Zimbabwe or Sudan.

Today I found a fascinating paper from Daron Acemoglu and James A Robinson at Massachusetts Institute of Technology, simply called Why is Africa Poor? They give a more subtle argument than either mine or the populist notion that European colonial abuses were entirely to blame for modern African poverty. Instead they focus on a number of factors:

1) Failure to form states
They say that sub-Saharan African regions tended to centralise power into state structures very late, many centuries after the same process had happened in much of Europe and Asia. Without a centralised state they had difficulty in organising large cooperative activities. Instead raiding and abducting by young men was rife and property rights were not protected.

2) Absolute monarchs
Those regions which did form into states usually ended up with absolutist monarchs of the kind that much of medieval Europe also endured. The problem here was that there was no distinction between the king and the state: the entire territory of the state belonged to the king, who could arbitrarily seize and redistribute land at any moment. 16th century Portuguese visitor Francisco Alvares described a country where an individual's territory would be seized and redistributed by the king every few years. With no property rights, individuals would not bother to look after the soil they worked and were going to shortly lose:
there is not even anyone to plant a tree because he knows that he who plants it rarely gathers the fruit.
Under absolute kings, a tiny elite of the king's cronies benefitted but the nation as a whole stagnated and failed to invest in its future.

3) Slavery
Slavery pre-dated the Atlantic trade (it existed in Eurasia also for many centuries), but the arrival of Europeans willing to buy slaves shifted West African economies into a perverse direction. Most slaves were prisoners of war, so the benefits of war soared as Europeans exchanged slaves for firearms and wealth. There was a general increase of lawlessness from small scale raids for slaves, and greedy rulers were incentivised to find people guilty of absurd and petty crimes for which they could be sold into slavery.

They argue that the slave boom largely distorted institutional development, but in some places led to the development of powerful states based entirely on slave-raiding. Between 1690 and 1710, they say, the state of Oyo was responsible for 80-90% of the slaves sold from the "Slave Coast". As well as those millions actually exported for slavery, many millions more likely died in the inflated carnage of the slave wars. When Europeans abandoned the slave trade, African slave kingdoms simply employed their slaves in Africa, selling raw materials to the West. During the gap between the end of European slave-purchasing and formal European colonisation, slavery in Africa may even have intensified, and it persisted in many places until the 20th century. In response, some communities retreated from roads to avoid the raiding, pushing them away from wider markets.

4) Technological backwardness
Sub-Saharan Africa was very slow to embrace basic technologies like the wheel and the plow. The authors admit that they 'lack satisfactory answers' for the slow uptake of such technologies, but suggest that the lack of property rights meant that nobody was going to invest in a new technology that would immediately be grabbed by the king.

5) Colonisation
For starters foreign rule of Africa until the mid-20th century prevented the kind of institutional development that helped Latin American countries slowly grow out of poverty.

More specifically there were 'dual economies' characterised by huge differences between an urban, developed and industrial society in the cities with rural, undeveloped and agricultural life with communal ownership of land in the countryside. The former are relatively prosperous, the latter very unproductive. In places like South Africa these divisions were enforced by the European colonists, fearful of competition from thriving African rivals and looking for cheap labour.

The British policy of ruling through local chiefs inhibited the development of property rights, and deepened the absolutist tendencies among African leaders, while the setting up of government monopolies undermined indigenous capitalism. Infrastructure was designed to facilitate extraction, not development or public goods. Colonisation intensified notions of ethnic differences, while the new African states had arbitrary borders that cut across ethnic lines, fuelling future conflicts.

6) Post-independence 'neopatrimonial' leadership
Since independence many sub-Saharan African countries have continued with the absolutist order that wrecked investment and innovation by ignoring property rights, and vesting authority in individual leaders instead of institutions. The governments were characterised by 'relationships of loyalty and dependence' by corrupt officials looking to fill their pockets.

They give the fascinating example of Sierra Leone where the British conquered a multiethnic region, directing a railway into the south to guarantee rapid access to the particularly rebellious Mende ethnic group. By the 1960s, after independence, the railway was the channel of exports for Sierra Leone, especially from the Mende. When a new government dominated by northern ethnic groups took power, prime minister Siaka Stevens had the railway to Mendeland ripped up, and the land sold off, because the Mende had overwhelmingly voted for the opposition. This was deeply destructive to Sierra Leone's economy, but the insecure government would rather wreck the country than risk overthrow at the hands of the hated Mende.

Virtually no public goods were developed - television broadcasts ceased when the Minister of Information sold the transmitter - and Sierra Leone sank into desperate poverty. By 2002 the GDP had declined by about 40% from its level at independence.

Similar scenarios plagued other African countries. Few countries, the authors claim, could agree on political institutions to solve conflicts peacefully. (This reminded me of a point I was making just a few weeks ago about the power of modern liberal democracies to create political stability and to win wars. The regular elections and peaceful exchange of power we take for granted in Western Europe are very unusual by historical standards, and desirable! Instead of the winner-takes-all civil wars of the Roman Empire, modern politicians know that their shot at power may be only a few years of patient politics away.)

In much of sub-Saharan Africa the corruption that rewarded cronies and ethnic insiders with loot taxed from the rest, along with the brutal suppression of ethnic outsiders and political enemies, caused deep instability. Every side was desperate to seize power, at all costs, because failure meant dreadful treatment. The result was regular civil war and instability.

Colonial chaos
The authors then argue that while some of these harmful tendencies existed in Africa before colonisation, they believe that colonisation exacerbated them. The relative success of Botswana, which was largely neglected by the British colonial power, is evidence for this point. Elsewhere weak states, absolutist institutions to perpetuate power amongst corrupt elites, insecure property rights, and a failure to provide public goods all led to deeply dysfunctional economies.

The good news now, not discussed in this paper, is that sub-Saharan Africa seems to be finally clicking into gear with economic growth, democratic growth, and a modest reduction of poverty:
For the first time since 1981, less than half of its population (47 percent) lived below $1.25 a day. The rate was 51 percent in 1981. The $1.25-a-day poverty rate in SSA has fallen 10 percentage points since 1999. 9 million fewer people living below $1.25 a day in 2008 than 2005.
What has happened? I'd like to know if Acemoglu and Robinson's hypotheses still stand, and if sub-Saharan Africa is seeing some kind of shift away from the weak and perverted institutions of old. In any case, if correct, they do challenge my view that colonisation 'doesn't matter much' for modern wealth or poverty. But the simplistic blame-heaping on European colonists for every African ill seems also unfair.

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